The hunt for the FTX thieves has begun

The hunt for the FTX thieves has begun

That means it will be very difficult for the thieves to make off with the profits in a usable form without being identified, says Michelle Lai, a cryptocurrency privacy advocate, investor and consultant who says she has tracked the movements of the stolen FTX funds with “ morbid fascination.” But the real question, Lai says, is whether identifying the thieves will offer any way out: After all, many of the most prolific cryptocurrency thieves are Russians or North Koreans operating in non-extradition countries, beyond the reach of Western law enforcement. “It’s not a question of whether they want to know who did it. It’s whether it will be actionable,” says Lai. “If they are on land.”

Meanwhile, Lai and many other crypto watchers have been keeping a close eye on an Ethereum address that currently has a value of around $192 million. The account has sent small sums of Ethereum-based tokens — some of which appear to have little or no value — to a number of exchange accounts, as well as Ethereum inventor Vitalik Buterin and Ukrainian cryptocurrency fundraising accounts. But Lai guesses that these transactions are probably just meant to complicate the picture for police or other observers before an actual attempt to launder or cash out the money.

The theft of FTX – whether the theft amounts to $338 million or $477 million – hardly represents an unprecedented move in the world of cryptocurrency crime. In the late March hack of Ronin Bridge, a cryptocurrency exchange for games, North Korean thieves took $540 million. And earlier this year, cryptocurrency tracking led to the bust of a New York couple accused of laundering $4.5 billions in crypto.

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But in the case of the high-profile FTX theft and the stock market’s overall collapse, tracking the misplaced funds could help put to rest — or confirm — swirling suspicions that someone within FTX was responsible for the theft. The company’s Bahamas-based CEO, Sam Bankman-Fried, who resigned on Friday, lost virtually all of his $16 billion fortune in the collapse. According to an unconfirmed report by CoinTelegraph, he and two other FTX executives are “under surveillance” in the Bahamas, preventing them from leaving the country. Reuters also reported late last week that Bankman-Fried had a “backdoor” built into FTX’s compliance system that allowed him to withdraw money without notifying others at the company.

Despite these suspicions, TRM Labs’ Janczewski points out that the chaos after FTX’s meltdown may have given hackers an opportunity to exploit panicked employees and trick them into clicking on a phishing email, for example. Or, as Michelle Lai notes, bankrupt insiders may have collaborated with hackers as a means of recovering some of their own lost assets.

As questions mount about whether — or to what extent — FTX’s own management may be responsible for the theft, the case has begun to resemble, more than any recent crypto heist, a very old one: the theft of half a billion dollars. bitcoins, discovered in 2014, from Mt. Gox, the first cryptocurrency exchange. If so, blockchain analysis by cryptocurrency tracking firm Chainalysis, along with law enforcement, helped pin the theft on external hackers rather than Mt. Gox’s own employees. Finally, Alexander Vinnik, a Russian man, was arrested in Greece in 2017 and later convicted of laundering the stolen Mt. Gox funds, and acquitted Mt. Gox’s embattled leaders.

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Whether history will repeat itself, and cryptocurrency tracking will prove the innocence of FTX’s employees, is still far from clear. But as more eyes than ever scan the cryptocurrency economy’s blockchains, it’s a safer bet that the whodunit behind the FTX theft will sooner or later provide an answer.

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