FTX investigates possible hack as some Australian firms exposed to collapse

A day after it filed for bankruptcy, collapsed cryptocurrency exchange FTX said Saturday that it was investigating “unauthorised transactions” flowing from its accounts, as crypto researchers documented suspicious transfers of $US515 million ($768 million) that may have been the result of a hack or theft.

It marks the latest development in the saga of FTX’s collapse, which has affected some Australian companies. Crypto investment firm Apollo Capital, which manages over $100 million for clients, had around 1.5 per cent of its assets in FTX’s native token which has plunged 92 per cent over the past week.

Sam Bankman-Fried’s collapsed crypto firm FTX revealed it had been the target of a hack.Credit: Bloomberg

Telstra Ventures, a venture capital firm backed by the telecommunications giant, was also a small investor in FTX’s $US420 million Series B raise. It has not specified its exposure to the business.

On Saturday John Ray III, the newly instated chief executive of FTX said in a statement that “unauthorised access to certain assets has occurred” and that the company was in touch with law enforcement officials and regulators. As part of the bankruptcy process, the company has been moving its remaining crypto funds to a more secure form of storage.

Over the past week, FTX and its founder Sam Bankman-Fried have gone from crypto darling to pariah, with the business filing for bankruptcy on Friday after a run on deposits and a failed bailout by fellow crypto exchange Binance meant FTX was unable to meet customer demand.

The implosion of the exchange has already cost customers billions of dollars in lost crypto deposits, setting off law enforcement investigations that could lead to criminal charges. Bankman-Fried has also resigned, with Ray, a corporate turnaround specialist, replacing him.

FTX was a US exchange that had a large cohort of institutional clients, and so far, any impacts on Australian businesses have been minimal. The company’s Australian entities were placed into administration on Friday, with reportedly a “considerable amount” of client funds still on hand.

However, FTX and Bankman-Fried’s investment firm Alameda’s deep integration with the crypto ecosystem as a whole means many crypto companies have been exposed to the collapse, including a business linked to an investment product offered by local comparison website Finder.

Finder’s product, Finder Earn, allows users to deposit a crypto stablecoin called TrueAUD (TAUD) and then earn a 4 per cent annual return on the amount deposited. TAUD is a stablecoin offered by US-based crypto firm TrustToken, which also operates an uncollateralised lending service called TrueFi.

TrueFi is currently owed $US12.8 million ($19.1 million) by Alameda, Bankman-Fried’s now-defunct $US15 billion trading firm. Alameda was also an investor in TrueFi, participating in a $US12.5 million funding round last year.

TrustToken’s lending platform and its stablecoin operations are separate, and the company says its stablecoin funds are fully collateralised and held in escrow at federally insured US-based depository institutions. The company does not appear to loan or otherwise invest stablecoin funds and publishes live verifications of the funds in escrow.

For this reason, a spokesperson for Finder said the company said it was confident there would be no potential flow-on effects for Finder Earn customers, noting that TAUD was not lent to Alameda and that TrustToken did not hold the stablecoin currencies itself.

“The [lending] pools on TrueFi themselves are separate to the issuance or redemption of the respective stablecoins they accept in lending, borrowing, collateral or payment of returns,” a spokesperson said. “There is no TAUD offering on TrueFi.”

Despite this, other Australian cryptocurrency exchanges have made moves to distance themselves from TAUD recently, with a spokesperson for Swyftx telling this masthead it had removed the stablecoin from one of its investment products last month in an effort to protect users from assets that derive yields from risky methods.

“We took a decision a number of weeks ago to only offer stakeable assets through our...offering. We’re being deliberately cautious on this one to provide an additional blanket of protection to our customers,” Swyftx head of strategic partnerships Tommy Honan said.

News of FTX’s possible hack started spreading on Twitter late Friday, as crypto enthusiasts examined public transaction records documenting the movement of cryptocurrencies. A report by crypto research firm Elliptic pegged the amount that may have been stolen or hacked at $US515 million.

The exact nature of the transfers remained unclear. It could have been the result of a hacker gaining access to the exchange’s system or an insider with special access seeking to abscond with funds. Asked about the transfers, Bankman-Fried said in a text to the New York Times, “We’re sorting through it with the bankruptcy” team.

A major theft would probably make it even more difficult for FTX to refund customers and other creditors who have already lost billions of dollars in the firm’s collapse. FTX is estimated to owe $US8 billion, according to people familiar with the matter. In an initial filing Friday, FTX said it had more than 100,000 creditors.

- with The New York Times