December 2, 2022

FTX Investigating Potential $515 Million Hack After Filing For Bankruptcy

Collapsed cryptocurrency exchange FTX said on Saturday it was investigating, a day after filing for bankruptcy. “Unauthorized Transactions” Flows from its accounts as crypto researchers document suspicious transfers $515 million It could be the result of a hack or theft.

John J. Ray III, the newly installed CEO of FTX, is a Report “There has been unauthorized access to certain assets” and the company has been in contact with law enforcement officials and regulators. As part of the bankruptcy process, the company is moving its remaining crypto funds to more secure storage.

The suspicious movement of funds marked a new twist in the dramatic events that began earlier in the week, when the exchange faced a drain on deposits and was unable to meet demand. Friday, Company A bankruptcy petition was filedAnd FTX’s founder and chief executive, Sam Bankman-Fried, announced his resignation, to be replaced by corporate turnaround expert Mr. Ray was appointed.

Mr. The explosion at Bankman-Fried’s cryptocurrency exchange has already cost customers billions of dollars in lost crypto deposits, setting off law enforcement investigations that could lead to criminal charges.

But the full impact of FTX’s dramatic decline is beginning to take shape. In his relatively short time as a multi-billionaire, Mr. Bankman-Fried built a surprisingly vast business empire, with investments in dozens of small crypto companies and partnerships with businesses such as Anthony Scaramucci’s investment firm Skybridge Capital and the NBA’s Miami Heat. He also became an influential Democratic donor, promising to spend as much as he could $1 billion During the 2024 election cycle.

Now, all those efforts have been thrown into disarray.

BlockFi, Mr. A crypto lending platform backed by Bankman-Fried said last week it was suspending operations as a result of the collapse. Mr. Bankman-Fried’s heavily promoted cryptocurrency, Solana, has fallen in price. And the team behind FTX Future Fund, Mr. A charity banked by Bankman-Fried announced their resignations.

News of the theft began circulating on Twitter Friday night as crypto enthusiasts pored over public transaction records documenting the movement of cryptocurrencies. A report by crypto research firm Elliptic estimates the amount stolen or hacked at $515 million.

The exact nature of the transfers is not clear. It could be the result of a hacker gaining access to the exchange system, or an insider with special access could be absconding with the funds. Asked about transfers, Mr. “We’re sorting it out with bankruptcy,” Bankman-Fried said in a text to The New York Times.

In its post, Elliptic said the suspiciously transferred cryptocurrencies from FTX were quickly moved through decentralized exchanges — crypto markets that operate based on an index and have fewer safeguards than centralized exchanges like Coinbase. “It’s a common technique used by hackers to prevent their traffic from being intercepted,” the researchers described.

When cryptocurrency is stolen, it is often difficult for thieves to convert it into usable cash. Since crypto transaction records are public, experts can track the movement of funds, gathering clues about the identities of thieves.

But a major theft would make it even harder for FTX to pay back customers and other creditors who have already lost billions of dollars in the company’s collapse.

After failing to meet a surge of withdrawal demands last week, FTX is estimated to owe $8 billion, according to people familiar with the matter. Amateur investors keep their crypto savings on FTX, which is widely considered a safe and easy-to-use platform even in the wild world of crypto. How much those customers are reimbursed depends on the bankruptcy process. In an initial filing on Friday, FTX said it had more than 100,000 creditors.

As speculation about FTX fund exchanges spread on Twitter, crypto industry officials pieced together the situation in real time. After reports surfaced that someone involved in moving funds had an account on Kraken, another crypto exchange, Nick Percoco, Chief Security Officer of Kraken, Tweeted“We know the identity of the user.”

Ryan Miller, general counsel for FTX’s US division, was quick to respond. “You’re interested in anything you want to share,” he said. “Can you reach me?”

A Kraken spokeswoman did not immediately respond to a request for comment.

This is a growing story. Check back for updates.