US authorities are investigating the FTX hack: Bloomberg

The U.S. Department of Justice launched an investigation into a hack of FTX. 

Hackers stole somewhere between $370 million and $400 million in crypto assets from the exchange’s wallets on Nov. 11, shortly after former CEO Sam Bankman-Fried filed for Chapter 11 bankruptcy protection and bailed from the company. This is separate from the $400 million that the Securities Commission of the Bahamas ordered to be transferred, though the two events happened around the same time.

The FTX hacking incident first became public knowledge in November when the exchange’s official Telegram admins reported that there had been “unauthorized access.” The amount lost is estimated to be over $370 million (and close to $400 million), per on-chain data cited by analytics firm Chainalysis.

The Justice Department is now investigating the case to uncover who was responsible for the breach. It is said to be separate from the fraud case against FTX co-founder Sam Bankman-Fried, Bloomberg first reported, citing a source familiar with the matter. It is unclear at this time if any suspects have yet been identified.

At one point, the wallet address connected with the hacker held more than $300 million in ether alone belonging to FTX reserves, almost all of which were sold off for bitcoin and could not be recovered.

The hack confusion

There was some confusion regarding the FTX hack and another transfer of $400 million in crypto assets from the exchange to The Bahamian regulators. The two events happened close to each other, leading media outlets to mistakenly report that the hack was an asset seizure. That wasn’t the case.

What actually happened is that the Securities Commission of the Bahamas ordered a transfer of $400 million from FTX as part of a safekeeping procedure, and while this did occur shortly after the hack took place, it was not connected in any way.

New FTX CEO John J. Ray III testified that the hack and another large asset transfer ordered by the Bahamian regulators were separate. This is verified by analytics firm Chainalysis, which is working with FTX to track down the assets.

“The $400 million stolen and hacked from FTX is completely separate from the $400 million held by the Securities Commission of the Bahamas. It’s totally understandable that people were confused by this, though,” a spokesperson from Chainalysis told The Block.

Ray also revealed in a prepared testimony document that FTX stored private keys to its wallets in an unencrypted manner, and had adopted very poor security controls — factors that could have easily allowed the hack to have taken place.

Disclaimer: Beginning in 2021, Michael McCaffrey, the former CEO and majority owner of The Block, took a series of loans from founder and former FTX and Alameda CEO Sam Bankman-Fried. McCaffrey resigned from the company in December 2022 after failing to disclose those transactions.

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