BitMart Will Use Its Own Reserves To Compensate The Hack Victims

The crypto exchange BitMart will use its own reserves to compensate the hack victims of the $196 million hacking incidents that we talked about previously in our crypto news.

Sheldon Xia as the CEO of BitMart said that the exchange will refund the users that fell a victim to the large-scale hack on Saturday night out of their own funds. Xia announced on Monday to confirm that the incident was caused by a stolen private key of the two of the exchange’s hot wallets. Xia wrote:

“BitMart will use our own funding to cover the incident and compensate affected users. “We are also talking to multiple project teams to confirm the most reasonable solutions such as token swaps. No user assets will be harmed.”

2/4 BitMart will use our own funding to cover the incident and compensate affected users. We are also talking to multiple project teams to confirm the most reasonable solutions such as token swaps. No user assets will be harmed.

— Sheldon Xia (@sheldonbitmart) December 6, 2021

Bitmart suffered a large-scale security breach that resulted in the ETH and BSC hot wallets of the exchange being compromised. Unlike the so-called cold wallets that are hardware devices such as USB Drives that store cryptos offline, hot wallets are connected to the internet which allows for easier and faster transactions. The convenience of using hot wallets came with a trade-off because they are more vulnerable to online attacks. The announcement reported that the hackers managed to drain $150 million in stolen funds but according to blockchain security firm PeckShield, the losses reached close to $200 million with $100 million issued on the Ethereum blockchain and $96 million in BSC-based assets stolen.

PeckShield noticed the breach over the weekend and pointed to an outflow of tens of millions of dollars from one of the exchange’s addresses. The analysts said the attack was simple as the hacker swapped the stolen token via a decentralized exchange aggregator 1Inch and also used Tornado Cash as a mixer. BitMart said:

“The affected ETH hot wallet and BSC hot wallet carry a small percentage of assets on BitMart and all of our other wallets are secure and unharmed.”

Pretty straightforward: transfer-out, swap, and wash @sheldonbitmart pic.twitter.com/LyA03sbgCZ

— PeckShield Inc. (@peckshield) December 5, 2021

The Cayman Islands-based exchange is conducting a security review and has suspended all deposits and withdrawals. Xia said the team is confident that these functions will be restored gradually. The incident happened less than 72 hours after the BadgerDao hack attack.