June 5, 2023

Funds disappear in bankruptcy on FTX crypto exchange; investigation underway

Cathy Bussewitz, Associated Press

Posted on Saturday, November 12, 2022 8:13 PM EST

NEW YORK (AP) — collapsed cryptoforeign exchange trading company FTX confirmed that its accounts had been “unauthorized access” hours after the company filed for Chapter 11 bankruptcy protection on Friday.

The embattled company’s new CEO, John Ray III, said Saturday FTX is ruling out the ability to trade or withdraw funds and is taking steps to secure customer funds, according to the tweet FTXgeneral counsel Ryne Miller. FTX It is also coordinating with law enforcement and regulatory authorities, the company said.

The exact amount of money is unclear, but analytics firm Elliptic estimated on Saturday that $477 million was missing from the exchange. Another $186 million was moved away FTXaccounts, but it may have been FTX move assets into storage, said Elliptic founder and chief scientist Tom Robinson.

There was a discussion on social media about whether the stock exchange had been hacked or whether the insiders of the company had stolen funds, the possibility that cryptoCurrency analysts could not rule out.

Until recently, FTX was one of the largest in the world cryptocurrency exchanges. It was already worth just under a billion dollars when it filed for bankruptcy protection on Friday, and its former CEO and founder Sam Bankman-Fried stepped down.

The company had estimated its assets at $10 billion to $50 billion and listed more than 130 subsidiaries around the world, according to its bankruptcy filing.

The dismantling of the once-giant stock exchange is sending shockwaves through the companies that supported the industry FTX writing down investments and falling prices of bitcoins and other digital currencies. Politicians and regulators are calling for tighter controls on heavy industry. According to experts, the saga is still unfolding.

“We have to wait and see what happens fall out is, but I think we’re going to see more dominoes fall and an awful lot of people lose their money and their savings,” said Frances Coppola, an independent economic and financial commentator. “And that’s really tragic.”

The timing and scope of the access the alleged hacker appeared to achieve as he siphoned money from multiple parts of the company led Coppola and other analysts to theorize that it could have been an inside job.

FTX said Saturday that it will transfer as many digital assets as can be identified to a new “cold wallet custodian,” essentially a way to store assets offline without remote control.

“It appears that the liquidators did not act quickly enough to prevent some sort of misappropriation of funds FTX after it filed for bankruptcy, and that’s bad, but it just shows how complicated this thing is, Coppola said.

At first, some people hoped that maybe all the missing funds were liquidators or liquidators trying to move assets to a safer place. But it would be unusual for it to happen on a Friday night, said Molly White. cryptocurrency researcher and fellow at Harvard University’s Library Innovation Lab.

“It looked very different from what a liquidator might do if they were trying to secure the assets,” he said.

White also said there are signs of a possible insider. “It seems unlikely that someone who is not an insider could have done such a massive hack with so much access FTX systems.”

ruin FTX emphasizes the need cryptoCurrency is regulated more than traditional finance, Coppola said.

“Crypto is not very early stage anymore,” he said. “Ordinary people have put their life savings into it.”

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