Is Phemex Safe? Proof of Reserves, Wallet Security and Asset Protection Explained
On January 23, 2025, Phemex lost over $70 million in a Lazarus Group attack on its hot wallets. A month later, the same hackers struck Bybit — this time for $1.5 billion. The surge in cybercriminal activity is forcing traders to rethink the balance between centralized and decentralized services. The Phemex team shared with ForkLog how the exchange reinforced its security framework and strengthened its defenses after the breach. From DeFi Back to CEX? Any centralized exchange (CEX) is, by definition, delegated custody of private keys. The user trades control for convenience and accepts the risks tied to bad-faith management of the venue and external attacks on hot wallets. The alternative to CEXes are DeFi services — not just DEXes and perp DEXes, but also lending protocols and liquid staking, since most centralized exchanges have long moved beyond trading and offer a wide range of financial products. April 2026 turned into the worst month for DeFi protocols in years. It started with the attack on Drift Protocol on April 1 — $280 million drained. The incident was linked to TraderTraitor, a Lazarus Group subunit behind the Bybit and Phemex breaches. Two weeks later, the exploit of Kelp Protocol for $293 million dealt a blow to Aave, the largest lending market. The attackers stole rsETH tokens and used them as collateral to siphon real funds. That triggered a wave of withdrawals: according to data from Standard Chartered, users pulled $17 billion out of Aave, and active loans shrank by $5.5 billion. The attacks continued through the end of the month. On April 22, hackers compromised the liquid staking platform Volo on Sui and drained $3.5 million. On April 27, the lending platform Scallop on the same blockchain was hit. On April 28, three projects were breached at once: cross-chain network ZetaChain ($334,000), Ethereum infrastructure project Syndicate ($330,000) and Sui-based exchange Aftermath Finance ($900,000). On April 30, attackers exploited the Wasabi protocol — losses topped $5 million. Many investors who held stablecoins and Ethereum in "battle-tested" protocols like Aave and Lido began moving capital out. But not everyone wants to give up the extra yield. Some users are again considering Earn products and a return to familiar trading on centralized exchanges. CEXes themselves have stepped up security in recent years along three key lines: Proof-of-Reserves (PoR) — cryptographic proof that an exchange holds assets covering its liabilities to clients. Became the de facto standard after the collapse of FTX in November 2022. multi-tier custody — splitting funds across cold, warm and hot wallets with multisig. compensation mechanisms — exchanges have started setting up insurance funds for unforeseen events. Phemex builds trust at the intersection of these three elements. Let's unpack what stands behind each. Proof-of-Reserves Phemex was one of the early centralized exchanges to release a Proof-of-Reserves system, launching its Merkle-tree version on November 21, 2022 — ten days after FTX's collapse. At launch, the system supported bitcoin, Ethereum, USDT and USDC. By May 2026, the list had grown to 11 assets, including TRX, BNB, XRP, SOL, SUI and AVAX. Reports come out monthly. As of May 2026, the combined reserve ratio stood at 129.75% — assets exceeded the exchange's liabilities to clients. That creates a buffer for extreme market conditions or operational disruptions. Source: Phemex. “Reserve transparency should be practical, repeatable, and easy for users to verify. Monthly Proof of Reserves helps turn that principle into a regular operating standard. For us, being user-first means giving traders the information they need to assess the platform for themselves, not asking them to rely only on statements of trust,” said Phemex CEO Federico Variola. The Merkle tree lets users verify that their own balance is included in the overall snapshot without exposing other clients' data. "Client balances are hashed in pairs, those hashes are hashed in pairs again, and so on until a single value remains — the Merkle root. Changing any balance by even 1 satoshi changes the root entirely. To confirm their funds are accounted for, a user copies their Hashed Client ID from the personal account and verifies it on the Proof-of-Reserves page," the Phemex team explains. Some of the exchange's cold wallet addresses are public. Anyone can check the balances through block explorers of the relevant networks. Where User Assets Are Stored Phemex uses three-tier custody: cold wallets — over 70% of client funds. Private keys are fully isolated from the internet. Each transaction requires sign-off from several independent signers physically separated from one another. All transfers are processed manually after multiple verifications; warm wallets — about 20% of assets. A secure bridge between cold and hot storage. A limited volume for liquidity management without direct internet exposure; hot wallets — under 8% of funds. Handle day-to-day deposits and withdrawals. Even if hot wallets are fully compromised, more than 90% of capital remains untouched in cold and warm storage. Hot wallet private keys are protected by Shamir Secret Sharing: a key is mathematically split into N encrypted fragments, and recovery requires K of N (for example, 3 of 5). The fragments are stored in separate locations, and compromising any one of them is useless without the rest. The fragments themselves are processed inside AWS Nitro Enclaves — isolated computing environments inaccessible to the operating system and to administrators. The custody infrastructure is reinforced by a partnership with Fireblocks, an institutional provider with a multi-party computation (MPC) custody model. MPC distributes cryptographic shares of a key across several protected environments. No single device and no single employee holds the full private key. "On top of that, there is round-the-clock wallet monitoring: automated analysis of activity across all three tiers, tracking transaction frequency and size, recipient addresses and deviations from behavioral patterns. Suspicious transactions are paused automatically and flagged for manual review," the team adds. What Protects the Account Account protection measures on Phemex are activated by the user. Only two-factor authentication is mandatory — for login, withdrawals, API key creation and security setting changes. To raise account security further, a user can set up: an anti-phishing code — a text string shown in every legitimate email notification from the exchange. If the code is missing or doesn't match, the message is a phishing attempt; a withdrawal address whitelist. This protects against a scenario where an attacker gains access to the account and tries to quickly send funds to a new address. At the infrastructure layer, Phemex relies on Palo Alto Networks corporate firewalls, network segmentation (trading engines are separated from web servers, wallet infrastructure from public APIs) and globally distributed DDoS protection. According to the exchange's data, uptime in 2025 reached 99.999%. What the Stress Test Revealed A breach is the strongest counterargument to any claim of "complete security." In January 2025, Phemex's internal monitoring detected anomalous activity in hot wallets. Within hours, Cyvers Alerts and PeckShield publicly reported suspicious transactions. Phemex fully suspended deposits and withdrawals across all networks. The exchange covered all user losses from corporate reserves. Unlike Binance with its dedicated SAFU insurance fund, Phemex has no separate insurance pool — payouts come straight from the corporate balance sheet. After the incident, the exchange rebuilt its custody system: introduced the three-tier architecture with the warm intermediate layer, dropped hot wallet share below 8%, added Fireblocks MPC and AWS Nitro Enclaves, and expanded address monitoring. What to Consider Before Signing Up Phemex remains a centralized exchange. Neither custody architecture nor a Proof-of-Reserves system makes a CEX functionally equivalent to self-custody in a cold wallet. The exchange is registered as a Money Services Business (MSB) with FinCEN in the United States and holds a Virtual Asset Service Provider (VASP) license in Poland. For users from Russia, Belarus and Ukraine, restrictions apply on fiat operations — deposits and withdrawals through partner Legend Trading are unavailable. Know Your Customer (KYC) verification is required for trading and withdrawals. Without it, only Phemex Academy materials are accessible. The check is run by Jumio and takes 2–5 minutes. For more on Phemex's functionality, see the March exchange review. Phemex Exchange Review 2026: Fees, Security, Trading Bots, and Earn Products Phemex started in 2019 as a derivatives exchange. Six years later, it trades 600+ crypto assets, tokenised stocks of Apple and Tesla, gold and silver futures, and serves over 10 million users. ForkLog So, Is Phemex Safe? The short answer: yes, if "safety" is understood in terms applicable to a CEX. After the breach, Phemex compensated users, rebuilt its custody system and made transparency the core of its public communication. By spring 2026, the picture looks like this: nearly 130% combined PoR with monthly publication, public addresses for on-chain verification, over 70% of assets in cold wallets, multisig for critical operations. Custodial risk is built into any CEX. The minimum account protection set includes two-factor authentication, anti-phishing codes and withdrawal whitelists. Regardless of an exchange's reputation, large amounts are best stored outside it, on a hardware wallet.
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Hyperliquid, Pump.fun, and EdgeX distributed $96.3M to holders in 30 days. Discover how each platform funded payouts and what it signals for DeFi. The post Three DeFi Platforms Distribute $96M to Token Holders in One Month appeared first on Blockonomi.
Capital B raises $17.8 million to expand bitcoin treasury holdings
Capital B has raised €15.2 million ($17.8 million) from institutional investors, including Blockstream CEO Adam Back and French asset manager TOBAM. According to Capital B’s May 11 press release, the company issued 23 million shares with attached warrants at €0.66…
Australia plans capital gains tax changes affecting crypto investors: Report
The Albanese government’s budget plans to replace the 50% capital gains tax discount on assets held over 12 months with a model taxing full real gains adjusted for inflation.
Veteran investor bets on Ethereum as AI agents drive tokenization demand
AI agents need “food,” and that food is not physical food; it is tokens, said Jordi Visser.
7 Democrats seen as ‘key’ to advancing CLARITY Act: Galaxy
The CLARITY Act, introduced in July 2025, stalled in January after Coinbase withdrew its support for the legislation over concerns about legal protections and stablecoin yields.
Understanding AI Agents: The Technology Reshaping Business Automation in 2026
AI agents go beyond chatbots to complete tasks autonomously. Learn why 85% of companies plan to deploy custom agents and how crypto payments are entering the mix. The post Understanding AI Agents: The Technology Reshaping Business Automation in 2026 appeared first on Blockonomi.
South Korea's Crypto Market Takes Massive Hit
South Korea’s once-thriving cryptocurrency market is facing an existential crisis amid a perfect storm of plunging trading volumes.
Cardano (ADA) Eyes Crucial Breakout: Is a Rally to $0.45 on the Horizon?
Cardano (ADA) consolidates near $0.27 as traders watch for a breakout above $0.30. Key support at $0.25 could fuel a rally to $0.45 and beyond. The post Cardano (ADA) Eyes Crucial Breakout: Is a Rally to $0.45 on the Horizon? appeared first on Blockonomi.
Goldman Sachs delays Fed rate cut outlook to December 2026 amid inflation pressures
Prolonged high rates may tighten financial liquidity, impacting crypto markets and potentially strengthening the US dollar, affecting global demand. The post Goldman Sachs delays Fed rate cut outlook to December 2026 amid inflation pressures appeared first on Crypto Briefing.
Renegade recovers $190K after hacker returns 90% of stolen funds
This incident highlights the critical need for robust security audits in DeFi, as even minor oversights can lead to significant financial risks. The post Renegade recovers $190K after hacker returns 90% of stolen funds appeared first on Crypto Briefing.
From $8 to $81,700: What Bitcoin Was Worth on Every Mother’s Day Since 2011
This Mother’s Day, bitcoin was trading around $81,700, a figure that would have seemed impossible when it sat at $8 on the same holiday in 2011, making this the second-highest Mother’s Day price in bitcoin’s 15-year history. A Mother’s Day Gift That Kept Compounding Every second Sunday in May offers a unique lens through which […]
UK government bonds weaken as pressure on Starmer mounts
Rising gilt yields could strain UK economic conditions, impacting mortgages and corporate borrowing, amid political uncertainty for Starmer. The post UK government bonds weaken as pressure on Starmer mounts appeared first on Crypto Briefing.
ECB’s de Guindos urges caution on rates in parting remarks, signaling relief for crypto markets
De Guindos's caution on rate hikes may stabilize crypto markets, fostering a favorable liquidity environment for risk assets to thrive. The post ECB’s de Guindos urges caution on rates in parting remarks, signaling relief for crypto markets appeared first on Crypto Briefing.
German police dismantle resurrected Crimenetwork marketplace, arrest administrator
The dismantling of Crimenetwork underscores the need for international cooperation in cybercrime and may prompt stricter cryptocurrency regulations. The post German police dismantle resurrected Crimenetwork marketplace, arrest administrator appeared first on Crypto Briefing.
Australia considers replacing 50% capital gains tax discount on crypto
Australia’s Labor government has proposed replacing the country’s long-standing capital gains tax discount with an inflation-indexed model that could raise tax liabilities for crypto investors holding assets over extended periods. The Australian Financial Review reported on Sunday, citing people familiar…
Tankers disable trackers in Hormuz amid rising US-Iran tensions
Rising tensions and tanker actions in Hormuz could destabilize global oil markets, impacting shipping routes and economic stability. The post Tankers disable trackers in Hormuz amid rising US-Iran tensions appeared first on Crypto Briefing.
Bitcoin briefly tests $82,000
On May 12 bitcoin briefly traded above $82,200, the highest level since the start of the month amid institutional inflows. Hourly chart, BTC/USTD on Binance. Source: TradingView. At the time of writing, bitcoin trades at $80,859 (+0.1% over 24 hours). Analysts at Zeus Research explained the rise by strong demand for spot bitcoin-ETF and improving macroeconomic conditions. According to SoSoValue, net inflows into crypto funds totalled $622.75 million last week. Positive momentum has persisted for six straight weeks, with more than $3.4 billion invested over the period. Source: SoSoValue. Progress on the CLARITY Act has offered an additional tailwind. Hearings in the relevant US Senate committee are scheduled for May 14. Bitrue Research Institute noted that easing political tensions in the Middle East also helped dampen volatility. Even so, analysts warned of a pullback toward $78,000–$80,000 if buying does not resume. Among altcoins, SUI led gains. Over 24 hours, it jumped 20% to $1.27. Hourly chart, SUI/USTD on Binance. Source: TradingView. The rally likely reflects SUI Group’s decision to stake 108.7 million coins, reducing available supply. Interest was also supported by the launch of futures on CME and the project’s partnership with fintech firm Paga to enable cross-border payments. XRP broke multi-week resistance at $1.45. The rise was accompanied by a spike in trading volumes, indicating activity from large players. Hourly chart, XRP/USTD on Binance. Source: TradingView. The token moved out of the $1.41 area. Within an hour, trading volume exceeded $169 million and price reached a local high of $1.507, before retreating back to $1.45. Analysts noted the importance of clearing $1.45—this level had capped rallies since April. Heavy volume confirms the move, though momentum faded near the psychological $1.50 mark. Trader and analyst Michaël van de Poppe highlighted the upside potential for altcoins. According to him, most assets have fallen by 90% since the summer of 2024 and are now starting to recover. Most #Altcoins have gone down by 90% since the Summer of '25.They are barely breaking out, but the upside is enormous.Things can go really quickly in a matter of weeks, and these are the first signs that we're seeing on the markets. I don't think this will end relatively…— Michaël van de Poppe (@CryptoMichNL) May 10, 2026 He noted that the market shows early signs of a move that could accelerate within weeks, calling the upside “enormous”. At the same time, the trader warned of sharp pullbacks. He recommended gradually increasing the share of stablecoins in portfolios to buy dips. Van de Poppe does not expect the current cycle to end soon. Short-term holders’ profit Unrealised profit for bitcoin short-term holders (STH) reached $19.25 billion amid the price rise, according to an analyst using the pseudonym Zizcrypto. $BTC: STH Unrealized Profit Rebuilds Below Prior PeaksShort-Term Holder supply, defined as coins younger than 155 days, is seeing unrealized profit rise again as Bitcoin trades near $81K.As of May 10, STH Unrealized Profit stands at $19.25B, showing renewed growth while… pic.twitter.com/dUrdlgH8Zi— Zizcrypto (@_Crypto_glass) May 11, 2026 STH refers to wallets that hold coins for fewer than 155 days. Their profit is rising but remains well below previous peaks. For comparison: in October 2025 it was $50.16 billion, and in January 2026 — $28.35 billion. The analyst believes selling zones may form at lower profit levels than before. This implies the market does not need to return to extreme profit readings to start a correction. The current set-up suggests scope for further gains. However, if the rally continues, newer bitcoin holders will become more sensitive to price changes. Zizcrypto stressed that profit growth by itself does not confirm immediate selling. Short-term investors’ behaviour will be a key factor if prices continue to recover. On May 8, the price of the leading cryptocurrency fell below $80,000 amid US strikes on targets in Iran.
CLARITY Act vote nears as Galaxy maps key Democrats
Galaxy says seven Senate Democrats may decide the CLARITY Act’s path as the crypto market structure bill heads to markup this week.
Analyst Predicts Massive Altcoin Rally After Bitcoin Run
Donald Trump rejects Iran’s peace proposal, oil prices surge over 4%
Rising oil prices from geopolitical tensions may fuel inflation, impacting global markets and increasing pressure on speculative assets. The post Donald Trump rejects Iran’s peace proposal, oil prices surge over 4% appeared first on Crypto Briefing.
Capital B Raises €15.2 Million to Expand Bitcoin Treasury Holdings
TLDR: Capital B issued 23,038,844 ABSA units at €0.66 each, raising €15.2M from global institutional investors. Net proceeds of €14.4M will fund 182 additional BTC, bringing total potential holdings to 3,125 BTC. Full exercise of 92,155,376 warrants could generate an additional €99.1M for Capital B’s treasury. Strategic investors Adam Back and TOBAM increased their stakes [...] The post Capital B Raises €15.2 Million to Expand Bitcoin Treasury Holdings appeared first on Blockonomi.
Strategy’s Saylor: We’d Buy 10 to 20 Bitcoin for Every One We Sell
TLDR: Strategy Chairman Michael Saylor confirmed the firm would buy 10 to 20 BTC for every bitcoin it sells. CEO Phong Le said bitcoin sales would only fund STRC dividends when more accretive than equity sales. Strategy holds 818,334 BTC worth roughly $66.2 billion, with JPMorgan projecting $30B in buys this year. Strategy’s software segment [...] The post Strategy’s Saylor: We’d Buy 10 to 20 Bitcoin for Every One We Sell appeared first on Blockonomi.
South Korea condemns attack on vessel amid Strait of Hormuz tensions
Rising tensions in the Strait of Hormuz could destabilize regional security and impact global oil markets, complicating diplomatic resolutions. The post South Korea condemns attack on vessel amid Strait of Hormuz tensions appeared first on Crypto Briefing.
Whitehat returns $190K to Renegade hours after hacking the protocol
The whitehat hacker said the decision to exploit Renegade’s dark pool was made to protect the funds and safety of DeFi users.