HomeBUISNESS NEWSFTX Collapse: Unauthorized access confirmed, trade frozen, $477 million missing; What we...

FTX Collapse: Unauthorized access confirmed, trade frozen, $477 million missing; What we know so far | International Business News


FTX was once a leading cryptocurrency platform. It rose to new heights in three years and took only days to mark a historic collapse. FTX was founded in 2019 by Sam Bankman-Fried. The Bahamas-based crypto exchange had a meteoric rise to prominence and was valued at more than $30 billion earlier this year. FTX waded into troubled water when concerns emerged about links between FTX and an asset-trading firm called Alameda Research, including suggestions that customers’ funds have been transferred from FTX to Alameda. Days later FTX rival Binance announced to sell all of its holdings of FTT tokens. FTT tokens are crypto that comprises much of Alameda’s assets. This resulted in a panic among customers as they rushed to withdraw funds from FTX.

Now, FTX had confirmed that there was an unauthorized access to its accounts. The company had already filed for Chapter 11 bankruptcy protection in the US. The embattled company’s new CEO John Ray III said Saturday that FTX is switching off the ability to trade or withdraw funds and taking steps to secure customers’ assets, according to a tweet by FTX’s general counsel Ryne Miller. FTX is also coordinating with law enforcement and regulators, the company said.

Exactly how much money is involved is unclear, but analytics firm Elliptic estimated Saturday that USD 477 million was missing from the exchange. Another $186 million was moved out of FTX’s accounts, but that may have been FTX moving assets to storage, said Elliptic’s co-founder and chief scientist Tom Robinson.

A debate formed on social media about whether the exchange was hacked or a company insider had stolen funds, a possibility that cryptocurrency analysts couldn’t rule out.

Until recently, FTX was one of the world’s largest cryptocurrency exchanges. It was already short billions of dollars when it sought bankruptcy protection Friday and its former CEO and founder, Sam Bankman-Fried, resigned.

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The company had valued its assets between USD 10 billion to USD 50 billion, and listed more than 130 affiliated companies around the world, according to its bankruptcy filing.

The unravelling of the once-giant exchange is sending shockwaves through the industry, with companies that backed FTX writing down investments and the prices of bitcoin and other digital currencies falling. Politicians and regulators are calling for stricter oversight of the unwieldy industry. Experts say the saga is still unfolding.

“We’ll have to wait and see what the fallout is, but I think we are going to see more dominoes falling and an awful lot of people stand to lose their money and their savings,” said Frances Coppola, an independent financial and economic commentator. ‘And that is just tragic, really.”

The timing and the extent of access that the assumed hacker appeared to achieve, siphoning 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’s moving as many digital assets as can be identified to a new “cold wallet custodian,” which is essentially a way of storing assets offline without allowing remote control.

“It does look as if the liquidators didn’t act fast enough to stop some kind of siphoning off of funds from FTX after it filed for bankruptcy, and that’s bad, but it just shows how complex this thing is,” Coppola said.

Initially, some people were hoping that perhaps all the missing funds were liquidators or bankruptcy administrators trying to move assets to a more secure spot. But it would be unusual for that to happen on a Friday night, said Molly White, cryptocurrency researcher and fellow with the Library Innovation Lab at Harvard University.

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

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

The collapse of FTX highlights the need for cryptocurrency to be regulated more like traditional finance, Coppola said. “Cyrpto isn’t in the very early stages anymore,” she said.

(With PTI/agency inputs)



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