Department Of Justice Launches Investigation Into The $400M FTX Hack

The U.S. Department of Justice is currently conducting a criminal probe into the alleged $400 million hack on the crypt derivatives exchange FTX on Nov. 11, a few hours after the company and its over 100 affiliates filed for chapter 11 bankruptcy protection.

The news, first reported by Bloomberg on Tuesday, cited a person familiar with the case who asked not to be identified as the source of the information.

The said hack took place between Nov. 11 and the early hours of Nov. 12, which saw a massive outflow of cryptocurrencies from FTX and FTX U.S. wallets.

An hour after the supposed hack started, FTX General Counsel Ryne Miller reported through a tweet that the team is "investigating abnormalities with wallet movements" and eventually shared a message on the FTX official Telegram channel, saying, "FTX has been hacked. FTX apps are malware. Delete them. Chat is open. Don't go on the FTX site as it might download Trojans."

The "hack" was later confirmed by the court-appointed FTX CEO John Ray III who reported about "unauthorized access" to FTX assets on the day the company filed for bankruptcy.

The investigation is reportedly headed by the Justice Department's National Cryptocurrency Enforcement Team, which consists of prosecutors focused on digital asset investigations and is currently working with Manhattan federal prosecutors who handled the arrest of the controversial FTX founder Bankman-Fried, Bloomberg reported.

Following the hack, blockchain analytics firm Elliptic said that funds taken from FTX wallets were exchanged for Ethereum through decentralized exchanges, which was a "tactic commonly seen in large hacks."

Another blockchain analytics firm, Chainalysis, reported on Nov. 20 that the stolen funds from the crypto platform were "on the move" and had bridged from Ethereum to Bitcoin.

"Funds stolen from FTX are on the move and exchanges should be on high alert to freeze them if the hacker attempts to cash out," it said in a tweet.

Chainalysis also refuted rumors making rounds online that the funds were sent to the Securities and Exchange Commission in the Bahamas.

"Reports that the funds stolen from FTX were sent to the Securities Commission of The Bahamas are incorrect. Some funds were stolen, and other funds were sent to the regulators," the blockchain analytics firm said, adding that "funds were bridged from ETH to BTC, likely to be mixed prior to a cash out attempt."

Chainalysis said it was trying to work with its partners to try to return what was stolen from depositors. "We are in touch with our partners across the ecosystem as we work to help secure as many assets as possible to return to depositors," the tweet read.

It is not yet clear if the hack was an inside job, as previously suspected, or a work of an opportunistic hack. The culprit behind the FTX hack, if caught and proven guilty, could face up to 10 years of imprisonment.