FTX says it may have been “hacked”, as $600 million in crypto is mysteriously drained overnight

FTX says it may have been “hacked”, as 0 million in crypto is mysteriously drained overnight

Photo: OLIVIER DOULIERY / AFP (Getty Images)

Photo: OLIVIER DOULIERY / AFP (Getty Images)

Hundreds of millions of dollars in assets were mysteriously taken out of the collapsing crypto exchange FTX on Friday, in what exchange officials have described as a potential “hacking” incident.

Already a company in a spectacular state of financial and reputational freefall, the once-respected and heavily promoted cryptocurrency exchange said Friday it is seeing a flurry of “abnormal” asset transfers sweeping through accounts. Subsequent analysis seemed to suggest that as much as half a billion dollars may have been stolen.

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The chaos started late Friday when FTX account holders started taking to Twitter to claim their money had disappeared. At 23:52, an administrator for the exchange’s Telegram page posted the following statement:

Ftx has been hacked. All funds seem to be gone.

FTX apps are malware. Delete them…

Do not go to the ftx site as it may download trojans.

Not long after, Ryne Miller, the company’s general counsel, arrived tweeted: “Investigation of wallet movement abnormalities related to consolidation of ftx balances across exchanges – unclear facts as other movements are not clear. Will share more information as soon as we have it.”

Shortly thereafter, Miller claimed that the company directed remaining funds into cold storage — the offline accounts that keep assets safe from hacking — in an effort to prevent more funds from being transferred.

Elliptic, a company that tracks cryptocurrency movements across the internet, said it had recorded more than $701 million in various tokens that left the crypto exchange’s coffers Friday night. In its analysis, Elliptic estimated that around $515 million in assets may have been stolen, while another $186 million potentially represented the assets that FTX had transferred to cold storage. The transferred funds involved a number of tokens, including Solana, Ethereum, Tron, Avalanche and Binance Smart Chain. The money was funneled into three separate wallet addresses, after which the transferor routed at least $220 million through decentralized exchanges, which Elliptic considers a “common tactic used by thieves trying to avoid confiscation of the stolen assets.”

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The timing of this whole episode – less than 24 hours after the company filed for Chapter 11 bankruptcy – immediately raised suspicions among people online – with many suggesting that this was not a true “hacking” episode, but some sort of attempt by FTX insiders . to rip off clients and steal half a billion dollars. Some theorized that a small group of FTX CEO Sam Bankman-Fried’s “insiders” were behind the apparent theft.

FTX, once considered one of the most promising ventures in the crypto industry and boasting endorsements from a number of celebrities such as Tom Brady and Steph Curry, has imploded in a spasm of abuse that some have equal to the crypto equivalent of Enron. The firm’s chief executive, Bankman-Fried, stepped down from his leadership position on Friday, amid revelations that the company had used client money to finance its own risky trading activities and that the company was insolvent.

A gigantic sum of customers’ money also appears to have disappeared before the recent “hacking” episode. Reuters reported on Saturday that of about $10 billion in client funds that Bankman-Fried previously transferred from FTX to his own company, Alameda Research, at least $1 billion is said to have vanished into thin air. It’s unclear where it went or what the total amount of missing funds is, Reuters says, although some estimates of the missing assets put the total value at somewhere between one and two billion dollars. A source told the outlet they thought the number was $1.7 billion. Reuters reports:

The financial hole was revealed in records Bankman-Fried shared with other top executives last Sunday, according to the two sources. The documents provided an updated account of the situation at the time, they said. Both sources held senior FTX positions until this week and said they were briefed on the company’s finances by senior staff.

Gizmodo reached out to FTX for comment on both of these developments and will update this blog if we hear back.

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