The US Department of Justice has reportedly launched an investigation into the hundreds of millions of dollars worth of crypto stolen in unauthorized transactions on the now-defunct FTX exchange, according to a statement from the company. Tuesday.
FTX was hit with an unexpected attack shortly after it filed for Chapter 11 bankruptcy in late November, adding a surprising twist to the story surrounding the exchange’s outspoken founder, Sam Bankman-Fried (SBF). The funds were then transferred to different exchanges and converted to different cryptocurrencies.
Now, federal prosecutors are currently tracing assets and have been able to freeze some, according to Bloomberg, which first reported the news on Tuesday, citing an individual familiar with the matter. However, the amount of money that has been frozen is called a “fraction” of the total amount.
Blockchain analysts claim about $650 million was taken from the Bahamian digital asset exchange in the hack, making it one of the most serious crypto attacks of 2022. However, FTX’s bankruptcy filings note “at least $372 million” was taken, indicating there may have been an accounting error in the accounting of the missing funds.
Blockchain analysis firm Chainalysis confirmed this last week, however, several news reports have claimed that Bahamian authorities accessed FTX funds following its submission. They were able to access $650 million worth of funds stolen by hackers during the November attack.
At the first court hearing regarding the collapsed exchange, James Bromley, FTX’s lawyer, said that a “substantial amount” of the assets on the exchange were either missing or stolen.
Bankman-Fried was charged with eight criminal charges earlier in the month, including wire fraud and money laundering. The DOJ investigation has nothing to do with these charges. Bankman-Fried had hinted before his arrest that the unauthorized transactions might have been an inside job done by a disgruntled employee.
FTX quickly collapsed last month when it was discovered that the company didn’t have enough funds to support client assets. This was because Alameda Research, the sister company founded by Bankman-Fried, was able to use FTX client assets to its own ends and without supervision, according to the newly-appointed FTX CEO, John J. Ray III.
Bankman-Fried was sentenced to $250 million last week and extradited to the United States from the Bahamas.