FTX Says $415 Million Of Its Crypto Assets Was Hacked

By   Adeola Adegunwa
Writer , Informationsecuritybuzz | Jan 18, 2023 01:41 pm PST

FTX, a bankrupt cryptocurrency exchange, said on Tuesday to creditors that cyberattacks had stolen around $415 million in cryptocurrencies. Since FTX declared bankruptcy on November 11, its CEO John Ray has revealed in a separate statement. That $90 million in cryptocurrency and $323 million in the cryptocurrency have been stolen from the company’s domestic and foreign exchanges.

Sam Bankman-Fried, the inventor of FTX, has been charged with squandering billions of dollars from FTX users to settle debts accrued by his cryptocurrency-focused hedge fund, Alameda Research. Bankman-Fried has admitted to fraud accusations. FTX informed the Delaware bankruptcy judge that it had made a profit of more than $5 billion in bitcoin, cash, and marketable assets nine weeks after declaring for bankruptcy.

Shortfalls For FTX At Crypto Exchanges

With the announcement that it had recovered about cash($1.7 billion), liquid cryptocurrencies($3.5 billion), and liquid equities($300 million) on Tuesday, the company provided additional details. Although FTX claimed to have discovered substantial, significant shortfalls at its international and U.S. crypto exchanges, it omitted to estimate total liabilities.

“It has taken a mundane investigative effort from our team to unearth this preliminary information, and we are making a huge progress in our efforts to maximize recoveries,” Ray stated in the statement.

According to the price of bitcoin on November 11, 2022, the crypto assets recovered up until this point total $685 million in Solana, $529 million in FTX’s own FTT token, and $268 million in Solana. Bankman-Fried praised Solana, but it saw a significant decline in value by 2022.

As part of its initial inquiry into system hacks, FTX discovered a November asset seizure by the Securities Commission of the Bahamas. This discovery made a huge revelation that regulators in the Bahamas and the bankruptcy team of FTX are at odds. The two parties reached an agreement in January, and according to Ray’s statement on Tuesday, the Bahamian government is keeping $426 million for creditors.

Bahamas Prime Minister Philip Davis brought up the dispute on Tuesday at an Atlantic Council event in Washington, D.C. He claimed that Ray’s team had “changed their minds” and accepted that the Bahamian asset seizure “was appropriate and perhaps has saved the day for many of the investors in FTX.”

Previous Hack On FTX Wallets Cost $400 Million

On-chain data revealed that the wallets of crypto exchange FTX were losing cash totaling somewhere between $370 million and $400 million after the business declared bankruptcy in November. The monies were likely stolen by a former employee or other bad actors who presumably acquired the secret keys to FTX’s cryptocurrency wallets, according to Sam Bankman-Fried, the former CEO of FTX. John J. Ray III, the new CEO of FTX, eventually admitted that the company lacked security overall and had held secret keys that weren’t encrypted.

In total, $1 billion to $2 billion of FTX clients’ funds are still missing. Eight criminal counts, including ones for fraud, money laundering, and violations related to campaign finance, have been brought against Bankman-Fried.

According to Ray’s testimony, the collapse of FTX Group “The failure to execute virtually looks to be the result of the complete concentration of power in the hands of a very tiny handful of incredibly uneducated and uneducated people. any of the controls or systems required for a business that is trusted with other people’s assets or money.” The study is still underway; thus, it will take time to get specific results.

Conclusion

A significant amount of the identified assets the bankrupt cryptocurrency firm FTX is attempting to recover were stolen from the exchange’s accounts, the company disclosed on Tuesday, totaling $415 million in cryptocurrency. Lawyers and consultants representing FTX debtors updated the total liquid assets identified for recovery and stated that they are valued at roughly $5.5 billion in a presentation titled “Maximizing FTX Recoveries.”

However, a statement from the corporation also includes “unauthorized third-party transfers” of $323 million from FTX.com (the foreign business) and $90 million from FTX US. According to hedge fund Alameda Research, an additional $2 million in cryptocurrency was also taken. The missing cryptocurrency might be linked to a system compromise at FTX that was discovered not long after the business failed in November.

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Marry Adams
Marry Adams
January 19, 2023 9:31 pm
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Marry Adams
January 19, 2023 12:30 pm
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Nicola.mcKinney
Nicola.mcKinney , Partner
InfoSec Expert
January 19, 2023 12:21 pm

“The disparity in estimated losses from sources within FTX compared with the Bahamian authorities highlights how contentious the ongoing jurisdictional battle regarding the insolvency of the FTX group is likely to become, and which we expect will come to a head later this year.

“The basis for recovery of assets by FTX is also emerging as a legal issue, with the complexities of digital assets and how they are held as property, and the question of who the assets belong to – individual investors, or the FTX companies – are becoming increasingly prominent issues for investors.

“Whether FTX, and crypto exchanges more generally, hold crypto assets in isolated accounts, or mixed or hot wallets, and the role of internal ledgers in the identification and ownership of those assets, are questions which the insolvency court may well have to resolve before repayments are made to customers who have lost funds in the FTX implosion, or to creditors of the companies.”

Last edited 13 days ago by nicola.mcKinney
Ilia Kolochenko
Ilia Kolochenko , Founder and CEO
InfoSec Expert
January 19, 2023 12:19 pm

Whilst an external intrusion is theoretically possible, I would be prudent when relying on such claims. In view of the notorious context, we may actually have at least three interrelated hypothesis: (i) a genuine data breach by unknown cyber threat actors, (ii) a sophisticated embezzlement of funds disguised as an external data breach, (iii) an external data breach facilitated by malicious insiders not necessary affiliated with the FTX management. Therefore, a scrupulous investigation by a competent and independent cybersecurity company is required prior to making any conclusions.”

Last edited 13 days ago by Ilia Kolochenko

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