Blockchain & Cryptocurrency , Cryptocurrency Fraud , Fraud Management & Cybercrime

'Unauthorized Transactions' Lead to Missing Funds at FTX

Bankrupt cryptocurrency exchange platform FTX says unsanctioned actors made off with customers' digital assets, initiating a scramble to cut off digital wallets from the internet.

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A Saturday statement attributed by FTX U.S. General Counsel Ryne Miller to newly installed CEO John J. Ray III acknowledged "unauthorized access to certain assets" while pledging to "secure all assets, wherever located."

A message posted Saturday on the FTX Telegram page warned users of malware on the platform.

Security firm PeckShield said on Monday the FTX account drainer's wallet address currently holds about $340 million worth of crypto. On Sunday, the account had a balance of about $390 million, it said.

Security firm Elliptic pegged the value of the stolen assets at $477 million. The hacker swapped more than $220 million for other tokens through decentralized exchanges, helping obfuscate the flow of funds on the blockchain and avoid seizure, the company wrote.

Following its Chapter 11 filing, the FTX platform on Friday halted transactions, began moving funds on the platform to a cold wallet and initiated a fact review and mitigation exercise, Miller said. The company is coordinating with law enforcement and relevant regulators, he added.

Amid reports the hacker used cryptocurrency exchange Kraken to move funds, Kraken Chief Security Officer Nicholas Percoco tweeted Saturday morning, "We know the identity of the user."

So far, he hasn't revealed a name, at least publicly. He responded to the increased interest in his Twitter account by posting a Sunday evening thread recounting his life story.

FTX filed for bankruptcy Friday, and its founder and CEO, Sam Bankman-Fried, stepped down after the platform entered a liquidity crunch caused by a sudden loss in consumer confidence. Investors - including Bankman-Fried's main rival, Binance CEO Changpeng Zhao - initiated a sell-off of FTC's native cryptocurrency token FTT days after trade publication CoinDesk revealed that a crypto hedge fund also run by Bankman-Fried was using FTT tokens as loan collateral. The Wall Street Journal reports that FTX also lent customer funds to the hedge fund Alameda Research. Multiple media outlets say the U.S. Department of Justice and the Securities and Exchange Commission are investigating.

The company's Telegram account pinned a message on Monday saying that the Securities Commission of The Bahamas launched an investigation into the case. The new CEO will handle the liquidation of assets and bankruptcy issues, it said. The company is headquartered in the Bahamas.

Tobias Silver, founder of the decentralized application JustMoney, broke down how the hacker moved the funds:

I was looking at the FTX Tron accounts now and there was a funny thing how the alleged hackers (or internal team) were moving the funds out.

They first moved all TRX out from there and then they were trying to move 47M USDT out but there was no trx for energy fees anymore 1/4

— Tobias Silver (@TobiasSilverJM) November 12, 2022

Separately, FTX customers also fell victim to an API key theft, losing another $6 million, PeckShield said.