A day after filing for bankruptcy, the collapsed cryptocurrency exchange FTX said on Saturday it was investigating “unauthorized transactions” flowing from his accounts as crypto researchers documented suspicious $515 million transfers that may have resulted from a hack or theft.
John J. Ray III, FTX’s newly appointed chief executive, said in a statement: pronunciation that “unauthorized access to certain assets has occurred” and that the company was in contact with law enforcement and regulators. As part of the bankruptcy process, the company has moved its remaining crypto funds to a more secure form of storage.
The suspicious move of funds marked another twist in a dramatic chain of events that began earlier in the week when the stock market suffered a deposit run and was unable to meet demand. On Friday, the company filed for bankruptcy and Sam Bankman-Fried, the founder and chief executive of FTX, announced his resignation, with Mr. Ray, a business transformation specialist, replacing him.
The implosion of Mr. Bankman-Fried’s cryptocurrency exchange has already cost customers billions of dollars in lost crypto deposits, sparking law enforcement investigations that could lead to criminal charges.
But the full impact of FTX’s dramatic collapse is just beginning to take shape. In his relatively short time as a multi-billionaire, Mr. Bankman-Fried built an astonishingly broad business empire, investing in dozens of smaller crypto firms and partnering with companies as diverse as Anthony Scaramucci’s investment firm SkyBridge Capital and the NBA’s Miami Heat. He also became an influential donor to the Democratic Party, pledging to spend as much as $1 billion during the 2024 election cycle.
Now all those enterprises have fallen into chaos.
BlockFi, a crypto lending platform that had helped fund Mr. Bankman-Fried, said last week that it was suspending its operations due to the collapse. The price of Solana, a cryptocurrency that Mr. Bankman-Fried heavily promoted, has crashed. And the team behind the FTX Future Fund, a charitable organization funded by Mr. Bankman-Fried, announced their resignation.
News of the possible theft began to spread on Twitter late Friday night, as crypto enthusiasts examined public transaction records documenting the movement of cryptocurrencies. A report from crypto research firm Elliptic estimated the amount that may have been stolen or hacked at $515 million.
The exact nature of the transfers remained unclear. It could be the result of a hacker gaining access to the exchange’s system, or an insider with special access trying to escape with money. Asked about the wire transfers, Mr. Bankman-Fried told The New York Times in a text message, “We’re sorting it out with the bankruptcy team.”
In his post, Elliptic said the cryptocurrencies suspected of being transferred from FTX were quickly moved through decentralized exchanges — crypto marketplaces that operate on code and have fewer guardrails than centralized exchanges like Coinbase. The researchers described the transfers as “a common technique used by hackers to prevent their loot from being seized.”
When cryptocurrency is stolen, it is often difficult for the thieves to convert it into usable money. Since crypto transaction records are public, experts can monitor the movement of the funds and gather clues about the identity of the thieves.
But a major theft would likely make it even harder for FTX to repay customers and other creditors who have already lost billions of dollars to the company’s collapse.
After a wave of withdrawal requests went unfulfilled in the past week, FTX owes an estimated $8 billion, according to people familiar with the matter. Amateur investors have stored their crypto savings on FTX, which has been widely regarded as a safe and easy-to-use platform, even in the wild world of crypto. How much those customers are repaid depends on the bankruptcy process. In an initial filing on Friday, FTX said it had more than 100,000 creditors.
As speculation about the FTX money transfers spread on Twitter, crypto industry officials appeared to piece together the situation in real time. After reports circulated that someone involved in moving funds had an account on Kraken, another crypto exchange, Kraken’s chief security officer, Nick Percoco, tweeted“We know the user’s identity.”
Ryne Miller, FTX’s US branch general counsel, responded quickly. “Interested in anything you want to share,” he said. “Can you reach me for a second?”
A Kraken spokesperson did not immediately respond to a request for comment.
This is a story in development. Come back for updates.
