FTX Crisis Deepens As Beleaguered Exchange Faces Potential Hack
FTX files for bankruptcy. Photo: Unsplash
Group admins on Telegram from the FTX community stated that the platform had been hacked and that all exchange funds appeared to be gone.
FTX US General Counsel Ryne Miller, allegedly pinned the message to the group, explained that he was investigating “abnormalities” regarding FTX balances on other exchanges.
Officials report that FTX was a victim of hack
An admin of the FTX community’s Telegram group, which is currently closed, announced that the exchange was the victim of a hack attempt on November 12. The message, which was released by Ryne Miller, reported on an ongoing hack and advised customers to stay away from FTX apps, reporting that they could also be compromised.
The administrator, identified as Rey, wrote:
“FTX was hacked. FTX apps are malware. Erase them. The chat is open. Do not go to the FTX website as it may download Trojans.”
Several users on social media reported having their exchange wallets drained, and seeing swaps of their tokens for stablecoins like Dai. Nansen’s Martin Lee noted “large withdrawals to the same wallet,” which the exchange has yet to report.
Council sees abnormalities, onchain funds blocked by Tether
While FTX’s communication channels are quiet on the matter, Miller, the General Counsel of FTX US, reported that he was reviewing these transactions this morning. He tweeted🇧🇷
“Investigating abnormalities in wallet movements related to the consolidation of FTX balances across exchanges – facts and other movements are unclear. We will share more information as soon as we have it.”
Funds that were withdrawn in the form of USDT on different chains were blocked by Tether, according to reports. More than 30 million USDT were involved in this movement.
Miller also reported that the exchange is now moving remaining funds to cold wallets to preserve remaining capital following an investigation of these “unauthorized transactions.” He stated🇧🇷
“Following the Chapter 11 bankruptcy filings – FTX US and FTX[ponto]com initiated precautionary measures to move all digital assets to cold storage. The process was accelerated tonight to mitigate the damage by observing unauthorized transactions.”
According to a Reuters report, Sam Bankman-Fried, the former CEO of FTX, allegedly had a backdoor into the FTX system. This method, usually secret, is used to evade authentication or encryption of a computer system.
“In a subsequent investigation, FTX’s legal and financial teams also learned that Mr. Bankman-Fried implemented what the two people described as a ‘backdoor’ in FTX’s accounting system, which was built using bespoke software,” Reuters reported.
Bankman-Fried denied any existence of a backdoor. The exchange had filed for Chapter 11 bankruptcy protection on Nov. The story is still in development as the movement of funds was still continuing at the time of writing.
Update: analyst and researcher Vini Barbosa noted that the transactions were multi-signature, which could indicate an inside job draining FTX funds. Furthermore, the “hacker” used Kraken to trade the funds and the head of security at this exchange said he knows the user’s identity: