Funds Fade On Failed Crypto Exchange FTX;  investigation is underway

Funds Fade On Failed Crypto Exchange FTX; investigation is underway

Collapsed cryptocurrency exchange FTX confirmed there was “unauthorized access” to its accounts, hours after the company filed for Chapter 11 bankruptcy protection on Friday.

Collapsed cryptocurrency exchange FTX confirmed there was “unauthorized access” to its accounts, hours after the company filed for Chapter 11 bankruptcy protection on Friday.

The company’s new CEO John Ray III said Saturday that FTX is turning off the ability to trade or withdraw funds and taking steps to secure client assets, according to a tweet by FTX General Counsel Ryne Miller. The company said FTX is also coordinating with law enforcement and regulators.

It’s unclear exactly how much money is involved, but analytics firm Elliptic estimated on Saturday that $477 million is missing from the exchange. Another $186 million was moved from FTX accounts, but that may have been moving FTX assets into storage, said Elliptic co-founder and chief scientist Tom Robinson.

A discussion has arisen on social media about whether the exchange was hacked or a company insider stole the funds, a possibility that cryptocurrency analysts cannot rule out.

Until recently, FTX was one of the largest cryptocurrency exchanges in the world. It was already short on billions of dollars when it sought bankruptcy protection on Friday and its former CEO and founder, Sam Bankman-Fried, resigned.

The company has estimated assets between $10 billion and $50 billion, and has listed more than 130 subsidiaries around the world, according to its bankruptcy filing.

The disintegration of the giant exchange sends shock waves across the industry, as companies that backed FTX write down investments and the price of bitcoin and other digital currencies plummets. Politicians and regulators are calling for stricter supervision of impractical industry. Experts say the saga is still unfolding.

“We will have to wait and see what the ramifications are, but I think we will see more dominoes fall and a lot of people will lose their money and their savings,” said Frances Coppola, an independent financial and economics firm. commentator. “This is really tragic.”

The timing and reach that the supposed hacker appears to have achieved, withdrawing funds from multiple parts of the company, led Coppola and other analysts to assume that it could have been an inside job.

FTX said Saturday that it is transferring as many identifiable digital assets as possible to a new “cold custodian,” which is essentially a way to store assets offline without allowing remote control.

“It looks like the liquidators didn’t act fast enough to prevent some kind of money theft from FTX after I filed for bankruptcy, which is bad, but it shows how complicated this thing is,” Coppola said.

At first, some people hoped that all the lost money would be liquidators or bankruptcy managers trying to move assets to a safer place. It would be unusual for this to happen on a Friday night, said Molly White, a crypto researcher and fellow at Harvard University’s Library Innovation Lab.

“It looked very different from what a liquidator would do if they were trying to secure the money,” she said.

White also said there are signs of possible involvement from within. “It seems unlikely that someone unfamiliar with this could have made such a massive hack with so much access to FTX systems.”

Coppola said the collapse of FTX highlights the need to regulate cryptocurrency like traditional finance.

“Cyrpto is not in its early stages anymore,” she said. “We have normal people putting their life savings into it.”

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