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posted by hubie on Thursday November 17, @06:27PM   Printer-friendly

https://www.wired.com/story/ftx-hack-theft-crypto-tracing/

Cryptocurrency has always offered a strange mix of temptations and challenges for anyone trying to steal it. As digital cash, held in multibillion-dollar sums on hackable, internet-connected networks, it presents a lucrative target. But once it's stolen, the blockchains that almost every cryptocurrency is built on make it possible to follow that money's every movement and, very often, to identify the thieves. So after a massive heist pulled nearly half a billion dollars worth of funds out of the already collapsing FTX cryptocurrency exchange yesterday, the world's crypto tracers are now closely tracking where that loot ends up—and looking for any clues that reveal the thief to be an FTX insider or just an opportunistic hacker.

On Friday, hours after the major cryptocurrency exchange FTX had filed for bankruptcy in the wake of its epic, 10-figure collapse, FTX's remaining funds were drained of more than $663 million worth of cryptocurrency, much of which appears to have been stolen. "FTX has been hacked," wrote an administrator in FTX's Telegram channel. "FTX apps are malware. Delete them." [...]

[...] "We're definitely watching the movements of these funds," says Chris Janczewski, the head of investigations at TRM Labs and a former special agent at the IRS's criminal investigations division. "This potential thief has hundreds of millions of dollars. But it's like they went into a bank, took as much cash as they could carry, and then the dye packs went off. They've got all this money, but now everyone knows it's connected to this bank robbery. What can you actually do with it?"

[...] But in the case of the high-profile FTX theft and the exchange's overall collapse, tracing the errant funds might help put to rest—or confirm—swirling suspicions that someone within FTX was responsible for the theft. The company's Bahamas-based CEO, Sam Bankman-Fried, who resigned Friday, lost virtually his entire $16 billion fortune in the collapse. According to an unconfirmed report from CoinTelegraph, he and two other FTX executives are "under supervision" in the Bahamas, preventing them from leaving the country. Reuters also reported late last week that Bankman-Fried possessed a "back door" that was built into FTX's compliance system, allowing him to withdraw funds without alerting others at the company.

[...] As the questions mount over whether—or to what degree—FTX's own management might be responsible for the theft, the case has begun to resemble, more than any recent crypto heist, a very old one: the theft of a half billion dollars worth of bitcoins, discovered in 2014, from Mt. Gox, the first cryptocurrency exchange. In that case, blockchain analysis carried out by cryptocurrency tracing firm Chainalysis, along with law enforcement, helped to pin the theft on external hackers rather than Mt. Gox's own staff. Eventually, Alexander Vinnik, a Russian man, was arrested in Greece in 2017 and later convicted of laundering the stolen Mt. Gox funds, exonerating Mt. Gox's embattled executives.

Whether history will repeat itself, and cryptocurrency tracing will prove the innocence of FTX's staff, remains far from clear. But as more eyes than ever scour the cryptocurrency economy's blockchains, it's a surer bet that the whodunit behind the FTX theft will, sooner or later, produce an answer.


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  • (Score: 4, Touché) by drussell on Thursday November 17, @07:15PM (1 child)

    by drussell (2678) Subscriber Badge on Thursday November 17, @07:15PM (#1280229) Journal

    Probably SBF, the girlfriend or other insider to cover their tracks of virtual asset embezzlement? We stole some virtual stuff that was backed by some other virtual stuff three layers deep, none of which actually exists in the real world, so.... umm, yeah, sorry?!

    https://youtu.be/MWfuDeO9thk [youtu.be]

    • (Score: 4, Insightful) by zocalo on Thursday November 17, @08:23PM

      by zocalo (302) on Thursday November 17, @08:23PM (#1280236)
      Yeah, so much this. The "hack" happened on the very last day before the plug was pulled, although the fall was probably inevitable at that point and anyone with a backdoor into the FTX system biding their time may well have just decided to cut their losses and go for it while they could. Still, given that SBF has been tweeting all sorts of stupid stuff for someone who might be in court or regulatory hearings over this debacle, presumably he's either seriously out of touch with the reality of his situation, hasn't got a lawyer smart enough to get him to STFU yet, or both. In that light, any investigator that doesn't have "look into it being an inside job" right at the top of his list of things to do probably shouldn't be in the job.
      --
      UNIX? They're not even circumcised! Savages!
  • (Score: 2) by mcgrew on Thursday November 17, @08:36PM (10 children)

    by mcgrew (701) <publish@mcgrewbooks.com> on Thursday November 17, @08:36PM (#1280241) Homepage Journal

    If you steal "currency" that's based on nothing but dreams and fairy dust rather than business or government (tangible assets), are you really stealing anything?

    --
    Older than dirt? Kid, I was a BETA TESTER for dirt! We never did get all the bugs out.
    • (Score: 2) by HiThere on Thursday November 17, @08:57PM (1 child)

      by HiThere (866) on Thursday November 17, @08:57PM (#1280245) Journal

      Well, yes. But it might be difficult to justify it an anything other than petty theft.

      --
      Javascript is what you use to allow unknown third parties to run software you have no idea about on your computer.
      • (Score: 2) by zocalo on Thursday November 17, @10:05PM

        by zocalo (302) on Thursday November 17, @10:05PM (#1280256)
        It might be *very* interesting to see how those arguments played out in court between the two sides though. I'd guess the judge - if they knew what they were doing - would sidestep the issue in any ruling but, if they didn't, you'd likely have a court either ruling that crypto has no tangible value at all, which would likely cause another massive fall in the overall value, or that it does have value, which would lend another veneer of legitimacy to it. Regardless of which side of the debate you fall, that's an awfully large gamble on things going your way.
        --
        UNIX? They're not even circumcised! Savages!
    • (Score: 2, Disagree) by SomeRandomGeek on Thursday November 17, @10:24PM

      by SomeRandomGeek (856) on Thursday November 17, @10:24PM (#1280259)

      Its a security feature! You own some cryptocurrency. If someone steals it, that proves that the whole currency was flawed to begin with. The value of the currency goes to zero, and the thieves get nothing. So there is no incentive to steal your cryptocurrency! I'm pretty sure that NFTs work on this principle, too.

    • (Score: 3, Insightful) by Beryllium Sphere (r) on Thursday November 17, @10:37PM

      by Beryllium Sphere (r) (5062) on Thursday November 17, @10:37PM (#1280260)

      Old legal maxim, "the value of a thing is what that thing will bring". Until the market collapses or the price goes to zero, it's like stealing anything that can be sold.

    • (Score: 2) by Sjolfr on Thursday November 17, @11:00PM (5 children)

      by Sjolfr (17977) on Thursday November 17, @11:00PM (#1280263)

      It was a government regulated exchange. Ever since the US government recognized crypto-currency as an actual currency it's been treated as such; taxes and all. Hundreds of millions in crypto is still hundreds of millions of the exchange rate in dollars. The very existence of the exchange, and the fact that it has to legally declare bankruptcy, proves that fact. Thinking otherwise is naive and/or misguided.

      Crypto-coins are absolutely unique and they are very traceable. The manner in which law enforcement goes about tracking down the coins, once they get used, is another matter. All they have to do is watch the blockchain for the coin transfers. Once they get an address, that can be tied to a person, they can start asking questions of those people and track the thieves down. Time and patience.

      • (Score: 1) by khallow on Friday November 18, @12:52AM (4 children)

        by khallow (3766) Subscriber Badge on Friday November 18, @12:52AM (#1280277) Journal

        Ever since the US government recognized crypto-currency as an actual currency

        Oh really? Does that have any legal meaning even if it were true (which I doubt)? I'm pretty sure the Fed isn't building up a reserve of bitcoins, for example.

        • (Score: 0) by Anonymous Coward on Friday November 18, @02:02AM (1 child)

          by Anonymous Coward on Friday November 18, @02:02AM (#1280281)

          Maybe there is a hard drive that they keep in the vaults of Fort Knox where they amass all their bitcoins.

        • (Score: 3, Interesting) by Sjolfr on Friday November 18, @02:58AM (1 child)

          by Sjolfr (17977) on Friday November 18, @02:58AM (#1280288)

          My mistake, the IRS treats crypto-currency as property for tax purposes. That ligitimizes crypto as a medium for making payments and brings the law in to play when it is stolen or laundered.

          In 2014, the IRS issued Notice 2014-21, 2014-16 I.R.B. 938, explaining that virtual currency is treated as property for Federal income tax purposes and providing examples of how longstanding tax principles applicable to transactions involving property apply to virtual currency.

          The concept is the same though. Crypto-exchanges are regulated much like stock exchanges. Steal $100M worth of bitcoin and, like Bernie Madoff, you can be prosecuted and convicted of a felony.

          • (Score: 1) by khallow on Saturday November 19, @12:12PM

            by khallow (3766) Subscriber Badge on Saturday November 19, @12:12PM (#1280483) Journal

            My mistake, the IRS treats crypto-currency as property for tax purposes. That ligitimizes crypto as a medium for making payments and brings the law in to play when it is stolen or laundered.

            It's in the same category as say, Pokemon cards. Crypto doesn't need much in the way of legitimization and the US government is heavily limited in what it can do to restrict use of it.

  • (Score: 2, Interesting) by bobmorning on Friday November 18, @12:53AM (1 child)

    by bobmorning (6045) on Friday November 18, @12:53AM (#1280278)
    • (Score: 1) by khallow on Friday November 18, @04:06AM

      by khallow (3766) Subscriber Badge on Friday November 18, @04:06AM (#1280295) Journal
      Very intriguing if true. The fox would be requesting that he not only be put in charge of the hen house, but also the investigation of any missing hens.
  • (Score: 2) by pgc on Saturday November 19, @10:27PM

    by pgc (1600) on Saturday November 19, @10:27PM (#1280552)

    Wasn't it already published that the hack was indeed performed by SBF, but was ordered by the Bahama authorities?

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