Bitcoin falters as hackers steal more than $30m from Tether

21 Nov 2017

Image: Wit Olszewski/Shutterstock

It’s a case of Jesus Heist Almighty as the shine is taken from what should have been a golden week for bitcoin.

Bitcoin reached a landmark valuation of $8,000 for the first time but that achievement has been mired by revelations that hackers stole more than $30m worth of bitcoin from digital currency start-up Tether.

The development also casts shade on the rise of ICOs as a legitimate funding mechanism.

Tether’s cryptocurrency is USDT, which is linked to the US dollar. On its website, Tether confirmed that $30,950,010 worth of USDT was stolen from its core treasury wallet.

“$30,950,010 USDT was removed from the Tether treasury wallet on 19 November 2017 and sent to an unauthorised bitcoin address. As Tether is the issuer of the USDT managed asset, we will not redeem any of the stolen tokens, and we are in the process of attempting token recovery to prevent them from entering the broader ecosystem.”

It warned users that not to accept the tokens if they are offered them, as they have been flagged and will not be redeemable by Tether.

Bitcoin bitten

As the heist from Tether’s wallet became known overnight, bitcoin dropped as much as 5.4pc – the most it has dropped since 13 November.

Little detail on how the hackers succeeded in taking the USDT was revealed but Tether said it is releasing a new version of the Omni Core software client to lock up the tokens that were stolen.

“Tether issuances have not been affected by this attack, and all Tether tokens remain fully backed by assets in the Tether reserve. 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,” Tether said.

Are cryptocurrencies here to stay?

Cryptocurrencies are all the rage and new funding mechanisms in the form of initial coin offers (ICOs), built around currencies such as bitcoin or ethereum based on the blockchain mechanism, are accelerating.

According to a recent report by CB Insights, in the second quarter of 2017, the total funding raised by ICOs surpassed equity financing for the first time.

As fascinating as this may be, the spectre of hackers muscling in on the action has been apparent from early on.

The ethereum network of ICOs has already succumbed to various scams, including phishing and Ponzi schemes, and such scams are understood to account for about 10pc of ICOs, according to research by Chainalysis.

Out of an estimated $1.6bn invested in ICOs by September, about $150m ended up in the hands of criminals.

Some of these heists have been considerable. The DAO, for example, was famously hacked and saw $55m siphoned off by cyber-criminals.

Updated, 9.21am, 21 November 2017: This headline has been amended to clarify the amount stolen from Tether and the company name itself.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years