FTX claims it was hacked by $415 Million, which now makes them solvent. Digital currency is supposedly equipped with “safeties” to prevent it from being traded more than once, to track it, and to protect it against duplication or hacking. One of the largest exchanges where such digital assets were traded was FTX, which authorities and market observers praised as one of the most open cryptocurrency businesses.
The market first thought the FTX implosion was caused by a classic bank run on the exchange’s reserves. Much of the world is still learning how owning, trading, and tracking cryptocurrencies will work for buyers, sellers, and regulators in a largely unregulated area of the financial industry. However, the company’s story has grown considerably more complex and possibly criminal as time has passed and new information has come to light.
On January 17, 2023, the bankrupt cryptocurrency exchange FTX informed its creditors that cyberattacks had stolen nearly US$415 million in cryptocurrency.
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Why FTX Claims Innocence
While nearly $5 billion in cryptocurrency, cash, and liquid securities had been recovered, FTX still had significant shortages at its international and US crypto exchanges. FTX said that some of the shortfalls were caused by cyberattacks, stating that since it filed for bankruptcy on November 11 2022, US$323 million in crypto had been hacked and stolen from its international exchange, and US$90 million had been stolen from its company.
Later, a blog post showed that founder Sam Bankman-Fried disputed some study elements. Bankman-Fried disputed FTX’s calculations, claiming that the firm’s attorneys at Sullivan & Cromwell had provided an “incredibly misleading” picture of the company’s finances. Bankman-Fried has been charged with stealing billions of dollars from FTX investors to repay debts incurred by his cryptocurrency-focused hedge fund, Alameda Research.
Bankman-Fried mentioned that FTX has more than enough cash to pay back US clients who, in his “best estimation,” are due somewhere between US$181 million and US$497 million. Since retiring from his position as CEO in November, Bankman-Fried has yet to have access to FTX documents.
A Sullivan & Cromwell spokeswoman declined to comment. In a recent court filing, the firm’s lawyers stated that they had rejected Bankman-Fried’s attempt to continue participating in the bankruptcy procedures for the business.
Bankman-Fried went on trial in October 2022 after claiming a not-guilty plea to all the fraud accusations against him. FTX did not mention or estimate how much was owed to its domestic or foreign clients and did not immediately react to inquiries regarding Bankman-Fried’s blog post.
On Tuesday, 10 January 2023, FTX gave further information regarding its recovery efforts, mentioning that it has recovered US$1.7 billion in cash, US$3.5 billion in liquid crypto, and US$300 million in liquid securities.
In recent news, it has made a Herculean investigation effort to find this preliminary information. Still, spokesmen said we are making headway in our attempts to maximise recoveries.
Based on cryptocurrency prices on November 11, 2022, the recovered crypto assets total US$685 million in Solana, US$529 million in FTX’s proprietary FTT token, and US$268 million in Bitcoin. Bankman-Fried praised Solana, but it lost most of its worth in 2022.
A conflict between FTX’s US-based bankruptcy team and Bahamian regulators resulted from an asset seizure by the Securities Commission of the Bahamas in November 2022 that was discovered during the company’s initial inquiry into system intrusions.
Spokesmen Ray stated in early January 2023 that the Bahamian government was holding US$426 million for creditors as part of the two parties’ settlement.
Prime Minister Philip Davis of The Commonwealth of The Bahamas created the conflict during a mid-January, 2023 meeting at the Atlantic Council in Washington and the Bahamas. It said Ray’s team had “come around” and concluded that the Bahamian asset seizure “was appropriate and has saved the day for many of the investors in FTX.”
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Is FTX Innocent?
Sam Bankman-Fried is accused of sending $10 billion in funds from FTX clients to cover trading firm Alameda Research’s losses without authorisation on eight charges, including fraud and conspiracy. Federal prosecutors have stated that some of his top executives have entered guilty pleas and are prepared to testify against him.
The information was presented as part of a presentation submitted to the federal bankruptcy court in Delaware, which detailed the $5.5 billion in liquid assets that the new management team, referred to in court records as FTX Debtors, had discovered.
The $2 billion in loans to business insiders come first. Then there are the 56 million Robinhood shares, worth $456 million, which have also been claimed by the defunct cryptocurrency lender BlockFi, who claims they were used as collateral for a loan that was not repaid; after that, $2.1 billion was unaccounted for. When Binance invested in FTX, FTX reimbursed Binance for the Series A shares obtained.
The debtor may recoup money given to third parties in two transactions during the 90-day “preferred period.” A $400 million investment in Modulo Capital is one example. The other is the $446 million paid to the bankrupt cryptocurrency lender Voyager Digital. However, crypto experts at Bitcoineer mention that if the hack of $415 million is proven to be accurate, this will absolve a lot of guilt from FTX and make them solvent.
Currently, FTX’s new management is “reviewing all prior transactions carried out by pre-petition management,” according to the presentation provided in court. Only experienced judges will be able to interpret these findings. The entire cryptocurrency industry is waiting for the result up until that point while holding onto their coins. This has left many investors wondering whether this case will truly be solved and create a new order of crypto, or if it will leave the rich absolved from guilt.
