Hackers who stole an estimated $477 million worth of cryptocurrency from collapsed FTX exchange began laundering the funds in bitcoins.
This month, after FTX filed for bankruptcy, new CEO John Ray III said that “unauthorized access to certain assets has occurred.”
Blockchain analytics firm Elliptic estimates that around $477 million worth of cryptocurrency was stolen from FTX.
The theft adds insult to injury at FTX, a once $32 billion crypto empire that collapsed has sent shockwaves through the industry.
The stolen money was converted into different digital coins, but the bulk – over $280 million – was turned into cryptocurrency etheraccording to public blockchain records of the account linked to the hackers.
Tom Robinson, co-founder of Elliptic, told CNBC that hackers are converting ether into a crypto product called RenBTC which is then converted into bitcoin through a bridge. This makes it possible to convert one crypto to another without going through a centralized exchange.
“This is a common tactic in laundering crypto thefts,” Robinson said.
Elliptic researchers have documented how RenBridge was used to launder “hundreds of millions” of dollars in cryptocurrency believed to be from ransomware attacks or hacks. Some of these hacks have links to Russian-backed ransomware groups, according to Elliptic.
So far, $74 million has been transferred to bitcoin from RenBTC using RenBridge.
Alameda, a trading company and sister company of FTX, acquired RenBridge in 2021 as part of FTX’s broader efforts to develop Solana and Serum.
Serum is a “decentralized exchange”, with a Serum token running natively on Solana, promising users faster settlement and execution times. FTX and Alameda were major backers of the project, which was bifurcated to try to prevent control of FTX after bankruptcy.
On November 11, FTX users noted unusual cryptocurrency transfers, sparking fears that FTX’s platform had been compromised. Messages from FTX’s Telegram feed indicated that the app and platform had in fact been infiltrated and compromised.
Further allegations that Bankman-Fried worked with Bahamian regulators to remove crypto from FTX wallets came after a Vox interview – which Bankman-Fried later claimed to have understood as a casual conversation with a journalist friend – in which the ex-CEO of FTX pinned the alleged theft of FTX crypto on a disgruntled employee.
FTX filings said they uncovered transfers from the Bahamas while investigating the weekend cryptocurrency theft. What these filings left unanswered was whether these two were one and the same occurrence, or two separate occurrences.
It is not yet known how much the assets Bahamian regulators have taken over are worth. CNBC reported on an emergency court filing by FTX on Nov. 18 to prevent further action by Bahamian regulators. FTX filings alleged that Bankman-Fried may have been working in concert with these regulators.
Hackers will at some point want to cash out this money in fiat. However, Robinson said it would be “difficult” due to the “traceability of cryptography”.
He said he expects hackers to use “mixers to cover their blockchain trail.”
Mixers are services or software that obfuscate a crypto transaction trail on the blockchain, making it difficult or impossible to trace those funds, Robinson said.
“This may be one of the motivations behind moving these assets to bitcoin – the wider availability of mixing services,” he added.
The blockchain is a public record of cryptographic activity. Each coin can have its own blockchain. This allows you to know, to some extent, where the funds are flowing. Using blenders could make this difficult.
Compliance software firm Crypto Chainalysis in a tweet on Sunday also confirmed that the hackers were transferring funds.
On Sunday, FTX urged cryptocurrency exchanges to keep tabs on stolen funds if hackers attempt to process the money through one of their services.
“Exchanges should take all steps to ensure that these funds are returned to the bankruptcy estate,” FTX said in another tweet.
FTX owes major creditors some $3.1 billion, according to court documents. In other words, the hacked money is about 15% of what FTX owes its largest customers alone.
Bankman-Fried once oversaw a sprawling crypto empire that spanned every inhabited continent and claimed billions in assets. The FTX implosion left Bankman-Fried a paper poor and investors were unable to access their crypto assets.
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