Collapsed Crypto Platform FTX Probes $500M Hack – DW – 12/11/2022

FTX, the world’s second-largest cryptocurrency exchange, said on Saturday it was investigating a possible hacking attack, a day after it collapsed when traders rushed to withdraw billions of dollars.

The Wall Street Journal (WSJ) reported that more than $500 million (€482 million) in crypto funds appear to be missing, citing crypto analytics firm Elliptic Enterprises which said the funds were withdrawn from the platform under “suspicious circumstances “.

The potential hack took place just after FTX filed for Chapter 11 bankruptcy on Friday, the company’s general counsel, Ryne Miller, said in a tweet.

Digital assets moved offline

Miller added that the company has taken “precautionary measures to move all digital assets to cold storage…to mitigate damages when observing unauthorized transactions.”

Cold storage refers to the movement of cryptocurrency assets to hardware not connected to the Internet, to ensure its security.

John Ray, who was named Chief Restructuring Officer and CEO of FTX on Friday following the firing of founder Sam Bankman-Fried, said “unauthorized access to certain assets has occurred.”

It said in a statement that an “active fact-finding and mitigation exercise was launched immediately in response.”

Ray added that FTX is coordinating with law enforcement and regulators and “will continue to do everything possible to secure all assets, wherever located.”

WSJ reported that a rival crypto exchange, Kraken, said it knew the identity of the suspected hacker and would pass the details on to authorities.

Sam Bankman-Fried poses for a photo, obtained by Reuters on July 5, 2022
Founder and CEO Sam Bankman-Fried resigned on Friday and denied rumors he fled to South AmericaImage: FTX/Handout/REUTERS

FTX founder denies fleeing to South America

Bankman-Fried, meanwhile, denied rumors that he flew by private jet to South America, telling Reuters news agency he was staying in the Bahamas, where he lives.

The 30-year-old founder, known for his shorts and t-shirts, went from poster boy for crypto successes to being the protagonist of the industry’s biggest crash.

Until 10 days ago, FTX had a valuation of around $32 billion, but suffered a series of shocking setbacks, first when the media revealed that its trading house Alameda Research was involved in a risky financial arrangement that appeared to involve serious conflicts of interest.

Financial media reported that FTX executives knew the platform was using billions in client funds to back Alameda.

Crypto market a ‘pessimistic place’ for investors

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Binance U-turn helped seal the fate of FTX

Adding to its woes was the decision of biggest rival Binance to seek to buy on Tuesday before withdrawing its offer a day later due to the state of the business.

In its bankruptcy filing, FTX Trading said it had between $10 billion and $50 billion in assets, $10 billion to $50 billion in liabilities, and more than 100,000 creditors.

The collapse shocked investors and prompted renewed calls to regulate the crypto asset industry, which has seen losses mount this year as cryptocurrency prices plummet.

FTX is under investigation by both the U.S. Securities and Exchange Commission (SEC) and the Department of Justice (DOJ), according to the New York Times.

mm/d (AFP, Reuters)