Hackers linked to North Korea’s Lazarus Group drained nearly $1.5 billion from Bybit’s ether cold wallets on February 21. Following this, panic spread across the platform as users rushed to withdraw funds. Blockchain data from DeFiLlama revealed total assets plummeted from $16.9 billion to $11.2 billion within hours. Meanwhile, CEO Ben Zhou activated emergency protocols, urging staff to prioritise withdrawal processing and client communication.
Initial investigations suggest the breach targeted Bybit’s Safe-integrated cold wallets. Notably, Safe temporarily disabled its smart wallet features to bolster security, inadvertently freezing $3 billion in USDT reserves. “We faced a perfect storm,” Zhou admitted during a live X Spaces session.
Bank Run
Within two hours of the hack, users requested over $100,000 in withdrawals per second. Ultimately, $5.5 billion flooded out, marking crypto’s largest-ever bank run. Despite reserves covering liabilities, liquidity crunched as Safe’s shutdown trapped critical funds. Zhou’s team worked overnight, developing custom software to bypass frozen wallets.
Remarkably, 99.994% of 350,000 withdrawal requests were processed within 10 hours. “Only 2,100 remain,” Zhou announced, praising staff endurance. Meanwhile, auditors like Hacken confirmed reserves still exceeded user balances despite the frenzy.
Ethereum Rollback Proposal
Desperation prompted radical solutions. Zhou disclosed discussions with Ethereum co-founder Vitalik Buterin about a potential blockchain rollback to reverse the theft. Although technically complex, the idea gained traction among figures like BitMEX’s Arthur Hayes.
However, Zhou clarified that any rollback required community consensus. “It’s not a one-man decision,” he stressed, acknowledging risks of chain splits. Concurrently, Chainalysis traced stolen funds, fuelling hopes for recovery. Authorities in Singapore and Interpol also joined the investigations.
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Crypto Unites to Rescue Bybit
The crisis showcased industry solidarity. Competitors like Bitget and Crypto.com offered loans, technical aid, and wallet blacklisting. “Bybit would’ve done the same,” Bitget’s Gracy Chen stated. Tether, Galaxy Digital, and others also pledged support, prioritising sector stability over rivalry.
Zhou thanked partners in a heartfelt message, noting, “Unity proves we’re stronger than malicious actors.” Additionally, Hacken’s audit transparency eased user fears, reinforcing trust.
Looking Ahead
Bybit now seeks alternatives to Safe wallets, vowing upgraded security. While hack origins remain unclear, Zhou assured no internal device compromises. As the exchange rebuilds, its ordeal underscores crypto’s fragility and resilience. “We’ll emerge stronger,” Zhou declared, embodying a sector determined to transform crisis into catalyst.
Written By Fazal Ul Vahab C H
