Report: DOJ launches criminal investigation into FTX hack

Report: DOJ launches criminal investigation into FTX hack

The US Department of Justice has launched a criminal case following the hacking of FTX Trading Ltd., Bloomberg in November, reported Today.

The investigation is reportedly separate from the criminal charges Brought against FTX founder Sam Bankman-Fried. After the cryptocurrency exchange collapse last month the Justice Department filed an eight-count indictment against Bankman-Fried. Two other top executives at FTX and its sister hedge fund Alameda Research have since pleaded guilty to fraud.

FTX filed for bankruptcy protection on Nov. 11 after a bank run revealed an $8 billion shortfall on its balance sheet. According to the Justice Department, the shortfall was the result of a “widespread scheme by Bankman-Fried to misappropriate billions of dollars in customer funds.” These customer funds were allegedly used for personal expenses, investments and political contributions.

Hours after FTX filed for bankruptcy on November 11, large amounts of cryptocurrency started moving out of digital wallets operated by the company. Later that day, FTX General Counsel Ryne Miller issued a statement saying the company had been hacked. Miller warned users not to visit the company’s website or download the apps for fear they might contain malware.

In response to the incident, FTX moved customer funds to so-called offline wallets. Such wallets are not accessible via the public network, making them more difficult to crack. However, the hackers involved in the cyberattack still got away with an estimated $377 million in cryptocurrency.

A subsequent analysis determined that the hackers converted the stolen money into several different coins. The bulk of the funds, or about $280 million, were converted into ether. The hackers carried out the exchange using a bridge, a software platform that allows digital assets to be moved across different blockchains.

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According to today’s Bloomberg report, the authorities have frozen some of the cryptocurrency that was stolen in the hack. However, the bulk of the funds reportedly remain unaccounted for.

It has been speculated that the cyber attack may have been carried out by an FTX insider with access to the company’s systems. One reason for the speculation was that the hacker breached several of FTX’s offline wallets, which are difficult to breach without access to internal systems.

The FTX breach is one of several major cyberattacks launched against cryptocurrency platforms in the past year. Previously, hackers stole cryptocurrency worth around $570 million from BNB Chain, a blockchain created by cryptocurrency company Binance Holdings Ltd. A separate cyber attack carried out in October saw hackers make off with $116 million in cryptocurrency.

Image: FTX

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