Cryptospace Spotlight #46 (13 Nov 2022) - FTX filed for bankruptcy, and claimed hacked shortly after.
FTX filed for bankruptcy protection, DFX Finance got hacked due to re-entrancy attack, and some exchanges experienced connectivity issue due FTX saga!
Security and Risk
12 Nov - FTX claimed hacked
Crypto exchange FTX claims it has been hacked for all its funds. Late Friday night, a message sent in its Telegram stated "FTX has been hacked. All funds seem to be gone." Additionally, the FTX mobile app and website are compromised and could download malware and Trojan viruses onto peoples' devices. [more][more-2]
11 Nov - DFX Finance hacked
DeFi protocol DFX Finance lost 3,000 ETH (~$4M) to attacker due to re-entrancy attack. [more][more-analysis]
The curious event of Sam Bankman-Fried (SBF) and FTX
Status for now: FTX Files for bankruptcy protection in US; CEO Bankman-Fried resigns. [more]
Bankruptcy filings attributed to FTX US and Alameda Research estimate each company has $10 billion to $50 billion in liabilities.
From $26 Billion to Nothing: The Rise and Fall of SBF and FTX [more][more-2][more-3]
FTX founder Sam Bankman-Fried’s estimated fortune fell from $16 billion earlier this week to effectively nothing, according to a report.
Rise: Bankman-Fried founded Alameda in 2017, profiting greatly from arbitrage trading strategies before establishing FTX in 2019. His profile started to rise in 2020, as he was touted as a “crypto savior” for helping SushiSwap after the founder of that decentralized exchange (DEX) bolted and left the community in the lurch.
Fall: Behind the scenes, however, reports allege that he was improperly using FTX customer funds to stem the bleeding at Alameda. However, when FTX customers began withdrawing assets en masse and the FTT token crashed, the firm found itself in a liquidity crunch. Rival exchange Binance nearly stepped in to save the day, but changed course when it saw the size of the mess.
Series for event from the Alameda saga until now. [more]
The saga kicked off on Nov. 2 after reports that a leaked balance sheet from the Sam Bankman-Fried-founded trading firm Alameda Research suggested the company held a significant amount of FTX Token, the native token of the FTX cryptocurrency exchange.
According to a recent report by The Wall Street Journal, the exchange provided up to $10 billion in loans using money that customers had deposited. Since FTX had $16 billion in customer assets, the exchange had lent more than half of its customer funds. [more]
FTX’s investors and $1.8B invested. These FTX investors stand to lose the most. [more]
Blaming on the regulator ambiguity. Coinbase CEO Brian Armstrong, in a tweet late Wednesday, butted heads with Sen. Elizabeth Warren, who said FTX’s blowup shows “much of the industry appears to be smoke and mirrors, and called on the SEC for more aggressive enforcement. Armstrong argued that the enormous amount of offshore trading activity was a direct result from what he sees as lacking SEC clarity on how the industry should operate. [more]
Rippling impact.
BlockFi, the crypto lender bailed out by FTX earlier this year, has suspended withdrawals. BlockFi said it cannot operate suitably due to uncertainty surrounding FTX.com, FTX US and Alameda Research. [more]
A Solana-based crypto asset tied to the price of bitcoin temporarily collapsed in value (~$10,000) Friday after FTX US – the only venue left to exchange it for real bitcoin – had frozen withdrawals. FTX effectively stranded everyone who still held the 16,000-odd soBTC still in circulation at press time Friday.[more]
Solana investors are expecting Alameda to sell off its massive SOL staking (~$900M). [more]
Token movements after bankruptcy. Elliptic found that $663 million in various tokens were drained from FTX's crypto wallets. Of that amount, $477 million was taken in the suspected theft, while the remainder is believed to have been moved into secure storage by FTX. [more]
Other Crypto Picks
The IMF published a paper on X-C, a platform for cross border payments, co-authored by the IMF and members of MIT’s Digital Currency Initiative. At a technical level, X-C can use a centralized database or distributed ledger (DLT), but either way, it relies on smart contracts to automate significant amounts of functionality and encryption for privacy. [more]
Bahamas - FTX’s Bahamas-based subsidiary is now facing a local regulator’s inquiry into accusations of impropriety when it comes to its safeguarding of customer funds. [more]
Crypto exchanges, such as Binance, Gate.io, KuCoin, Poloniex, Bitget, Huobi, OKX, Deribit and Bybit, had separately issued statements that they would publish their Merkle tree reserve certificates to increase transparency after Binance CEO Changpeng Zhao ‘CZ’ urged crypto exchanges to produce proof-of-reserves to gain trust. [more]
Binance released partial holding after its CEO pushed for industry wide proof-of-reserves. [more]
Crypto exchange Crypto.com has released a statement stating the number of digital assets that the company holds. According to the statement, the exchange acknowledged the situation of the market coming off the back of the fall of FTX. The exchange also mentioned the need for transparency in its dealings while noting that the safety of users’ funds and the digital asset has always been its priority. However, the company noted that things like these needs total commitment from both them and the users. [more]
Major exchange Coinbase experienced network connection issues Tuesday night (UTC) time, which it says were caused by a higher level of sign-ups and transfers. Kraken, meanwhile, said it saw brief and intermittent connectivity issues. [more]