The hopes for anyone getting any money out of FTX are dwindling after nearly $400 million was drained from the exchange late on Friday.
Crypto-watchers noted that the money was first transferred into Tether and then further down the chain.
FTX general council said it was “investigating abnormalities with wallet movements” and a message was pinned to the top of the FTX Telegram to say the exchange was hacked and to delete FTX apps.
A later message from FTX lawyers said they had taken precautionary steps to move digital assets to cold storage. It’s likely this was in response to thefts in order to save the remainder of funds. Customers reported balances being zeroed out.
Reuters reports that at least $1 billion of client funds is missing and that Bankman-Fried had transferred $10 billion of customer funds to Alameda Research.
In a subsequent examination, FTX legal and finance teams also learned that Bankman-Fried implemented what the two people described as a “backdoor” in FTX’s book-keeping system, which was built using bespoke software.
They said the “backdoor” allowed Bankman-Fried to execute commands that could alter the company’s financial records without alerting other people, including external auditors. This set-up meant that the movement of the $10 billion in funds to Alameda did not trigger internal compliance or accounting red flags at FTX, they said.
Another developing problem is a reported loophole in Bahamas bankruptcy proceedings that allows the removal of domestic funds. With this, there’s an arbitrage between foreign and local money with funds being sold/drained to Bahamian accounts.
It’s not clear to me what’s truth and rumors but at this point it’s beyond FUBAR. Bitcoin is trading at $16,790 and ethereum at $1259.
On the upside, maybe that’s the end of this guy.
Kevin “Zero-Credibility” O’Leary
— Neil Jacobs (@NeilJacobs) November 11, 2022