Tether Gives Drift $147 Million to Help Address Crypto Hack

Following a cyberattack, Drift Protocol is relaunching with Tether’s USDT stablecoin as its settlement layer.

The cryptocurrency exchange, which had previously used Circle’s USDC as its settlement layer, announced the reboot on Thursday (April 16) along with new funding of up to $147.5 million from Tether and its partners.

“During the initial phase of the collaboration, a substantial portion of exchange revenue, together with committed support capital, is intended to fund a dedicated user recovery pool,” Drift said in a news release. “This structure is designed to address the $295 million in outstanding user losses over time as exchange revenue grows. Drift has been actively working with law enforcement and blockchain forensics partners to track and recover stolen assets. Any funds recovered would be contributed to the recovery pool.”

Drift, the largest perpetual futures exchange on the Solana blockchain, had suspended activity on its platform on April 1 after discovering an exploit carried out by a North Korea-linked group.

Following the attack, some critics said Circle could have acted faster to freeze funds that were stolen from Drift. During the incident, hackers used Circle’s cross-chain transfer protocol to move about $232 million in USDC from Solana to Ethereum, according to a report by CoinDesk earlier this month.

But during a press conference in Seoul earlier this week, Circle CEO Jeremy Allaire said the stablecoin issuer does not freeze wallets without a formal legal basis.

He characterized USDC, the second-biggest dollar-pegged stablecoin after Tether’s, as a regulated financial product and not a tool for real-time intervention.

“Circle has a very, very clear performance obligation under the law,” Allaire said, per CoinDesk. “Circle follows the rule of law, and we are able to undertake actions such as freezing a wallet at the direction of law enforcement or the courts.”

Allaire argued that USDC is part of the traditional financial system, and therefore subject to oversight. He contended that the decision to freeze funds should not be made at the discretion of cryptocurrency companies dealing with an exploit, but should rather come in response to court orders or requests from law enforcement.

The report noted that Tether takes a more proactive stance, repeatedly freezing funds connected to hacks and illegal activity within hours.

As for Drift, the company said it is undergoing a “full protocol reboot,” with each component subject to independent audits before go-live. Drift added that it will “implement hardened operational security practices across the entire stack – from key management, to infrastructure, to team access controls.”