FTX says it is eliminating trading and withdrawals, moving digital assets to a cold wallet after an alleged $477 million attack.

In this photo illustration, the FTX website is shown on a computer on November 10, 2022 in Atlanta, Georgia. Binance, the world’s largest cryptocurrency firm, has agreed to acquire FTX, another major cryptocurrency exchange, in a rushed sale to avoid a liquidity crisis, which is known as the “Lehman Moment” in the cryptocurrency industry.

Michael M. Santiago | Getty Images

John Ray, FTX’s new CEO and chief restructuring officer, said the bankrupt crypto exchange is “in the process of removing trading and withdrawal functionality” and is “moving as many digital assets as can be identified to a new cold wallet custodian.” according to a statement tweeted by the company’s general counsel, Ryne Miller.

The announcement comes as the failed exchange investigates what it calls “unauthorized transactions” that began within hours of FTX filing for Chapter 11 bankruptcy protection in the United States.

news related to investments

Bitcoin will fall further, the fund manager says, until this catalyst kicks in

CNBC Pro
Bitcoin will fall further, the fund manager says, until this catalyst kicks in

The suspected hack was announced by an administrator on FTX’s Telegram channel, according to blockchain analytics firm Elliptic and was followed by a tweet from Miller indicating that the wallet’s movements were abnormal.

Figures from Singapore-based analyst firm Nansen released an evening program more than $2 billion in net outflows from the global FTX exchange and its US arm in the past seven days, of which $659 million occurred in the previous 24 hours.

Elliptic discovered that $663 million in various tokens were drained from FTX’s crypto wallets. Of that amount, $477 million was taken in the alleged theft, while the rest is believed to have been moved to safe storage by FTX.

Eliptic has found that stablecoins and other tokens are converting rapidly ether and dai on decentralized exchanges, a technique the firm says is commonly used by hackers to prevent their transport from being hijacked.

“The way these assets were moved is very suspicious,” said Tom Robinson, Elliptic’s chief scientist. “Very similar transaction patterns have been seen in the past with large-scale theft, whereby stolen assets are quickly exchanged on decentralized exchanges, to avoid seizure.”

The new head of FTX said the exchange was coordinating with law enforcement and relevant regulators about the breach and was making “every effort” to protect all assets globally.

Miller, FTX’s general counsel, said the decision to push digital assets into cold storage was meant to “mitigate the damage of observing unauthorized transactions.”

People who choose to hold their own cryptocurrency can store it “hot,” “cold,” or some combination of the two. A hot wallet is connected to the Internet and allows owners relatively easy access to their coins so they can access and spend their cryptos, while cold storage generally refers to cryptos stored in wallets whose private keys are not connected to the Internet. The trade-off for convenience with hot storage is potential exposure to bad actors.

CNBC’s Rohan Goswami contributed to this report.

FTX files for bankruptcy

Leave a Reply

Your email address will not be published. Required fields are marked *