February 3, 2023

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FTX says “unauthorized transactions” have drained millions from the exchange

FTX moved users’ funds to offline wallets early Saturday morning after a spate of “unauthorized transactions” drained hundreds of millions of dollars from the ailing cryptocurrency exchange. Ryne Miller, general counsel at FTX US, did not confirm a hack, but said on Twitter that the company took the step to “mitigate the damage” caused by the potential theft, as transferring funds offline or to “cold storage” helps prevent outsiders from gaining access to them.

FTX’s new CEO, John Ray, who took the place of company founder Sam Bankman-Fried after his resignation on Friday, issued a statement Miller’s Twitter account Saturday afternoon. “We are in the process of removing trading and withdrawal features and moving as many digital assets as possible to a new cold wallet custodian,” says Ray. “As has been widely reported, unauthorized access to certain assets has occurred.” He adds that FTX is in contact with law enforcement and “relevant regulators” to address the situation.

“FTX has been hacked. All funds seem to be gone, “an admin continued The official Telegram channel of FTX writes, while users are also instructed to delete FTX’s apps and warned against visiting the platform’s websites due to the presence of malware. FTX.com and FTX.us are not available at this time.

Some users on Twitter are speculating that a member of Bankman-Fried’s inner circle helped siphon off the exchange’s funds Crypto tracker ZachXBT He said: “Several former FTX employees have confirmed to me that they do not recognize these transfers.” Nick Percoco, the CEO of cryptocurrency exchange Kraken, says the platform was able to track down the identity of the account in question as the alleged thief used Kraken to dump the funds.

Last week’s CoinDesk report helped trigger FTX’s rapid and catastrophic collapse, suggesting that Alameda Research was leaning heavily on FTT, a sister token of FTX. This prompted Binance CEO Changpeng “CZ” Zhao to announce that his exchange would sell its FTT tokens, causing the coin’s value to plummet and other customers to bail. As FTX struggled to make up the reported $8 billion shortfall caused by the influx of withdrawal requests, Binance offered to buy the company but just a day later withdrew its plans, stating that its “issues are beyond our control or ability to assist.”

According to a report by Reuters, between $1 billion and $2 billion in client funds remain unaccounted for after Bankman-Fried “secretly transferred” $10 billion from FTX to shore up Alameda Research. In a text message to Reuters, Bankman-Fried denied the funds were secretly transferred and reportedly replied “???” when asked about the missing funds. The outlet also noted that Bankman-Fried added a “backdoor” to FTX’s accounting system that reportedly allowed the founder to change the company’s financial records “without notifying anyone else.”

Update, 3:12 PM ET: Updated to add a statement from John Ray.