FTX

SBF - MASK OFF: FTX Collapse and Hack Post-Mortem

What Happened

Sam Bankman-Fried's FTX and Alameda Research collapsed, revealing fraudulent practices and misappropriation of customer funds. Following the collapse, approximately $633 million was removed from FTX wallets on November 12, 2022.

Root Cause & Operational Failures

According to newly-appointed CEO John J. Ray III:

> "Never in my career have I seen such a complete failure of corporate controls"

Critical failures included:

• No accounting department at FTX or Alameda

• Unsecured group email accounts used as root access to private keys

• No daily blockchain reconciliation

• Software concealing customer fund misuse

• Alameda exempt from FTX's auto-liquidation protocols

• Concentrated control among inexperienced individuals

Attack Vector & Financial Impact

• $477 million attributed to "unauthorized access" (SBF claimed ex-employee compromise or malware)

• Bahamian authorities claimed responsibility for instructing wallet drainage

• Remaining $156 million moved to secure multisig pending bankruptcy

• Crypto assets valued at only $659K (versus claimed $5B)

• $3.3B in loans from Alameda to SBF and Paper Bird Inc.

The FTX Accounts Drainer address subsequently became the 30th largest ETH holder.

Additional Context (from search)

Later investigations revealed the $477M was carried out by a SIM-swap gang. Emily Hernandez walked into a Texas AT&T store and used a fake ID to take over an FTX employee's phone account. SMS-based 2FA was bypassed. Funds were laundered via DEXs, RenBridge ($74M), and mixers (likely with Russian criminal gangs).

Fund Recovery

Approximately $100 million in frozen assets; Tether froze portions of stolen USDT.