The former two-weight world champion was captured on video appearing to cut lines of the drug with a credit card before snorting them through a rolled up bank note.
Hatton, 31, has not fought since losing inside two rounds to Manny Pacquiao in May 2009 and has recently hinted he may retire.
Now he faces the biggest fight of his life outside of the ring and admits he has been urged by family and friends to seek help.
Responding to the News of the World allegations, publicist Max Clifford said: “I have spoken to Ricky, he is very upset and very subdued, very flat.
“He feels he’s let everybody that matters down badly, his friends, his family, his fans and of course most of all himself, that he is, in his own words, he’s been in a bad place for some time, probably before even his last fight and obviously he’s really upset about what has happened but he totally takes responsibility.
“He just wants to let everybody know how he feels, he’s got to sort himself out. He feels devastated and we all hope this will be the wake-up call.”
Klitschko: Haye is talking garbage
WLADIMIR Klitschko says David Haye should stop talking “garbage” and take up the challenge of a heavyweight unification showdown.
Klitschko retained his WBO and IBF titles with a 10th-round stoppage of Samuel Peter in Frankfurt on Saturday.
He said: “I’m getting tired of David Haye, we're talking about him a lot. I hope he’ll stop talking garbage and follow through with his promises.”