Funds vanish at bankrupt crypto exchange FTX; probe underway
NEW YORK Collapsed cryptocurrency trading company FTX confirmed that there was “unauthorized access”, hours after it filed for Chapter 11 bankruptcy relief Friday. According to Ryne Miller, FTX’s general counsel, John Ray III, the embattled company’s CEO, said Saturday that FTX will stop customers from being able to withdraw or trade funds and take steps to protect their assets. According to the company, FTX is also coordinating its efforts with regulators and law enforcement.
It is not clear how much money is involved, but Elliptic, an analytics firm, estimated Saturday that $477 millions was missing from the exchange. Another $186million was taken out of FTX’s accounts. However, Elliptic’s chief scientist and co-founder Tom Robinson said that it could have been FTX moving assets into storage.
There was a debate on social media about whether the exchange had been hacked or whether funds were stolen by an insider. This possibility was something that cryptocurrency analysts could not rule out.
FTX was the largest cryptocurrency exchange in the world until recently. It was already insolvent and had to file for bankruptcy protection Friday. The company’s former CEO and founder, Sam Bankman Fried, resigned.
According to its bankruptcy filing, the company had listed more than 130 affiliate companies around the globe and valued its assets at $10 trillion to $50 quadrillion.
The collapse of the once-mighty exchange is causing shockwaves in the industry. Companies that backed FTX are writing down their investments and the prices for bitcoin and other digital currencies are falling. The industry is undergoing a tumultuous period. Both regulators and politicians are calling for tighter oversight. Experts believe the story is still unfolding.
” We’ll have to wait to see what the fallout, but I think there will be more dominoes dropping and a lot of people losing their money and savings,” said Frances Coppola. Coppola is an independent financial and economic commentator. “And that is just tragic, really.”
The timing and the extent of access that the assumed hacker appeared to achieve, siphoning money from multiple parts of the company, led Coppola and other analysts to theorize that it could have been an inside job.
FTX stated Saturday that it is moving as many digital assets to a new “cold-wallet custodian” which is basically a way to store assets offline without remote control. Coppola stated that it appears as if liquidators failed to act quickly enough to stop siphoning of funds from FTX.
Initially, some people were hoping that perhaps all the missing funds were liquidators or bankruptcy administrators trying to move assets to a more secure spot. Molly White, a Harvard University cryptocurrency researcher and fellow at the Library Innovation Lab, said that it would be unusual for this to happen on Friday night.
” It looked very different to what a liquidator might do, if they were trying secure the funds,” she stated.
White said that there are indications of insider involvement. “It seems unlikely that someone who is not an insider could have pulled off such a massive hack with so much access to FTX systems.”
The collapse of FTX highlights the need for cryptocurrency to be regulated more like traditional finance, Coppola said.
“Cyrpto “isn’t in its very early stages anymore,” she stated. “We’ve got ordinary people putting their life savings into it.”
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