US prosecutors investigate FTX’s 372 million theft

abdelaziz Fathi

The United States Department of Justice is investigating the hack that drained about $372 million out of bankrupt cryptocurrency exchange FTX.

FTX

The mystery theft took place on November 11 shortly after the exchange and its 130 affiliated entities filed for bankruptcy. Both the hack and new probe added insult to injury of FTX, a once $32 billion crypto empire, whose founder and former CEO Sam Bankman-Fried is sued in a separate fraud case.

According to a Bloomberg report, federal prosecutors from the Justice Department’s National Cryptocurrency Enforcement and Manhattan authorities are tracking the stolen assets. Per the report, they already managed to freeze some tokens, but amount of funds frozen is described as a “fraction” of the overall amount.

At the time of the hack, some blockchain security firms documented suspicious transfers of $600 million worth of tokens from FTX, which may have been the result of a hack or theft. Hackers allegedly sent 180,000 ether (ETH) coins, worth nearly $200 million to at least a dozen digital wallets. The suspicious hack marked a new twist in a dramatic series of events as some experts claimed that some clues point to a high-level insider.

Following the incident, and as part of the bankruptcy process, Bahamian regulators ordered Bankman-Fried to provide “unauthorized access” to the exchange’s systems and transfer of all digital assets to a wallet owned by the government.

Authorities in the Bahamas — where FTX is headquartered —justified the move to take control of assets, citing “urgent interim regulatory action was necessary to protect the interests of clients and creditors of FDM.”

At the time of the attack, FTX’s new CEO and restructuring veteran John Ray acknowledged that the exchange had been “compromised.” He added that the exchange took precautionary steps to mitigate damage upon observing unauthorized transactions.

The collapse of FTX has already cost customers and creditors up to $50 billions in lost deposits and investments, setting off investigations that led to criminal charges.

FTX’s new CEO, who previously oversaw Enron’s liquidation and other bankruptcy cases, painted the picture of a crypto empire with unreliable financial statements, mishandling confidential data and the use of corporate funds to buy homes for employees in the Bahamas.

Per leaked reports, FTX’s downfall stemmed from Bankman-Fried’s efforts to save other crypto firms, which ultimately left his trading unit in financial hole of up to $8 billion as customers rush for the exit. Concerns about the world’s second largest cryptocurrency exchange’s financial health reportedly triggered huge withdrawals in just three days.

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