Crypto exchange BitMart vows to compensate for $205 million hack

BitMart is the latest victim of cryptocurrency hacks, a key risk as the sector gradually goes mainstream. PHOTO: REUTERS

NEW YORK (BLOOMBERG) - Crypto exchange BitMart will use its own funding to compensate users affected in a security breach that saw hackers withdraw about US$150 million (S$205 million) of cryptocurrencies, according to a tweet by its chief executive officer.

"No user assets will be harmed," and the company expects to resume deposit and withdrawal functions on Tuesday (Dec 7), Mr Sheldon Xia tweeted Monday.

Mr Xia said he will share more information on last week's breach and the compensation arrangement in a live discussion on social-media and messaging platform Telegram at 8 pm New York time Monday.

Last week, BitMart closed a Series B funding round led by New York-based private equity firm Alexander Capital Ventures that valued the crypto exchange at more than US$300 million. BitMart, which says its offices are distributed in New York, Hong Kong, Singapore and Seoul, and Alexander Capital Ventures did not immediately respond to requests for comment.

BitMart is the latest victim of cryptocurrency hacks, a key risk as the sector gradually goes mainstream.

Last week, cryptocurrency lender Celsius Network, which has raised funds from major investors including Canadian pension fund Caisse de Depot et Placement du Quebec, confirmed it lost funds as a result of a hack of BadgerDAO, a decentralised finance platform.

In August, hackers stole US$600 million worth of crypto tokens from another DeFi protocol known as PolyNetwork in what was considered to be the largest DeFi hack ever, though they later returned the money.

The disclosure of BitMart's hack came after cryptocurrency prices plunged over the weekend. Bitcoin fell more than 20 per cent to as low as US$42,296 in Saturday trading, and then pared the losses to trade at about US$48,900 on Monday morning in New York. It is still up around 69 per cent this year.

BitMart's hack, first revealed by blockchain security firm PeckShield I and later confirmed by the exchange, was caused by a stolen private key that compromised two of its "hot wallets", according to Mr Xia's tweets.

PeckShield estimates the total loss is about US$200 million, greater than the US$150 million indicated by BitMart's Mr Xia. Crypto hot wallets, unlike cold wallets, are connected to the Internet; they offer more convenience but are less secure.

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