Deribit Cryptocurrency Derivatives Exchange Hot Wallets Hacked for $28 Million, Withdrawals Halted: Details

Deribit becomes the latest in a long list of crypto companies to be targeted by hacks in 2022.

Written by Shomik Sen Bhattacharjee, Edited by Siddharth Suvarna | Updated: 2 November 2022 19:19 IST

Photo Credit: Medium/ Deribit

Panama-headquartered Deribit was officially launched in June 2016

Highlights

Deribit stores 99 percent of its customers' funds in cold storage
Deribit said the attack was limited to hot wallets
The exchange said its losses are covered

Crypto derivatives platform Deribit was hacked for $28 million (roughly Rs. 231.7 crore) late on November 1, according to an announcement posted on Twitter. The trading platform says that its clients' funds are safe, adding that the losses have been covered by its own reserves, meaning that Deribit's insurance fund will not be affected by the hacking incident. Deribit claims that it stores 99 percent of its customers' funds in cold storage addresses. The attacker managed to compromise the exchange's hot wallets for Bitcoin, Ether, and USD Coin.

The exchange added that these wallets have been isolated and quarantined. Consequently, Deribit affirmed that most client accounts, such as Fireblocks, were not affected. Since the hack only affected these hot wallets, Deribit also emphasised that any assets in cold storage were completely safe.

Client assets, Fireblocks or any of the cold storage addresses are not affected. It's company procedure to keep 99% of our user funds in cold storage to limit the impact of these type of events.

The hack is isolated & quarantined to our BTC, ETH and USDC hot wallets.
— Deribit (@DeribitExchange) November 2, 2022

Although the exchange said it is continuing to operate, it is implementing several security measures for now. For instance, it said it would have to temporarily suspend withdrawals, even for third-party custodians Copper Clearloop and Cobo.

However, Deribit confirmed that it was still processing deposits customers had already deposited, albeit at a somewhat slower pace. It said it has had to raise the minimum number of confirmations required to complete transactions, which may cause delays.

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The fact that the exchange ensured the security of client funds and covered losses from company reserves rather than its insurance fund comes as good news to users.

According to data provided by the derivatives data platform Coinglass, Deribit continues to rule the roost in the cryptocurrency options sector. The Dutch derivatives exchange, which is currently based in Panama, has an 89.76 percent share of the total Bitcoin options interest. Chicago-based derivatives giant CME comes in second place with a 6.87 percent share of the market. OKX and FTX are also in the top five.

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Meanwhile, on the Ethereum options market side, Deribit has near-complete control with a whopping 96.64 percent share.

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