Illustration: The Verge
FTX moved users’ funds to offline wallets early Saturday morning after a wave of “unauthorized transactions” drained hundreds of millions of dollars from the beleaguered cryptocurrency exchange. Ryne Miller, the general counsel at FTX US, didn’t confirm a hack, but said on Twitter that the company made the move to “mitigate damage” caused by the potential theft, as transferring funds offline, or to “cold storage,” helps prevents outsiders from gaining access to them.
The millions in funds evaporated from the platform shortly after FTX filed for chapter 11 bankruptcy on Friday, affecting the domestic FTX US trading platform, the global version of FTX, and Alameda Research. It’s still unclear how much is missing from the exchange, but a report from CoinDesk suggests the amount could total over $600 million, while the blockchain analytics company, Elliptic, puts this number at about $473 million.
Following the Chapter 11 bankruptcy filings – FTX US and FTX [dot] com initiated precautionary steps to move all digital assets to cold storage. Process was expedited this evening – to mitigate damage upon observing unauthorized transactions.
— Ryne Miller (@_Ryne_Miller) November 12, 2022
“FTX has been hacked. All funds seem to be gone,” an admin on FTX’s official Telegram channel writes, while also instructing users to delete FTX’s apps and warning against going on the platform’s websites due to the presence of malware. FTX.com and FTX.us are currently down at this time of writing.
Sam Bankman-Fried, the founder of FTX and Alameda Research, has since resigned as CEO and still hasn’t commented on the matter. Some users on Twitter speculate whether a member of Bankman-Fried’s inner circle drained the exchange’s funds, with crypto sleuth ZachXBT stating “multiple former FTX employees confirmed to me they do not recognize these transfers.” Nick Percoco, the CEO of the cryptocurrency exchange Kraken, says the platform was able to track down the identity of the account in question, as the alleged thief used Kraken to offload the funds.
Last week’s report from CoinDesk helped set off FTX’s quick and catastrophic collapse, which indicated Alameda Research relied heavily on FTT, a sister token from FTX. This led Binance CEO Changpeng “CZ” Zhao to announce that his exchange would sell off its FTT tokens, causing the coin’s value to plummet and other customers to jump ship. As FTX struggled to make up for the reported $8 billion shortfall caused by the influx of withdrawal requests, Binance offered to buy the firm, but walked back on its plans just one day later, stating its “issues are beyond our control or ability to help.”
According to a report from Reuters, anywhere from $1 billion to $2 billion in customer funds remain unaccounted for after Bankman-Fried “secretly transferred” $10 billion from FTX to prop up Alameda Research. In a text message to Reuters, Bankman-Fried denied that the funds were secretly transferred, and reportedly replied “???” when asked about the missing funds. The outlet also found that Bankman-Fried added a “backdoor” to FTX’s accounting system that reportedly allowed the founder to change the company’s financial records “without alerting other people.”