FTX Faces Bankruptcy and Massive Crypto Theft
Cryptocurrency exchange FTX recently experienced a double blow as it dealt with bankruptcy and a significant crypto theft that put its remaining assets at risk. New details have emerged about the frantic response by FTX’s staff and consultants as they raced against time to prevent a potential billion-dollar heist.
How FTX Responded to the Crypto Theft
According to a report by Wired, the events unfolded on November 11, 2022, when FTX noticed large outflows of its cryptocurrency holdings. The company’s staff witnessed the real-time theft of hundreds of millions of dollars’ worth of crypto on the Ethereum blockchain tracking website, Etherscan.
FTX’s CEO, John Ray III, quickly assembled a team of over 20 staff members, lawyers, advisers, and consultants for an urgent video call. However, they lacked crucial information about the company’s storage and security measures.
In an effort to safeguard the remaining funds, FTX’s Chief Executive of subsidiary LedgerX, Zach Dexter, reached out to digital asset trust company BitGo. Dexter requested immediate creation of “cold storage” wallets offline for FTX to transfer its remaining funds securely.
Temporary Storage Solution
As BitGo prepared the cold storage wallets, FTX faced the challenge of where to temporarily store the vulnerable funds. Kumanan Ramanathan from Alvarez & Marsall offered his personal Ledger Nano hardware wallet as a temporary refuge. He set up a new wallet on his Ledger Nano and transferred funds to it.
Afterwards, BitGo notified FTX that their wallets were ready, prompting them to transfer hundreds of millions more in crypto to BitGo’s cold storage. Throughout the night, FTX staff searched every wallet containing the company’s funds, transferring all coins they found to BitGo.
Ensuring Security
Ramanathan had approximately $400 to $500 million of FTX’s crypto holdings. To protect the funds, FTX’s General Counsel, Ryne Miller, went to Ramanathan’s office to ensure security. In a surprising move, Ramanathan even called the police to report a theft in progress and seek their assistance in safeguarding the stash.
Thankfully, there was no physical threat, and the funds stopped being siphoned once they were moved to Ramanathan’s Ledger wallet. Eventually, the funds held in Ramanathan’s office were transferred to BitGo, securing $1.1 billion of FTX’s remaining assets.
Preventing a Catastrophic Heist
The swift actions and decisions made by consultants, staff, and FTX’s leadership during that night prevented a potentially catastrophic heist from taking place.
Hot Take: FTX’s Crisis Averted Through Swift Response
In the face of bankruptcy and a massive crypto theft, FTX managed to prevent further loss by quickly assembling a team and taking decisive actions. Their collaboration with BitGo and the temporary storage solution offered by Kumanan Ramanathan played crucial roles in securing their remaining assets. This incident highlights the importance of having strong security measures and the ability to respond swiftly in the world of cryptocurrency exchanges.
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