FTX Collapse Hit by Fraudulent Transactions, Analysts See Outflows of Over $600 Million

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HONG KONG/SINGAPORE/LONDON — FTX was thrown into more chaos on Saturday when the crypto exchange said it detected unauthorized access and analysts said hundreds of millions of dollars in assets had been removed from the platform under “suspicious circumstances”.

FTX filed for bankruptcy on Friday, in one of the most publicized crypto blasts, after traders rushed to withdraw $6 billion from the platform in just 72 hours and rival exchange Binance abandoned a proposed bailout deal.

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FTX chief executive John J. Ray III said Saturday the company is working with law enforcement and regulators to mitigate the issue and is doing “everything possible to secure all assets, wherever they are.” find”.

“Among other things, we are in the process of removing trading and withdrawal functionality,” he said.

The exchange’s dramatic fall from grace saw its 30-year-old founder, Sam Bankman-Fried, known for his shorts and t-shirt attire, go from poster boy for crypto successes to protagonist of the biggest crash Of the industry.

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 by private jet to South America.

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The turmoil at FTX has seen at least $1 billion in client funds disappear from the platform, sources told Reuters on Friday. Bankman-Fried had transferred $10 billion in client funds to its trading company, Alameda Research, the sources said.

New issues surfaced on Saturday when FTX’s U.S. General Counsel Ryne Miller said in a Twitter post that the company’s digital assets were being moved to what’s called cold storage “to mitigate damages. when observing unauthorized transactions”.

Cold storage refers to crypto wallets that are not connected to the internet to protect against hackers.

Blockchain analytics firm Nansen said it saw $659 million in outflows from FTX International and FTX US in the past 24 hours.

A separate blockchain analytics firm, Elliptic, said around $473 million worth of cryptoassets were “removed from FTX wallets under suspicious circumstances early this morning,” but did not comment. was able to confirm that the tokens had been stolen.

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Crypto exchange Kraken said: “We can confirm that our team knows the identity of the account associated with the ongoing FTX hack, and we are committed to working with law enforcement to ensure they have everything. what they need to sufficiently investigate this matter.”

FTX was not immediately available to comment on the releases or Kraken’s statement.

A document Bankman-Fried shared with investors on Thursday and was reviewed by Reuters showed FTX had $13.86 billion in liabilities and $14.6 billion in assets. However, only $900 million of these assets were liquid, leading to a cash crisis that ended with the company filing for bankruptcy.

In its bankruptcy filing, FTX Trading said it had between $10 billion and $50 billion in assets, $10 billion to $50 billion in liabilities, and more than 100,000 creditors. Ray, a restructuring expert, was appointed to take over as CEO.

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The collapse shocked investors and prompted renewed calls to regulate the crypto-asset industry, which has seen losses mount this year as cryptocurrency prices crash.

“Things will continue to simmer after the FTX crash,” said Alan Wong, COO of Hong Kong Digital Asset Exchange.

“With an $8 billion gap between liabilities and assets, when FTX is insolvent, it will trigger a domino effect, leading to a series of FTX-linked investors going bankrupt or being forced to sell assets.”


Since its inception in 2019, FTX has raised over $2 billion from top investors including Sequoia, SoftBank, BlackRock, and Temasek. In January, FTX had raised $400 million from investors at a valuation of $32 billion.

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SoftBank and Sequoia Capital said they were reducing their investments in FTX to zero.

Cryptocurrency exchange Coinbase Global Inc will also reverse the investment its venture capital arm made in FTX in 2021, according to a person familiar with the matter.

Bitcoin fell below $16,000 for the first time since 2020 after Binance abandoned its bailout deal on Wednesday.

On Saturday, it was trading around $16,831, down more than 75% from an all-time high of $69,000 reached in November last year.

FTX’s FTT token has fallen around 91% this week. Shares of cryptocurrency and blockchain-related companies also fell.

“We believe cryptocurrency markets remain too small and siloed to cause contagion in financial markets, with a market capitalization of $890 billion compared to US stocks’ $41 trillion,” wrote Citi analysts.

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“Over four years, FTX has raised $1.8 billion from venture capital funds and pension funds. This is the main way financial markets could suffer, as it may have other minor implications for portfolio shocks in a volatile macro regime.

The US securities regulator is investigating FTX.com’s handling of client funds amid a liquidity crisis, as well as its crypto lending activities, a source with knowledge of the investigation said.

Hedge fund Galois Capital had half of its assets trapped on FTX, the Financial Times reported on Saturday, citing a letter from co-founder Kevin Zhou to investors and estimating the amount at around $100 million.

(Additional reporting by Angus Berwick and Carolina Mandl in New York; Editing by Pravin Char, Megan Davies and Daniel Wallis)



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