Phemex enhances security following a $70 million hack, implementing Proof-of-Reserves and multi-tier storage to protect user assets.
Phemex has taken significant steps to bolster its security protocols after a hack in January 2025 resulted in a loss of over $70 million. The attack, attributed to the Lazarus Group, raised concerns among traders about the safety of centralized exchanges (CEX) in light of increasing cyber threats.
In response to the breach, Phemex's management has outlined key enhancements to its security framework, focusing on three critical areas: Proof-of-Reserves (PoR), multi-tier fund storage, and compensation mechanisms for users.
Shift in User Trust
With the rise in cyberattacks, including a devastating breach at Bybit that resulted in $1.5 billion in losses shortly after the Phemex incident, many investors are reevaluating their reliance on centralized exchanges. This trend has led some to consider decentralized finance (DeFi) alternatives, although DeFi protocols themselves have faced significant attacks, such as a $280 million breach of Drift Protocol in April 2026.
Despite these concerns, Phemex has reinforced its commitment to user security by implementing PoR shortly after the FTX collapse in late 2022. This system now covers a range of assets, with a current coverage ratio of 129.75%, ensuring that reserves exceed obligations to clients.
"Monthly publication of Proof-of-Reserves allows users to independently verify the platform's integrity," said Phemex CEO Federico Variola.
The PoR mechanism utilizes Merkle trees, enabling users to confirm their balances without exposing other clients' data. Additionally, Phemex employs a three-tier storage system: over 70% of user funds are stored in cold wallets, which are isolated from online threats, while only a minimal portion is kept in hot wallets for operational purposes.
Enhanced Account Protection
Phemex also offers users various account protection features. While two-factor authentication is mandatory, users can opt for additional security measures, including an anti-phishing code and a withdrawal address whitelist, to protect against unauthorized access.
Infrastructure-wise, Phemex employs advanced security technologies, including corporate firewalls and DDoS protection, achieving an impressive uptime of 99.999% in 2025. Following the January hack, the exchange restructured its storage system to further minimize risk, emphasizing a balance between user convenience and asset security.
Conclusion: Is Phemex Safe?
In light of its recent security upgrades and commitment to transparency, Phemex appears to be a safer option for traders, as long as they understand the inherent risks associated with centralized exchanges. With ongoing efforts to enhance user protection and asset management, Phemex is positioning itself as a trustworthy platform in an increasingly volatile market.
