Massive funds flow out FTX and Alameda over ‘unauthorized access’ or bespoke ‘backdoor’

Over $400 million outflow crypto exchange FTX and Alameda wallets on Nov. 11. FTX confirmed that there was “unauthorized access” to crypto it is holding following a reported hack. However, Reuters reported that FTX CEO Sam Bankman-Fried built a “backdoor” to his exchange in an effort to change financial records and move funds.

Crypto exchange FTX saw millions of dollars flow out of its exchange, with early reports of some user account balances being completely empty.

So far, over $400 million has been transferred to a single wallet address. The wallet has acquired tens of millions of dollars worth of several types of tokens by draining FTX accounts and began selling tokens that it received from FTX.

Later, an admin in FTX’s official Telegram channel claimed the embattled crypto exchange may have been hacked for all its funds. A message was sent on Friday that stated “FTX has been hacked. All funds seem to be gone.” The message has since removed the latter statement while claiming that “some funds were retrieved.”

Meanwhile, funds also were seemingly being channeled out of Alameda wallets, with millions in tokens being redirected to one address this morning. 

Transactions to the wallet included 9.8 million wrapped XRP (around $3.6 million), about 6.8 million in the Render network token (around $3.4 million), about 3.4 million in xSUSHI (about $5.3 million) and 100 million in BitDAO’s token (around $30 million), according to logs on block explorer Etherscan, as of 5:45 a.m. ET. Data also showed 11 million in the stablecoin Tether moved from the crypto exchange Kucoin. These total just under $55 million.

Meantime, Reuters reported that Sam Bankman-Fried built a “backdoor” to his FTX exchange in an effort to change financial records and move funds without alerting others. 

According to Reuters citing two people with knowledge of the matter, Bankman-Fried used bespoke software that was designed so that even external auditors would not be notified of changes to FTX books, the report said. It meant that no red flags were raised when $10 billion of funds were moved to FTX’s sister trading arm Alameda. 

Bankman-Fried, who has since resigned as CEO, denied such a “backdoor” existed when asked by Reuters. He also said he “disagreed with the characterization” of the $10 billion transfer. 

At the same time, FTX confirmed Saturday afternoon that there was “unauthorized access” to crypto it is holding following a reported hack.

FTX’s general counsel Ryne Miller tweeted a statement from new interim CEO John Ray, saying “we are in the process of removing trading and withdrawal functionality and moving as many digital assets as can be identified to a new cold wallet custodian. As widely reported, unauthorized access to certain assets has occurred.”

Ray also says the firm is “coordinating” with law enforcement and regulators. The statement follows reports of a hack of user funds late Friday night, including large on-chain movements of funds from FTX’s wallets.