Tether Theft Leaves $31 Million Exposed in Latest Crypto Heist

Controversy swept through the cryptocurrency market this week after Tether announced a significant hacking event. The startup company issued a statement on Tuesday, where it blamed malicious actors for compromising its Treasury account. More than 24 hours later, there is no information about whether the funds can be returned.

Tether Heist

Tether has announced that $31 million was wiped from its Treasury wallet on Nov. 19, with the hacker diverting the funds to an unauthorized bitcoin address. The startup company, which issues dollar-backed tokens, is now trying to prevent the funds from re-entering circulation.

The company issued the following statement following the heist:

“Yesterday, we discovered that funds were improperly removed from the Tether treasury wallet through malicious action by an external attacker. Tether integrators must take immediate action, as discussed below, to prevent further ecosystem disruption.”

Tether has also suspended its wallet services as it continues to investigate the cause of the attack. It is also releasing a fresh version of Omni Core to prevent the attacker from diverting funds into another wallet. The company is urging all its users to upgrade to the new protocol. It has also requested that major exchanges block the address  of the attacker.

The token cryptocurrency, labelled USDT, is pegged to the U.S. dollar and fully backed by assets in its reserve account. The company has assured users that all Tether tokens “remain fully backed by assets in the Tether reserve.”

It added: “The only tokens that will not be redeemed are the ones that were stolen from Tether treasury yesterday. Those tokens will be returned to treasury once the Omni Layer protocol enhancements are in place.”

Skepticism Builds

Tether has been a source of controversy long before the recent heist. Back in April, the company said U.S. dollar wire exchanges had been blocked, raising skepticism that the tokens weren’t fully backed by fiat money. According to Bloomberg, market participants have also raised questions about Tether’s relationship with Bitfinex, a cryptocurrency exchange that has also been breached.

Tether and Bitfinex have worked together for at least three years. Both companies sued Wells Fargo & Co earlier this year after the U.S. banking giant eliminated wire transfers.

The recent string of controversies could undermine Tether’s image as a facilitator of fiat currency trades. Even then, the company says on its website that it is not obliged to let users exchange USDT tokens for dollars.

In terms of price levels, USDT was last seen trading at $1.00 for a market capitalization of roughly  $675 million. Trade volumes over the last 24 hours approached $509 million. That makes it the world’s twentieth most valuable cryptocurrency.

The total value of all coins in circulation reached $250 billion on Wednesday for a new all-time high. There are 72 cryptocurrencies valued at $100 million or more. A total of 12 cryptos have a market cap exceeding $1 billion. Latest price trends show at least three more tokens could be welcomed by the billion-dollar club relatively soon.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock. 

Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi