Days after FTX filed for bankruptcy, the crypto exchange platform witnessed an unauthorized outflow of its assets under ‘suspicious circumstances’.
Days after FTX filed for bankruptcy, the crypto exchange platform witnessed an unauthorized outflow of its assets under ‘suspicious circumstances’.
Crypto exchange FTX was engulfed in more chaos on Saturday after the company said it had detected unauthorized transactions and analysts flagged that hundreds of millions of dollars in assets had been moved from the platform under “suspicious circumstances”.
FTX filed for bankruptcy Friday was one of the highest-profile crypto blowups after traders withdrew $6 billion from the platform in just 72 hours and rival exchange Binance abandoned a proposed rescue deal.
The exchange’s dramatic fall from grace has seen its 30-year-old founder, Sam Bankman-Fried, known for his shorts and T-shirt attire, go from poster child of crypto’s successes to hero of the industry’s biggest crash. Huh.
Bankman-Fried, who lives in the Bahamas, has also been the subject of speculation about his whereabouts. On Saturday he told Reuters he was in the Bahamas, denying speculation on Twitter that he had flown to South America on a private jet.
The turmoil at FTX has caused at least $1 billion of customer funds to disappear from the platform, sources told Reuters on Friday. The sources said Bankman-Fried transferred $10 billion of client funds to its trading company, Alameda Research.
New problems emerged on Saturday when FTX’s US General Counsel Rainn Miller said in a Twitter post that the firm’s digital assets were being moved to so-called cold storage “to minimize losses when unauthorized transactions are observed.”
Cold storage refers to crypto wallets that are not connected to the internet to protect against hackers.
Blockchain analytics firm Nansen said it saw outflows of $659 million from FTX International and FTX US over the past 24 hours.
Elliptic, a separate blockchain analytics firm, said that approximately $473 million worth of cryptoassets were “taken out of the FTX wallet this morning under suspicious circumstances”, but could not confirm that the tokens had been stolen.
Crypto exchange Kraken said: “We can confirm that our team is aware of the identity of the account associated with the ongoing FTX hack, and we are committed to working with law enforcement to ensure that they have no access to the matter.” has everything necessary to conduct an adequate investigation.”
FTX was not immediately available for comment about the outflow or Kraken’s statement.
The collapse spooked investors and prompted new calls for regulation in the crypto asset sector, which has seen losses this year as cryptocurrency prices plummet.
“Things will continue to boil after the FTX crash,” said Alan Wong, operations manager at the Hong Kong Digital Asset Exchange.
“With an $8 billion gap between liabilities and assets, when FTX goes bankrupt, it will trigger a domino effect, causing a chain of investors belonging to FTX to go bankrupt or be forced to sell assets. A liquidation In a bear market, the event will lead to a new round of cryptocurrency declines, as well as liquidation of leverage.”
market crash
Since its founding in 2019, FTX has raised over $2 billion from top investors including Sequoia, SoftBank, BlackRock and Temasek. In January, FTX raised $400 million from investors at a valuation of $32 billion.
SoftBank and Sequoia Capital said they are zeroing their investments in FTX.
According to a person familiar with the matter, cryptocurrency exchange Coinbase Global Inc. will also write off its venture arm’s investment in FTX in 2021.
Bitcoin fell below $16,000 for the first time since 2020 after Binance abandoned its hedge deal on Wednesday.
It was trading around $16,831 on Saturday, down more than 75% from its all-time high of $69,000 in November last year.
FTX’s token FTT is down almost 91% this week. Shares of cryptocurrency and blockchain-related firms also declined.
“We believe the cryptocurrency market is too small and too quiet to cause contagion in financial markets, with an $890 billion market cap compared to US equities’ $41 trillion,” wrote Citi analysts.
“Over four years, FTX raised $1.8 billion from venture capital and pension funds. This is the primary way it could hurt financial markets, as it could have more modest implications for portfolio shocks in a volatile macro regime.”
In its bankruptcy petition, FTX Trading said it has $10 billion to $50 billion in assets, $10 billion to $50 billion in liabilities, and more than 100,000 creditors. John J Ray III, a restructuring specialist, was appointed to take over as CEO.
The US securities regulator is probing FTX.com’s handling of customer funds amid a liquidity crunch as well as its crypto-lending activities, a source with knowledge of the investigation said.
Half of hedge fund Gallois Capital’s assets were stuck on FTX, the Financial Times reported on Saturday, citing a letter to investors from co-founder Kevin Zhou and estimating it to be around $100 million.