FTX confirms 'unauthorized transactions' as $1B in crypto reportedly vanishes
Cryptocurrency exchange FTX, which filed for bankruptcy Friday, transfers funds to offline storage after 'abnormalities'
D.A. Davidson Director of Research Gil Lauria and Duke Financial Economics Center Policy Director Lee Reiners debate the case for cryptocurrency as the FTX crisis continues to unfold on 'The Claman Countdown.'
Embattled cryptocurrency exchange FTX said Saturday it was moving funds into offline storage after reporting "unauthorized transactions."
Analysts said millions of dollars worth of assets had been withdrawn from the platform.
"Following the Chapter 11 bankruptcy filings – FTX US and FTX [dot] com initiated precautionary steps to move all digital assets to cold storage. Process was expedited this evening – to mitigate damage upon observing unauthorized transactions," FTX U.S. general counsel Ryne Miller tweeted.
Cold storage refers to crypto wallets that are not connected to the internet to guard against hackers.
INSIDE THE COLLAPSE OF CRYPTO EXCHANGE FTX: EVERYTHING YOU NEED TO KNOW
This illustration photo shows a smartphone screen displaying the logo of FTX, the crypto exchange platform, with a screen showing the FTX website in the background in Arlington, Va., Feb. 10, 2022. (Olivier Douliery/AFP via Getty Images / Getty Images)
Miller had previously written that FTX was "investigating abnormalities with wallet movements related to consolidation of FTX balances across exchanges," although noting that facts were unclear "as other movements [were] not clear."
An administrator in the official FTX Telegram channel wrote that "Ftx has been hacked."
That administrator told users not to visit the FTX site "as it might download Trojans."
"Some funds were retrieved," the FTX administrator wrote. Coindesk reports that the message was pinned by Miller.
FTX did not immediately return FOX Business' request for comment on the matter.
Figures from the Singapore-based analytics firm Nansen showed a one-day net outflow from FTX of about $266 million, with $73 million withdrawn from FTX U.S.
Sam Bankman-Fried, founder and chief executive officer of FTX Cryptocurrency Derivatives Exchange, during an interview on an episode of Bloomberg Wealth with David Rubenstein in New York Aug. 17, 2022. (Jeenah Moon/Bloomberg via Getty Images / Getty Images)
Reuters, citing two people familiar with the matter, reported that at least $1 billion of customer funds had disappeared and that people told the news outlet that Bankman-Fried had secretly transferred $10 billion of customer funds from FTX to his trading company Alameda Research.
Two sources told Reuters that Bankman-Fried — in a meeting he confirmed took place — shared records with other senior executives that revealed the financial hole.
Spreadsheets reportedly showed that between $1 and $2 billion dollars of the funds were not accounted for among Alameda's assets and that the spreadsheets did not indicate where the money was moved.
GET FOX BUSINESS ON THE GO BY CLICKING HERE
In text messages to Reuters, Bankman-Fried said he "disagreed with the characterization" of the $10 billion transfer.
"We didn't secretly transfer," he said. "We had confusing internal labeling and misread it."
When asked about the missing funds, Bankman-Fried responded: "???"
In this photo illustration, the FTX website is seen on a computer Nov. 10, 2022, in Atlanta. (Photo Illustration by Michael M. Santiago/Getty Images / Getty Images)
Upon additional examination, FTX legal and financial teams purportedly learned that Bankman-Fried implemented what two people described as a "backdoor" in FTX's bookkeeping system, allowing him to execute commands to alter the company's financial records without alerting others.
Bankman-Fried denied implementing a "backdoor."
FOX Business' request for further comment from Bankman-Fried was not immediately returned.
CLICK HERE TO READ MORE ON FOX BUSINESS
This all comes after the Bahamas-based FTX filed for Chapter 11 bankruptcy protection.
A rescue deal with rival exchange Binance fell through.
Reuters said that the U.S. Securities and Exchange Commission and the Department of Justice are investigating FTX.com's handling of customer funds and its crypto-lending activities.
Reuters contributed to this report.