$600 Million Outflowed From FTX Exchange: A Hack or An Insider Theft?

The series of dramatic events in the sinking centralized exchange of Sam Bankman is not ending anytime soon. New developments are being shared in the markets every day, closing the gates of recovery for one of the biggest exchanges in the world. 

The problems are only increasing for FTX and Sam Bankman-Fried as new cyber thefts are being reported using FTX’s official application updates. The overall theft is massive and it pushes FTX users toward another deep pitfall. But what this theft is all about? And why hackers are targeting a sinking ship?

In this blog, CoinGabbar is going to explore this theft and dive deeper into reading between the lines of this strange event. 

What is the Situation

Last evening things took a wild turn when massive funds were shifted to anonymous addresses. Over $600 million worth of crypto tokens has moved from the FTX ecosystem without leaving any footprints behind. FTX officials have reported this incident as theft and warned their users to not update their mobile applications. FTX admins have also warned them against using the website of the exchange as it can cause trojans to users’ systems. 

Today FTX officials have told that they are shifting funds from their exchange to offline cold storage facilities because of reported unauthorized transactions. FTX has reported that it has already started the investigation from its end and will take all the actions required to mitigate the risks for its users. 

In a metrics disclosure from a Singapore-based analytical firm, Nansen has shown a one-day net outflow from the exchange to be more than $266 million last night. The number only increased after that and things moved out of control from the hands of the FTX administration. 

Users came to know about the incident from various sources including the official Telegram group of the FTX exchange. One of the administrators from that group has warned the people to not update their application as it is not an official update and is pushed by hackers. Admin also warned against using the official website of the exchange until notified otherwise. 

Is it Theft or Something Else?

The entire cryptocurrency market is full of speculations around the FTX malicious update and people are wondering whether this hack was truly a hack. In a recent tweet, Changpeng C.Z Zhao blamed SBF without taking his name for the entire Sh!t show!

On the other hand, crypto communities are presenting their narratives on mishappening and blaming it on SBF. From Twitter to Reddit, the speculations of FTX pushing the update by themselves have been moving around the entire space. According to the on-chain data, the stolen tokens were sold in the market using decentralized exchanges and most of the tokens from the same addresses are in the market, selling the token amass.

In one of the Reddit threads, the user blamed SBF to orchestrate the entire hacking fraud and suck out all the remaining liquidity from the exchange. The speculations around SBF leaving the Bahamas have also started circulating in the crypto space.

What Will Happen to the Investors?

The fall of one of the biggest centralized exchanges in the market might act as a wake-up call for all those investors who keep holding their currencies in their exchanges. However, the chances for the investors to regain their bits from the exchange has almost negligible. The possibility of FTX being completely liquidated to pay off the investors has gone down drastically after this hacking incident.

All the news in the space is negative about FTX investors' future and withdrawals are not possible until all the assets owned by FTX are liquidated to pay for the indebted amounts. 

Conclusion

According to industry sources, this act of pushing app update could not be possible without assistance from a company inside who have the access to all the major lock points in the organizations. Pushing the updates are highly sensitive matter and when we consider the security protocols used by FTX, this incident looks more like an insider job rather than a hack down of a full-fledged crypto exchange.

However, all crypto users must make sure that all of their funds are secured in cold wallets. Centralized crypto exchanges must also showcase their Proof-of-Reserves and users must check these metrics before choosing any exchange for their crypto investments.