That means it’s hard for thieves to abscond with their profits in consumable form without being detected, said Michelle Lai, a cryptocurrency privacy advocate, investor and consultant who says she’s been tracking stolen FTX The movement of money, “morbid charm.” But the real question, Lai said, is to determine whether the thieves will offer any recourse: After all, many of the most prolific cryptocurrency thieves operate in non-extradition countries beyond the reach of Western law enforcement agencies Russian or North Korean. “It’s not a question of whether they know who did it. It’s whether it works,” Lai said. “Wherever they are on shore.”
Meanwhile, Lai and many other cryptocurrency watchers have been keeping a close eye on an ethereum address that currently holds about $192 million worth of funds. The account has been sending small amounts of ethereum-based tokens (some of which appear to be of little value) to various exchange accounts as well as ethereum inventor Vitalik Buterin and a Ukrainian cryptocurrency fundraising account. But Lai speculates that the transactions may have simply been designed to complicate matters for law enforcement or other observers before any real attempts to launder money or cash out.
The theft of FTX — whether the theft totaled $338 million or $477 million — hardly represents an unprecedented loss in the world of cryptocurrency crime. North Korean thieves stole $540 million in a late-March hack of gaming cryptocurrency exchange Ronin Bridge.Earlier this year, cryptocurrency tracking led to a New York couple charged with laundering $4.50 billion in cryptocurrencies.
But in the context of the high-profile FTX theft and the overall collapse of the exchange, tracing the erroneous funds could help to quell or confirm suspicions that someone inside FTX was responsible for the theft. The company’s Bahamas-based chief executive, Sam Bankman-Fried, resigned on Friday, losing nearly all of his $16 billion fortune in the collapse. According to an unconfirmed report by CoinTelegraph, he and two other FTX executives were “regulated” in the Bahamas, preventing them from leaving the country. Reuters also reported late last week that Bankman-Fried had a “back door” built into FTX’s compliance system, allowing him to withdraw funds without alerting the rest of the company.
Despite these suspicions, TRM Labs’ Janczewski noted that the chaos of the FTX debacle may have provided hackers with an opportunity to exploit panicked employees and trick them into clicking on phishing emails. Or, as Michelle Lai points out, a bankrupt insider might work with a hacker as a way to recover some of their lost assets.
As questions mount about whether or to what extent FTX’s own management might be responsible for the theft, this case is starting to feel like a very old one compared to any recent cryptocurrency theft: worth 5 A $100 million theft of bitcoin was discovered in 2014 from the first cryptocurrency exchange, Mt. Gox. In this case, blockchain analysis by cryptocurrency tracking firm Chainalysis, as well as law enforcement, helped pin the theft to outside hackers, rather than Mt. Gox’s own employees. Ultimately, Russian man Alexander Vinnik was arrested in Greece in 2017 and later convicted of laundering stolen Mt. Gox funds, exonerating Mt. Gox’s beleaguered executives.
Whether history will repeat itself, and whether cryptocurrency tracking will vindicate FTX employees, is unclear. But with more and more eyes scouring the cryptoeconomy’s blockchains, it’s safe to say that sooner or later the detectives behind the FTX theft will have an answer.
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