After $473 million disappeared from the exchange, user monies were put into cold storage.
A flood of “unauthorized transactions” drained hundreds of millions of dollars from FTX early Saturday. FTX US’s general counsel, Ryne Miller, didn’t confirm a hack but claimed the company moved cash offline to “mitigate the damage” from potential theft. Putting funds in “cold storage” prevents outsiders from accessing them.
Millions of dollars disappeared off the platform after FTX filed for chapter 11 bankruptcy on Friday, affecting FTX US, FTX global, and Alameda Research. It’s unknown how much is lost from the exchange, but CoinDesk says it could be above $600 million while Elliptic says $473 million.
FTX’s new CEO John Ray, who replaced firm founder Sam Bankman-Fried on Friday, tweeted on Saturday. “We’re removing trading and withdrawal functionality and moving digital assets to a new cold wallet custodian,” Ray explains. Unauthorized access to assets has been reported. He says that FTX is contacting law police and “relevant regulators”
2/ Among other things, we are in the process of removing trading and withdrawal functionality and moving as many digital assets as can be identified to a new cold wallet custodian. As widely reported, unauthorized access to certain assets has occurred.
— Ryne Miller (@_Ryne_Miller) November 12, 2022
“FTX is compromised.” All funds seem to be gone,” an admin on FTX’s official Telegram channel says, urging users to uninstall the platform’s apps and websites due to malware. FTX.com and FTX.us are down.
Some Twitter users suspect a member of Bankman-inner Fried’s circle drained the exchange’s cash. Crypto detective ZachXBT said, “many former FTX workers do not recognize these transfers.” The alleged criminal used Kraken to dump the cash, claims Kraken CEO, Nick Percoco.
Alameda Research relied extensively on FTX’s sister coin, FTT, according to a CoinDesk story last week. Binance CEO Changpeng “CZ” Zhao announced the exchange would sell its FTT tokens, prompting the coin’s value to drop and consumers to flee. Binance offered to buy FTX as it tried to make up for an $8 billion withdrawal shortage, but retracted its offer one day later, saying its “problems are beyond our control or ability to aid.”
Reuters reports that $1 billion to $2 billion in client cash are missing after Bankman-Fried “secretly transferred” $10 billion from FTX to Alameda Research. Bankman-Fried reportedly answered “???” when queried about missing monies in a text message to Reuters. Bankman-Fried built a “backdoor” to FTX’s accounting system, allowing the founder to manipulate financial records “without alerting others.”