A new report published by Wired reveals that the cryptocurrency exchange FTX may have suffered millions of dollars in losses following a hack attack in November 2022, due to inadequate security measures and lack of transparency in the company’s operations.
FTX Hit by Loose Security Measures
After FTX’s bankruptcy, the new management made great efforts to transfer various funds worth $1 billion to different storage devices and managed to recover most of the funds as they were melting away in the cryptocurrency exchange. According to the report, this indicates that a significant portion of the funds controlled by the exchange at that time were at risk of being stolen.
As it is known, accounts associated with FTX and FTX.US were emptied just hours after the cryptocurrency exchange filed for bankruptcy and its founder, Sam Bankman-Fried, resigned from his leadership position in the crypto empire. John J. Ray III, CEO of FTX Debtors and Chief Responsible for the Restructuring Process, reported that $323 million worth of funds from the global exchange and $90 million from the exchange’s US branch were emptied after the hack attack.
A court application filed in April reveals that most of the funds held in FTX were stored in hot wallets or wallets connected directly to publicly accessible computers, posing a direct risk of attack. It is believed that unknown attackers were able to access the private keys of FTX’s wallet addresses or the passwords that provided access to these wallets, enabling them to start emptying the funds.
The Report Highlights the Remarkable Movement of Funds in FTX
Furthermore, the report emphasizes that after FTX’s bankruptcy filing, only a few members of the team may have known the exact number of wallet addresses owned by the cryptocurrency exchange or where their private keys were located. This also suggests that the funds may have been emptied by someone internally. The bankruptcy team investigated the real-time emptying of the accounts before Gary Wang, one of FTX’s founders who is currently facing fraud charges alongside Bankman-Fried, was able to access certain wallets and start transferring funds.
Wang succeeded in sending $500 million to a wallet in the hardware wallet called Ledger Nano, which is the legal advisory firm Alvarez & Marsall’s consultant for FTX. After this transfer, the emptying of funds in FTX stopped.
The next day, Wang and Bankman-Fried made another transfer of $500 million to wallets provided by the cryptocurrency custody organization BitGo. This transfer ultimately saved over $1 billion in funds that could have been lost if no precautionary measures were taken by the cryptocurrency exchange.
