Drift Secures $148 Million in Funding from Tether and Partners to Recover from Exploit

In the aftermath of a devastating North Korean-led exploit, Drift Protocol has announced plans to relaunch with Tether's USDT as its primary settlement layer, following the securing of a substantial funding package totaling up to $147.5 million from Tether and its partners. This deal, which includes $127.5 million from Tether and $20 million from other partners, is designed to facilitate user recovery efforts and reboot the platform as a USDT-based perpetual futures exchange on the Solana blockchain. Previously, Drift relied on Circle's USDC for its settlement needs. The rescue package encompasses a revenue-linked credit facility, ecosystem grants, and loans to market makers, with a portion of trading revenue and committed capital being directed towards a recovery pool aimed at covering approximately $295 million in user losses over time. The exploit, which occurred on April 1, saw a North Korea-linked group infiltrate Drift Protocol, posing as a quantitative trading firm for about six months before executing the exploit, resulting in losses exceeding $270 million. The incident led to Drift's governance token, DRIFT, losing around 70% of its value. Circle, the issuer of USDC, faced criticism from the crypto community for not halting the transfer of funds following the exploit, with the attacker moving approximately $232 million in USDC from Solana to Ethereum via Circle's cross-chain transfer protocol. Critics argued that Circle could have acted faster to blacklist wallets and freeze funds, potentially slowing down or preventing the attacker from transferring the assets. However, Circle's approach is to only freeze USDC wallets when directed by law enforcement or courts, reflecting its strategy to closely align with regulators and institutions. In contrast, USDT has demonstrated a greater ability to freeze funds linked to hacks or illicit activities. As the largest decentralized perpetual futures exchange on Solana, with over 175,000 users and a cumulative trading volume of roughly $150 billion, Drift's transition to USDT marks a significant development in the ongoing competition within the stablecoin market. With USDT still maintaining a significant lead in terms of market supply, Circle's USDC has been steadily gaining ground, driven by its regulatory alignment and growing institutional adoption. The new funding package will also enable Tether to support fee reductions and user incentives tied to Drift's transition to USDT, while providing liquidity support to designated market makers to enhance trading depth at relaunch. This strategic move positions USDT at the core of Drift's trading infrastructure, offering a pathway to restore user funds and resume operations.