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

Following a significant exploit that resulted in the loss of over $270 million in client assets, Drift Protocol has announced plans to relaunch with Tether's USDT as its primary settlement layer, thanks to a proposed funding package of up to $147.5 million from Tether and its partners. The funding package, which includes up to $127.5 million from Tether and $20 million from other partners, aims to support user recovery and reboot the platform as a USDT-based perpetual futures exchange on Solana. Previously, Drift utilized Circle's USDC as its settlement layer. The rescue package comprises a revenue-linked credit facility, ecosystem grants, and loans to market makers, with a portion of trading revenue and committed capital allocated to a recovery pool to cover approximately $295 million in user losses over time. The funding comes after a North Korea-linked group infiltrated Drift Protocol, posing as a quantitative trading firm for about six months before executing an exploit that exceeded $270 million on April 1. Drift's governance token, DRIFT, has lost around 70% of its value since the exploit. The incident led to criticism of Circle for its perceived reluctance to halt the money transfer after the exploit, with the attacker moving about $232 million in USDC from Solana to Ethereum using Circle's cross-chain transfer protocol. In response, Circle's CEO, Jeremy Allaire, stated that the company only freezes USDC wallets when directed by law enforcement or courts, not in real-time during hacks, citing the need to align closely with regulators and institutions. In contrast, USDT has demonstrated a willingness to freeze assets linked to hacks or illicit activities. As the largest decentralized perpetual futures exchange on Solana, with over 175,000 users and approximately $150 billion in cumulative trading volume, Drift's transition to USDT is expected to have significant implications for the stablecoin market. The competition between stablecoins is intensifying, with exchanges, fintechs, and traditional financial institutions vying for control of on-ramps, liquidity, and settlement layers. While USDT still dominates the market, Circle's USDC has been gaining ground, with its transaction volume outpacing Tether's in recent months. The new funding package will enable Tether to fund fee reductions and user incentives tied to Drift's transition to USDT, as well as provide liquidity support to designated market makers to bolster trading depth at relaunch. Drift's move to USDT is seen as a strategic decision to restore user funds and resume operations, positioning USDT at the center of its trading infrastructure.