Tether had $30,950,000 USDT stolen from its digital wallets following an attack in November 2017. Tether is a blockchain powered cryptocurrency used by bitcoin exchanges to trade and use digital tokens with fiat currencies such as the dollar, yen and euro.
In a post on its website, Tether said it would not redeem any of the stolen tokens so the hacker will not be able to exploit their worth, and it was attempting token recovery to stop them from entering the wider ecosystem. The company listed the bitcoin address in which the attacker was holding funds, and told users that if they received USDT tokens from that address, or from a downstream account, which receives the said token, “do not accept them, as they have been flagged and will not be redeemable by Tether for USD”.
Tether was listed as the world’s 20th most valuable virtual currency, according to coinmarketcap.com at the time of the hack (it is currently listed at 14th). It has a market capitalization of $675M. Its tokens are pegged to fiat currencies, which lets users store and instantly transfer funds globally. According to Arthur Hayes, chief executive officer of BitMEX, a cryptocurrency derivatives venue in Hong Kong, Tether has become an important part of the bitcoin ecosystem in the way in which it helps exchanges facilitate trades between crypto and fiat currencies.
Every tether is backed 1-1 by traditional currency held in the company’s reserves, according to the company’s website. Doubts have been expressed over the cryptocurrency’s viability. Following the hack, Bloomberg news reported on skepticism earlier in the year over Tether’s international wires being blocked by its Taiwanese banks, which fueled doubts over whether or not the tokens were actually fully backed by fiat currencies.
Hayes said, “If tether is actually fundamentally compromised, that will be a very big issue for many exchanges,” Hayes said. “The knee-jerk reaction was that fear.”
The price of Bitcoin immediately dropped by as much as 5.4 percent in morning trade, but then rebounded. This is likely because there are currently no other credible pegged tokens, making Tether’s users unlikely to abandon it despite the hack.
In its post, Tether said it was offering new builds of its Omni Core software to the Tether community, and any updates should stop any movement of the stolen coins. They advised exchanges, wallets and other Tether integrates to “install this software immediately in order to prevent loss”.
Tether said that it was working with the Omni Foundation to rectify the hard fork created by the Omni Core software and to investigate ways to reclaim stranded tokens. It promised that “Once this protocol enhancement is complete, the Omni Foundation will provide updated binaries for all integrators to install” and following completion of the protocol upgrades, “Tether will reclaim the stolen tokens and return them to treasury”.