FTX Plans To Track Customers’ Hacked Assets, Here’s How

Key Insights

• FTX exchange hires AlixPartners.
• The Forensic team will help to locate stolen funds on the exchange.
• Investigation showed that the hackers have been moving some funds through crypto mixers and OKX exchange.

 

Barely a month after the FTX exchange debacle, customers and stakeholders still count their losses. You would recall that on 11 November, hackers accessed and siphoned customers’ wallets. The FTX wallet said about $450 million of assets were stolen from its coffer. 

Shortly after, the former CEO, Sam Bankman-Fried, granted an interview with Crypto blogger Tiffany Fong. In the November 16 interview, he revealed that he was close to finding those hackers. Similarly, he said he had “narrowed it down to eight people.” He added that it was either an ex-employee or someone somewhere installed malware on an ex-employee’s computer. 

Furthermore, FTX debtors who had their funds unassessed since FTX filed for bankruptcy and some employees who were not paid— approached the court. On 22 November, the lawyer representing these debtors revealed that customers’ funds were either stolen or missing. Therefore, the exchange must reveal what happened to the funds before filing for bankruptcy. 

On this premise, FTX exchange, under the new management, has reportedly hired a team of financial forensic investigators. The team’s main role is to track down and locate the billions of dollars worth of missing customers’ assets. 

FTX Hires Forensic Team

Investigations revealed that the stolen funds on the collapsed exchanges have been moving through various crypto mixers and exchangers. All these moves are to launder the fund and make it untraceable. It is, however, intriguing how the hackers intend to launder such amounts of digital assets without a trace. 

Furthermore, the hackers reportedly transferred their ETH holdings on 20 November to a new wallet address. After that, they swapped some of the ETH for an ERC-20 version of Bitcoin and bridged the funds to the BTC Network. The hackers proceeded to use a laundering technique called Peel chaining. 

The Peel chaining technique subdivides the digital assets into smaller units and shares them across multiple wallets. The hackers reportedly sent the BTC through a crypto mixer and to the OKX exchange. All these reportedly occurred on 29 November. 

Therefore, the exchange has sought the service of AlixPartners, a financial advisory company. AlixPartners will partner with the new FTX management to identify the missing billions and how the hackers move them through mixers. 

Significantly, the forensic team is led by Matt Jacques, the former chief accountant of the Securities and Exchange Commission. The team’s first task will be to conduct “asset tracing” to identify and recover the stolen digital assets— wherever they may be stored or scattered. Furthermore, the forensic team will complement the restructuring work ongoing at the FTX exchange. 

Conclusively, experts and industry players opined that AlixPartners must investigate Sam Bankman Fried’s role in the events leading to the bankruptcy. Similarly, his claims that he “unknowingly commingled” customer funds with the loans granted Alameda research needs to be scrutinized.