Crypto Exchange BitMart Vows Compensate for $150 Million Hack

Yueqi Yang, Bloomberg News

A person types at a backlit keyboard arranged in Danbury, U.K., on Thursday, Jan. 7, 2021. In the spring, hackers managed to insert malicious code into a software product from an IT provider called SolarWinds Corp., whose client list includes 300,000 institutions. Photographer: Chris Ratcliffe/Bloomberg , Bloomberg

(Bloomberg) -- Crypto exchange BitMart will use its own funding to compensate users affected in a security breach that saw hackers withdraw about $150 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, Sheldon Xia tweeted Monday.

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 p.m. 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 $300 million. BitMart, which says its offices are distributed in New York, Hong Kong, Singapore and Seoul, and Alexander Capital Ventures didn’t 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 Dépôt et Placement du Québec, confirmed it lost funds as a result of a hack of BadgerDAO, a decentralized finance platform.

In August, hackers stole $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% to as low as $42,296 in Saturday trading, and then pared the losses to trade at about $48,900 on Monday morning in New York. It’s still up around 69% this year.

BitMart’s hack, first revealed by blockchain security firm PeckShield Inc. and later confirmed by the exchange, was caused by a stolen private key that compromised two of its “hot wallets,” according to Xia’s tweets. PeckShield estimates the total loss is about $200 million, greater than the $150 million indicated by BitMart’s Xia.

Crypto hot wallets, unlike cold wallets, are connected to the Internet; they offer more convenience but are less secure.