Over $500 Million Lost from FTX
The story of the FTX collapse has all the makings of a Hollywood blockbuster; an exchange that was seen as a giant of its industry, securing co-signs from celebrities like Tom Brady and Giselle Bundchen, a sudden liquidity crisis and hundreds of millions in funds unaccounted for.
Sadly, it seems FTX is nowhere near out of the woods as it has reportedly suffered a hack. This comes as stats from crypto intelligence firm Elliptic from November 12, 2022, show that over $2 billion in crypto funds flowed out of its exchange wallet, with over $659 million being moved in a 24-hour period. Out of this figure, around $477 million is believed to have been taken illegally while the rest was moved to FTX’s secure storage.
Details About the Hack
Information about the hack first became public late Friday, November 11, 2022, when FTX users took to social media to show that their account balances were drained and demanded an explanation from the exchange. This was later acknowledged by FTX’s general counsel Ryne Miller, who confirmed that the exchange was, “Investigating abnormalities with wallet movements related to the consolidation of FTX balances across exchanges – unclear facts as other movements not clear. Will share more info as soon as we have it.”
Soon after, it was revealed that a horde of the exchange’s reserves had been moved into cloud storage to avoid any further theft. Eagle-eyed crypto watchers eventually noticed that the funds that were stolen were routed through several wallet addresses and then through decentralized exchanges to avoid detection. This is a common tactic used by crypto hackers but also cast a lot of suspicions on the exchange.
FTX Under Suspicion
Only a day before the hack, the company had formally filed for bankruptcy and many believed that the timing of the hack was rather convenient and offered its founders a way to make off with hundreds of millions in customer funds. On top of this, there was the revelation that top executives in the company had been using customer funds for their own risky personal investments.
And then there was the way that the funds were taken out in the first place. As Martin Lee, a crypto investigator pointed out on Twitter, there was no on-chain congestion even as almost half a billion dollars was moved out of the wallets of one of the top exchanges in the world.
“We’ve seen over $2B in net outflows from FTX Intl and FTX US over the past 7 days Of which $659M (33%) happened in the last 24 Hours. Somehow no congestion or long wait times when the wallet was getting mass drained,” they pointed out.
Following the movement of the other funds into the cold wallet, FTX’s management said that it was cooperating with law enforcement to secure the rest of the customer’s assets and get to the root of the issue. Sadly, this alleged hack does not do the exchange any favours and only further damages its reputation within and outside the industry.