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$477M FTX ‘hack’ was a Bahamian government asset seizure
- texaslonghorn5 4y agointeresting, since FTX was headquartered in the bahamas this seems lawful and not unreasonable. though some will argue the government doesn't have the right to do that, I think you sacrifice your protection when you commit fraud. how quickly should the bahamas have announced about the asset seizure? is it common in other countries to not comment about (seizures in) ongoing investigations?
- sanxiyn 4y agoThe news article doesn't state the legal authority, but the statement from Securities Commission of the Bahamas of course does. "Under the Digital Assets and Registered Exchanges Act, 2020 (DARE Act), the Commission has the authority..." The government has the right to do this because FTX agreed to this.
- tartoran 4y agoBut does FTX have the right to agree to this? It’s like me agreeing with a stranger to sell your house and split the proceeds between us. FTX wasn’t entitled to the customers money and neither had the Bahamian authorities.
- sanxiyn 4y agoBahamian government is seizing assets "to protect the interests of clients or customers".
- yanderekko 4y agoThat's just dodging the key question. Obviously the government has some rationale other than that they're taking it because they can. The problem is that they're still taking money that's owned by someone else, even if it's controlled by SBF. I'm sure there are strong international norms if not laws against a sovereign power directing a foreign financial actor to repay some sort of debt by pilfering client deposits, regardless of whether the debt is legitimate or not.
- HWR_14 4y agoI don't think the idea is that the Bahamas will keep the crypto. It took it because it's a safe holder of it. It can get it back at some rate once the lawsuits go through. Certainly, I would feel more confident getting my money back from a reasonable government than SBF.
- deleted 4y ago[deleted]
- initplus 4y agoThe alternative isn't SBF keeping the funds. It's the funds going through the US bankruptcy proceedings alongside the rest of FTX's assets. SBF chose to operate out of the Bahamas because of their lax legal structure. The fact that he claimed for days this was a hack makes this look like a failed attempt at buying his freedom. I have much more faith in the integrity of the US bankruptcy process than whatever nonsense is going to happen in the Bahamas...
- philwelch 4y agoI suspect that if you deposit 100 ETH at FTX, legally, you no longer own the 100 ETH. Instead, you own an IOU from FTX stating that FTX owes you 100 ETH. FTX owns the ETH. In an ideal world, an IOU from FTX for the amount of 100 ETH would be worth 100 ETH. Unfortunately, FTX is insolvent and bankrupt. The only thing the bankruptcy court can do is divide up FTX’s assets and distribute whatever FTX does have to their creditors. That is naturally going to entail taking possession of those assets. This used to be a risk even with banks, and a lot of people during the Great Depression lost the money they had in the bank due to bank insolvency. The solution to this problem was the FDIC. If you have an American bank account, not only do you have an IOU from the bank for the number of dollars you have in that account, you also have an insurance policy from the FDIC that will pay you the value of the account (up to a specific limit) if the bank is unable to do so. And if the FDIC isn’t good for the money, that would mean the US government has defaulted on their debt, which probably means it’s the end of days, your dollars would have been worthless anyway, and you’re just going to have to get by on whatever canned food, water purification tablets, and ammunition you’ve managed to stockpile in your house until the world re-stabilizes into whatever cyberpunk dystopia comes after the collapse of the United States.
- davidgay 4y ago> But does FTX have the right to agree to this? That makes no sense. They are incorporated under Bahamianan law, so that law takes precedence over any contractual agreement. I.e., FTX cannot enter into a contract that declares implicitly or explicitly that they won't follow said law.
- legutierr 4y agoFTX is incorporated in Antigua and Barbuda and headquartered in The Bahamas. https://en.wikipedia.org/wiki/FTX_(company) https://en.wikipedia.org/wiki/FTX_(company)
- hef19898 4y agoFTX Trading Ltd. has a bunch of legal entities on the Bahamas. As shown in the latest Delaware court fillings. The Bahamas have at least jurisdiction over those legal entities and their assets. That FTX as a whole was unable, and/or unwilling, to keep proper track of accounts, cash and assets across their overly complicated corporate structure is hardly the Bahamas fault.
- legutierr 4y agoOK, yes, there are Bahamian entities over which Bahamian authorities likely have jurisdiction. But given what you say with regards to the complexity of FTX's corporate structure, it's likely difficult to determine that the assets that were transferred to Bahamian authorities actually belong to those Bahamian entities. Maybe it's better that these assets are in the hands of Bahamian authorities, but it is highly questionable that the transfer happened after the Delaware filing, and that it was made in such a sloppy way that destroyed so much value. My albeit very basic understanding is that once the bankruptcy filing was made in Delaware, the Bahamas had some obligation to defer to the Delaware courts. It makes one wonder if this was actually an official action to begin with, and was not instead given a post hoc imprimatur only when it became obvious that the transfers could not be hidden.
- 4y ago
- dotnet00 4y agoThat's why crypto exchanges tend to be careful to not imply that they are banks. When you transfer your crypto to an exchange, the crypto is now theirs and they're just promising to give it back to you when you ask for it. Then they can do whatever they want with it internally until they go bust, at which point the promises all go in the trash.
- kayamon 4y agoOf course they have the right. It's called 'fractional reserve banking' and it's the foundation of our financial system.
- zeven7 4y agoAnother interesting angle to this is that the funds were collected in various different currencies, but all of them were converted into ETH. And they weren't converted carefully to make sure they got the full value, no attempt at OTC deals or anything; they were converted in a rush and dumped on the open market. This resulted in pretty clear loss of funds. It seems like a strange way for a government to operate. That's not all: They also seized the funds with SBF's help after FTX had declared bankruptcy and SBF had stepped down as CEO. General counsel for FTX at the time indicated they were surprised by the fund movement and unaware of what was going on[1]. Shouldn't the Bahamas have been communicating with the people actually in charge of FTX at the time? Aren't those the people who would legally be in control of the funds? [1] https://twitter.com/_Ryne_Miller/status/1591281729125613570 https://twitter.com/_Ryne_Miller/status/1591281729125613570 /tinfoil
- ehnto 4y agoI agree with your last paragraph, but the prior makes total sense. The government aren't crypto experts nor were they trying to min-max their incoming half a billion. They wanted it quick and easy.
- zeven7 4y agoI would expect a government to hold it as seized until they brought in both crypto experts and legal experts to help them determine what to do with it, probably via the judicial system. When Japan seized BTC from Mt Gox it was years before they converted it to Yen. The same goes for BTC seized by the US government in cases like Silk Road. The Bahamas didn't even convert it to the Bahamian dollar or USD. They converted to ETH. (Likely SBF did it for them.)
- A4ET8a8uTh0 4y agoYes, however, governments do on occasion hire experts in various fields. During my last conference the discussion was exactly on how you can't just drop millions of BTC/ETH w/e into the market without effectively hurting the price. It is not like they were trying to be nice to the markets. The money just had to be split between several cooperating agencies so there was a reason to maximize return in USD.
- bmitc 4y agoWhy did FTX publicly announce it as a hack then?
- rippercushions 4y agoThe announcement was from the new FTX under emergency CEO Ray, not the old FTX under SBF. And the Bahamas claims that the specific FTX company that did the transfers, FTX Digital Assets, was not a part of the bankruptcy proceedings and that SBF was still its CEO. Finally, new-FTX did not say they were "hacked", only that the transfers were not authorized by them.
- llamataboot 4y agoSBF straight up said multiple times it was a hack in his leaked talks with a vix reporter many days alter
- thisarticle 4y agoDo people still hold anything this guy says as having any truth to it?
- llamataboot 4y agoWell, i do not take it as truth that it was a hack, but I do take it as as lie that he never said it.
- camjohnson26 4y agoIt’s pretty simple, he was lying.
- gruez 4y agoConsidering that SBF was reported to be "under supervision" by the authorities, it doesn't seem too implausible that the Bahamian government showed up to their office and politely requested an employee with access to transfer the funds, and for them to keep their mouth shut.
- booleandilemma 4y agoGood, I'm glad it wasn't SBF or another insider.
- stefan_ 4y agoWell it seems it was SBF in the bed with the Bahamian government.
- sanxiyn 4y agoDo you have any evidence? At a glance, this seems to be Bahamian civil servants diligently doing their duty that was given.
- KptMarchewa 4y agoSBF discussion with Vox reporter is a big hint.
- JamesianP 4y agoThe Bahamas has a total population of a smallish city and surely a national budget to match. Grabbing 500M anonymously (while letting everyone run around for days thinking it was a hacker) doesn't make much sense either. Did they put their entire country's budget on the exchange or something?
- 4y ago
- deleted 4y ago[deleted]
- woodruffw 4y agoMaybe this is a stupid question, but how? Was the Bahamas' SEC holding its own copies of FTX's keys? I thought the entire point of these schemes was that this kind of seizure-by-force wasn't possible (absent exploits or insiders).
- gruez 4y ago>absent exploits or insiders Insiders can be press ganged with threats of violence, which the state has a monopoly on.
- woodruffw 4y agoI had assumed that they had some kind of obtuse M of N scheme with no sufficient number of parties in the same place at once, but that was perhaps too optimistic (?) of me.
- gruez 4y agoThat's can be pulled off, but actually requires planning and forethought to pull off. For instance, you'd want the keys to be on HSMs/hardware wallets in different jurisdictions (ideally rivals like US and Russia). Obviously this wasn't something they considered or planned for considering many (most?) of the higher ups were living in a shared penthouse in the Bahamas. Although, to be fair I don't fault them for not planning for this. If things get bad enough that men with guns are demanding you to do something, being able to reject their request would be pretty low on my list of priorities.
- ohbtvz 4y agoArmed government agents show up to your door asking you for half a billion dollars. You tell them "can't do it, I need this other key that's held by my partner in a different place". What do you think is going to happen next? "Understandable, have a good day" and they go home? Or they hold you in jail until you somehow find a way to comply?
- throwaway0x7E6 4y ago
- blackhaj7 4y agoDidn’t the transactions got to FuckSBF or something similar? This sounds like bull
- hailwren 4y agoNo, there is a way to spoof transfer events on etherscan so that trolls can attach funny coin names to famous wallets.
- binarynate 4y agoAny thoughts on why SBF lied to the Vox reporter about it being a hack? https://www.vox.com/future-perfect/23462333/sam-bankman-fried-ftx-cryptocurrency-effective-altruism-crypto-bahamas-philanthropy#XafM6E https://www.vox.com/future-perfect/23462333/sam-bankman-frie... Maybe he just didn't want to have to explain some breaking news to her.
- boogoob 4y agoA large portion of the transferred assets were quickly traded to ETH. I wouldn’t expect that from an “asset seizure”. Maybe the seizure didn’t happen until after the hack?
- deleted 4y ago[deleted]
- dathinab 4y ago> [..] accused Bankman-Fried of attempting to undermine their efforts [..] by pushing the second bankruptcy case if that is true they might have very well had reason to lie until the bankruptcy proceedings in the Bahamas have started successfully/maybe some under the table agreements where completed. I wouldn't be surprised if they have some deal with the Bahamian government giving them some benefit for allowing the government to size millions of crypto assets. But there might very well have other reasons. Like them not knowing that the transaction was a asset seizure in context of the bankruptcy proceeding is a possibility as crazy as it might sound.
- deleted 4y ago[deleted]
- ninth_ant 4y ago> Like them not knowing that the transaction was a asset seizure in context of the bankruptcy proceeding is a possibility as crazy as it might sound. This would _also_ imply that whoever internal to FTX that authorized the asset transfer for siezure didn't tell anyone and covered their tracks well enough that SBF didn't know about it. I mean, it's possible? But seems more straightforward that SBF was simply lying in the vox interview, he still seemed deluded enough to think he could fundraise his way out of the abyss, and this lie was part of his attempt to raise funds.
- citilife 4y agoIMO this looks more like SBF decided to buy his freedom by handing over the keys.
- fortran77 4y agoand, let's face it, it's not like any of those things he was holding will have much value anymore anyway. Why not hand it over?
- 55555 4y agoNo one is mentioning that the new FTX CEO wrote in a recent Chapter 11 filing that the hack we're discussing here was actually 2 events: the movement of ~$300 in crypto AND the dilutive printing of ~$300 in FTT. Can somebody please explain that second one? Because this makes no sense at all.
- easytiger 4y agoAs per FT: > The “dilutive ‘minting’ of approximately $300m in FTT tokens by an unauthorised source” after FTX filed for bankruptcy. That’s along with the $372m hack. Guessing: post ftx collapse someone minted new ftt tokens. Which should be strange because only FTX should have been able to do so.
- 55555 4y agoMaybe SBF & co minted more FTT in order to dump to increase fiat liquidity during the withdrawal phase, and then right after had to hand everything over to the Bahamas. This isn’t the timeline popularly floated, tho
- meltedcapacitor 4y agoThe mint was after withdrawals have stopped, and it does not look like they had run out of unlocked FTT. In any case there was no buyer in size, so if they had dumped all they could the meagre proceeds would have probably been enough for like an extra half hour worth of withdrawals.
- manholio 4y agoIt doesn't really matter, FTT is a garbage token forever associated with fraud. Its value is zero and you can print how many you like without hurting anyone.
- 55555 4y agoIt matters a lot. Bahamas seizing existing crypto makes sense. Printing more and diluting holders is just bizarre. That would basically be the Bahamas doing a rugpull.
- wutheringh 4y ago
- hestefisk 4y agoNo. It’s driven by decent people tired of scams and fraudsters. Let’s keep religion out of the debate.
- DeWilde 4y agoStealing other people's money might be the more likely reason as humans tend to be very sensitive about this.
- wutheringh 4y ago
- DeWilde 4y agoMaybe, but that notion of theft seems better than to live in a world where anyone can barge up to you and, for example, take your meal, leaving you hungry. Would you agree?
- quickthrower2 4y agoWell the troll has been well fed
- deleted 4y ago[deleted]
- citizen4earth 4y ago[dead]
- hef19898 4y agoStrong words. You should read the latest filling from FTXs new CEO with Delaware courts. FTXs financial and corporate structure is such a mess, that nobody knows who owns and controlls what. Heck, they even don't know who worked when at which FTX company. So, for the Bahamas, freezing and confiscating assets is prudent thing to do. The crypto will be held in custody until courts, including the Delaware ones, figure out who has what claim on which assets and cash thelat can be recovered from FTXs desintegration. At least those 477 million are easy to locate, much harder to allocate to specific claims so.
- citizen4earth 4y agoI would agree if the Bahamas government didn't first deny that they ordered SBF to surrender those assets and then only after they were caught by us in the community through tracking the transactions did they formally announce the seizure. Do you not find that a bit coincidental? Why the conversion to ETH? Who authorised it? There was and is no judiciary evidence supporting the Bahamas government's position and the Delaware court has uncovered clear suspicious activity. Why did they lie and then change their story? We must wait to see what come out but a shady blacklisted country managing my money is not acceptable to most of us.
- hef19898 4y agoThe Bahamas are a sovereign jurisdiction, not a US state. So if they decide to have jurisdiction over people and legal entities residing and registered in the Bahamas, no additional court decision is needed.
- citizen4earth 4y agoNo one is challenging that Bahamas is a country. The only holdings in the country was a shell holding nearly nothing of value. Antigua and Barbuda and Delaware were principle locations of the holdings. FTX Digital Markets was a shell for SBF to buy his way into the country - everyone knows that already. Do you not see a conflict of interest for a state regulator to be photographed with SBF at a ground breaking ceremony and then lie about ordering seizure and then only after being caught red handed back tracking and saying they ordered it? Shady business. Even within the FT article it is clear: https://www.ft.com/content/ecc6f488-f17d-4e0d-ab38-984d3e3ef5d5 https://www.ft.com/content/ecc6f488-f17d-4e0d-ab38-984d3e3ef... "FTX wrote in a court filing earlier this week that there was “credible evidence that the Bahamian government is responsible for directing unauthorised access to the debtors’ systems for the purpose of obtaining digital assets of the debtors — that took place after the commencement of these [bankruptcy] cases”."
- Eliezer 4y agoI'd guess this is just false.
- LatteLazy 4y agoKudos to the Bahamas for actually knowing what to do and acting decisively in the public interest...
- lost_tourist 4y agoThey acted decisively but -highly- suspect it is for public interest but a very small group of private interests.
- LatteLazy 4y agoAt least now there is the chance of someone other than an ex-FTX-top-1%er getting something...
- verteu 4y agoThere was definitely a hack (perhaps in addition to government action). The FTX holdings database was wiped, and malware was hosted on their website and mobile apps: https://www.coindesk.com/business/2022/11/12/ftx-crypto-wallets-see-mysterious-late-night-outflows-totalling-more-than-380m/ https://www.coindesk.com/business/2022/11/12/ftx-crypto-wall...
- taxman22 4y agoI don’t think malware was confirmed to be installed on FTX apps. They were just saying that IF it was hacked then the bad actors could add malware.
- yokem55 4y agoYeah, the ftx coins were moved to two addresses. One is the one most folks were watching, where most of the non-eth funds were sold to eth on decentralized exchanges, and sometimes at really high slippage. The stable coins were all converted to DAI, which doesn't have any blacklist feature. This address is also a basic private key wallet, like metamask, not a multisig or contract wallet. None of this sounds like a regulator doing the bare minimum to preserve a company's assets for future bankruptcy liquidation. The other address that recieved substantial funds is a contract based multisig wallet, and it recieved everything that is truely a shitcoin. And that wallet hasn't sold or moved anything beyond the initial movement. On the night of the hack there was speculation that this was a whitehat rescue of the remaining tokens. To me this sounds more like there was both a hack, and a seizure to preserve what was left.
- throwoutway 4y agoA hack or an insider? Sounds more like an insider to me
- xg15 4y agoFinance noob here, and purely out of couriosity, but could someone explain what the actual legal status of FTX' deposits is now? From what I got, crypto exchanges spend a lot of effort to not be banks in a legal sense, so the special protections for customer deposits with traditional banking don't apply - the deposits are technically owned by FTX, not the customers. On the other hand, customers do appear to have some claims in the bankruptcy proceedings, enough that the SEC seized the funds. So it's not just "you pay me, I make number go up" either. Were the deposits just treated like loans to FTX?
- jbirer 4y agoThat's pretty smart. The Bahamian government "seizes" the money, takes their cut, you get the rest, and you can claim your money was seized instead of having to incur the legal risk of moving that money yourself.
- fuzzfactor 4y agoThe Bahamas has a lot of sharks, and they've got more appetite for things they didn't used to have so much when it was still a British Crown colony. When there's blood in those waters it's a lot more likely there's going to be a feeding frenzy.
- manman12345 4y ago