Tether Swoops In With $148M to Save Drift Protocol — and Takes USDC’s Spot in the Process

TLDR

• Tether is leading a $147.5M recovery package for Drift Protocol after a $280M exploit on April 1
• North Korea-linked hackers posed as a quant trading firm for six months before striking
• Drift will switch from Circle’s USDC to Tether’s USDT as its core settlement layer
• Circle faced criticism for not freezing funds as $232M in USDC moved across its own bridge
• Drift’s governance token has lost around 70% of its value since the hack

Drift Protocol, one of Solana’s largest decentralized exchanges, was hit by a $280 million exploit on April 1. Now Tether is stepping in with a rescue plan.

Tether is leading a funding package of up to $147.5 million to help Drift recover user funds and relaunch its platform. Tether is contributing $127.5 million, with the remaining $20 million coming from undisclosed partners.

The funding is structured as a revenue-linked credit facility, meaning a portion of Drift’s trading revenue will flow into a recovery pool over time. The goal is to repay roughly $295 million in total user losses.

As part of the deal, Drift will drop Circle’s USDC as its settlement layer and replace it with Tether’s USDT. Tether also plans to offer fee reductions and liquidity support to market makers when the platform relaunches.

Drift is the largest perpetual futures DEX on Solana, with over 175,000 users and around $150 billion in cumulative trading volume since launching in 2021.

How the Hack Happened

The attackers were linked to North Korea. They posed as a quantitative trading firm and spent about six months building access inside Drift before executing the exploit on April 1.

The hackers moved roughly $232 million in USDC from Solana to Ethereum using Circle’s own Cross-Chain Transfer Protocol. The transfers happened across more than 100 transactions over six hours.

Blockchain investigator ZachXBT pointed out that Circle had a window to act but did not freeze any funds during that time. Crypto executives and security researchers were openly critical of Circle’s response.

Circle’s CEO Jeremy Allaire later said the company only freezes USDC wallets when directed by law enforcement or courts. He said acting unilaterally during a hack carries legal risk.

Drift’s governance token fell around 70% in value following the exploit. Circle’s stock also dropped about 10% on April 9 after the criticism gained traction, though it has since recovered and is up roughly 20% from that low.

Stablecoin Competition Sharpens

The decision to replace USDC with USDT puts this incident directly in the middle of the ongoing rivalry between the two largest stablecoins.

Tether’s USDT still leads by a wide margin, with around $185.5 billion in supply compared to Circle’s $78.6 billion. But Circle had been gaining ground, with its transaction volume outpacing Tether’s in recent months.

Tether has a track record of freezing wallets linked to hacks and illicit activity, which has become a key point of comparison following the Drift incident.

Drift said that as of now, the transition to USDT positions the stablecoin at the center of its trading infrastructure while the recovery process gets underway.

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