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FTX-Owned Service Used to Launder Hundreds of Millions 'Hacked' From FTX, Researchers Say

Hackers who stole around $477 million worth of cryptocurrency from collapsed exchange FTX have started to launder the funds into bitcoin. This is according to data from blockchain analysis firm Elliptic.According to Elliptic's data, the hackers have already laundered around $3 million worth of the stolen cryptocurrency.

November 21, 2022
10 minutes
minute read

Hackers who stole around $477 million worth of cryptocurrency from collapsed exchange FTX have started to launder the funds into bitcoin. This is according to data from blockchain analysis firm Elliptic.According to Elliptic's data, the hackers have already laundered around $3 million worth of the stolen cryptocurrency.

The firm says that the hackers are using a number of different methods to try and hide the stolen funds, including mixing services and sending the funds to multiple different addresses.Elliptic's data shows that the hackers are making use of a number of different cryptocurrency exchanges to launder the stolen funds. So far, the hackers have used exchanges such as Binance, Huobi, and OKEx to convert the stolen cryptocurrency into bitcoin.

This month, after FTX filed for bankruptcy, new CEO John Ray III said that "unauthorized access to certain assets has occurred." Ray did not elaborate on what assets were accessed or how the access occurred.

According to blockchain analytics company Elliptic, around $477 million worth of cryptocurrency has been stolen from FTX. This is a significant amount of money, and it highlights the need for better security measures in the cryptocurrency world.

The theft is a major setback for FTX, a once $32 billion crypto empire whose collapse has sent shockwaves across the industry.

The stolen money has been converted into different digital coins, but the bulk of it - more than $280 million - was changed into the cryptocurrency ether, according to public blockchain records of the account linked to the hackers.

Tom Robinson, co-founder of Elliptic, told CNBC that the hackers were converting the ether into a crypto product called RenBTC which is then being converted into bitcoin via a bridge. This allows for crypto to be converted into another without going through a centralized exchange, which is beneficial for the hackers.

According to Robinson, a common tactic in the laundering of crypto thefts is to use a mix of different currencies. This makes it more difficult to trace the stolen funds and makes it more likely that the thieves will be able to access the funds.

According to researchers at Elliptic, RenBridge has been used to launder hundreds of millions of dollars in cryptocurrency that is suspected to have come from ransomware attacks or hacks. Some of these hacks have been linked to Russian-backed ransomware groups.

So far, 74 million dollars have been moved to bitcoin from RenBTC using RenBridge.

Alameda, a trading firm and sister company to FTX, acquired RenBridge in 2021 as part of FTX’s broader efforts to build out Solana and Serum. Alameda will help FTX to develop these platforms and provide liquidity for them.

Serum is a decentralized exchange that uses a Serum token native to Solana. The project was backed by FTX and Alameda, and was forked in an attempt to prevent FTX from gaining control following the bankruptcy. Serum promises faster settlement and execution times for users.

On Nov. 11, FTX users noted unusual transfers of cryptocurrency, sparking fears that FTX’s platform had been compromised. Some users took to FTX’s Telegram thread to share their concerns, with some even claiming that the app and platform had been infiltrated and compromised.

Further allegations that Bankman-Fried worked with the regulators in the Bahamas to move crypto out of FTX wallets came after a Vox interview. In the interview, Bankman-Fried claimed that a disgruntled employee was responsible for the suspected theft of FTX crypto.

According to FTX filings, the company discovered transfers to the Bahamas while investigating a crypto theft that took place over the weekend. It is not clear from the filings whether the two events are related or if they are two separate occurrences.

The value of the assets seized by Bahamian regulators is still unknown. According to a CNBC report from Nov. 18, FTX has filed an emergency court order to stop any further action by the Bahamas regulators. FTX alleges that Bankman-Fried may be working with the regulators.

Robinson said that hackers cashing out their money into fiat will be “challenging” due to the “traceability of crypto.”

He said that he expects the hackers to use “mixers to cover their blockchain trail.” He went on to say that, “They will most likely use a service that mixes their coins with other users’ coins, making it harder to trace the hackers’ coins back to them.”

According to Robinson, mixers are services or software that make it difficult or impossible to trace crypto transactions on the blockchain. This makes it difficult to track where the funds are going.

According to Chainalysis' Kim Grauer, the increased availability of bitcoin mixing services may be one of the motivations behind moving assets to bitcoin. Mixing services make it more difficult to trace the origins of a transaction, which could be appealing to those looking to hide their assets.

The blockchain is a public ledger of all cryptocurrency activity. Each coin has its own blockchain, which makes it possible to trace where funds are moving. However, the use of mixers could make this difficult.

Chainalysis, a crypto compliance software company, confirmed in a tweet on Sunday that hackers are moving funds.

FTX on Sunday urged cryptocurrency exchanges to be on the lookout for the stolen funds if the hackers try to process the money through one of their services.

"Exchanges should take all measures to ensure that these funds are returned to the bankruptcy estate," FTX said in another tweet.

According to court filings, FTX owes its largest creditors some $3.1 billion. In other words, the hacked money is about 15% of what FTX owes its biggest clients.

Bankman-Fried used to manage a huge crypto empire that included operations on every continent and had billions of dollars in assets. However, the collapse of FTX has left him penniless and investors unable to get to their crypto assets.

Bryan Curtis
Eric Ng
John Liu
Editorial Board
Bryan Curtis
Adan Harris
Managing Editor
Cathy Hills
Associate Editor

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