Tether, the company behind USDT – a digital token backed by fiat currencies like the dollar and euro – disclosed that a hack resulted in the loss of $30.95 million worth of tokens. Tether posted an announcement to its website November 19, 2017 reporting that a “malicious action by an external hacker” resulted in the coins being “removed from the Tether Treasury wallet” and “sent to an unauthorized Bitcoin address.” Tether worked to “blacklist” or otherwise inhibit hackers from using the stolen coins following the hack.
The Tether hack illuminates the privacy, reputational, financial and recovery risks associated with issuing, owning, and storing digital currencies. These risks and events are likely to repeat themselves as more initial coin offerings (“ICO”) come to the market, and the prices of digital currencies continue to soar.
According to Tether, USDT tokens are pegged to fiat currency to decrease the volatility experienced by non-fiat backed cryptocurrencies, such as Bitcoin, and to facilitate trading of USDT tokens on crypto-exchanges. Although it is a less commonly used coin, the Tether hack rippled throughout the cryptocurrency market. News of the Tether theft contributed to a 5.4 percent decline in Bitcoin’s value the week the incident was announced (it eventually recovered).
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