Court-appointed lawyers liquidating assets for the collapsed cryptocurrency exchange FTX have painted a bleak picture of the company’s financial situation and the fate of billions of dollars frozen.
“A large amount of property has been mysteriously stolen or disappeared,” James Bromley, a partner at the law firm Sullivan & Cromwell, which was appointed by the court to represent FTX, told the court. FTX declared bankruptcy under Chapter 11, U.S. law on Nov.
10 after a liquidity drain left the company $8 billion in debt. The rapid collapse has left individual investors and large funds scrambling to recover billions of dollars in cryptocurrencies they have deposited on the FTX platform.
Sam Bankman-Fried’s “Personal Territory”
However, in just over a week, Bankman-Fried’s mismanagement of FTX has left lawyers unable to get a full picture of the company’s financial position, Bromley said at the hearing.
Lawyers from FTX’s new management team announced at the bankruptcy trial that it would create a vast network to identify and trace the billions of dollars transferred through FTX, which they called founder Sam Bankman-Fried’s “personal territory.”
“FTX is under the control of inexperienced and naïve individuals. We’re dealing with a global company, but it’s run as a personal territory by Sam Bankman-Fried. Some of them, or even all of them, are compromised individuals,” Bromley said.
According to the lawyer, FTX and Sam Bankman-Fried used a significant amount of the company’s money to pay for things unrelated to the business. The document also revealed that one of FTX’s U.S. affiliates bought nearly $300 million worth of real estate in the Bahamas for senior management.
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“Based on preliminary investigations, most of FTX’s property purchases involving homes and resort properties are used by the company’s senior executives,” Bromley said. The collapse of the empire once valued at up to $40 billion has led to investigations by the U.S.
Securities and Exchange Commission (SEC) and the Justice Department, with FTX suspected of embezzling customer deposits. According to multiple documents, Alameda Research is considered a “sister company” to FTX because it was founded by Sam Bankman-Fried.
The Alameda Fund then secretly used users’ money on FTX to cover investors’ eyes. They have silently traded billions of dollars without letting users know.
Bromley also said the number of individual and institutional clients that FTX owes could be in the millions. According to court documents, FTX owes $3.1 billion from its 50 largest creditors, of which the first 10 names alone account for $1.45 billion.
The journey to track down the hacked money
Since its bankruptcy, FTX has been the target of cyberattacks. According to Bloomberg, in just the first 24 hours after the collapse, the FTX exchange was hit by a mysterious cash flow worth about $662 million. This is the latest twist of one of the darkest periods for the cryptocurrency industry.
Blockchain analytics firm Nansen has put an overall cash flow estimate of around $662 million, highlighting activity on both international FTX and FTX US exchanges. Meanwhile, an independent analyst by Elliptic claims that it has uncovered $475 million stolen from FTX in illegal transactions.
In court, Bromley said FTX was in regular contact with the U.S. Department of Justice seeking the money. Meanwhile, the cybercrime unit of the Manhattan attorney’s office has launched a wide-ranging investigation. Fortunately for FTX, modern technology can help investigators track down clues to attacks. Specifically, every digital currency today is built on the blockchain.
When stolen, users can track the movement of that money and easily identify thieves. According to Wired, after the huge amount of nearly half a billion dollars was withdrawn from FTX, followers of cryptocurrencies around the world are closely watching the destination and looking for any clues that reveal the culprits Besides, the authorities are also focusing on observing every movement of the wallet address where the hacked funds are transferred into in the first 24 hours after the burglary occurred.
“We are definitely watching the movement of this money. This thief has hundreds of millions of dollars but it’s like robbing a bank and trying to get as much money as he can carry. Now everyone knows this money is associated with a robbery. What can the hacker do about it?” said Chris Janczewski, head of investigations at TRM Labs.
According to Elliptic’s analysis, hackers will likely “launder” by mixing FTX’s money with other users’ money. However, blockchain analysts have proven they can fully expose this trick, especially when users have to deposit a huge amount of money to perform this behavior.
Source: cafebitcoin
