News Updates November 11 & 12, 2022

1. Reports Suggest More Than $1 B In Customer Funds Missing At FTX
Atleast $1 Billion Missing: The sources allege that Bankman-Fried used a  "backdoor" in FTX's book-keeping system to siphon off money. According to a report by the news agency Reuters, at least $1 billion in client deposits have gone missing from the bankrupt cryptocurrency exchange FTX. 

Reuters spoke to two sources who held senior positions in FTX until this week. The sources told Reuter’s that Sam Bankman-Fried, the exchange’s founder and former CEO, covertly moved $10 billion of customer funds from FTX to his trading company, Alameda Research.

They said that a significant amount of that sum has vanished. One source estimated that the lost sum could be around $1.7 billion. The other stated that there was a $1 billion to $2 billion deficit. Although it is well known that FTX transferred client funds to Alameda, this is the first time the lost amounts have been mentioned. The sources allege that Bankman-Fried used a  “backdoor” in FTX’s book-keeping system to siphon off money. They claim that the “backdoor” enabled Bankman-Fried to execute commands that could change the company’s financial records without informing others, including external auditors.

2. Wrapped tokens issued by FTX or Alameda collapsing, no longer redeemable. 

Wrapped tokens on Solana issued by FTX or Alameda Research are experiencing sharp declines after both entities filed for Chapter 11 bankruptcy protection.

The price of wrapped bitcoin on Sollet is down 77% over the past 24 hours. Its current price is $3,866 — a far cry from the price of native bitcoin's current $16,819 — according to CoinGecko, which is displaying a notice on its website that reads: "soBTC tokens are wrapped BTC tokens issued by FTX or Alameda. Both these entities have filed for Chapter 11 bankruptcy and the BTC tokens are no longer redeemable."

Wrapped ether on Sollet is only down 9% to $1,138 over the same time frame. Native ether is trading at $1,255. CoinGecko is displaying the same warning for soETH as for soBTC.

Wrapping coins, such as bitcoin or ether, on Solana makes those assets available to use on the Solana blockchain — opening them up to usage in Solana's decentralized finance ecosystem.

Many Solana-wrapped assets were custodied by FTX or Alameda, according to open-source portfolio tracker Rotkiapp's founder on Twitter, which added: "That means they are no longer redeemable and will probably go to 0." Pseudonymous crypto writer Aylo also noted that "Solana DeFi will have to absorb this loss."

3. Flight Radar Report Shows

FTX Co-Founder's Private Jet Flew to Argentina, SBF Says He's Still in the Bahamas.

According to Flightradar24’s official Twitter account, the most tracked flight at 3:33 a.m. on Nov. 12, 2022, was Sam Bankman-Fried’s (SBF) private jet flying from the Bahamas to Argentina. While the flight track doesn’t mean SBF took the flight, a number of people suspected someone from SBF’s inner circle did fly out of the Bahamas. The former FTX CEO, however, texted Reuters after the flight report, and told the news outlet he did not leave the Bahamas.

Former FTX CEO’s Private Jet Embarks to Argentina, SBF Claims He Remains in the Bahamas
The former FTX CEO and frontman, Sam Bankman-Fried (SBF), has been under the spotlight all week after his exchange, which was once worth $32 billion, shuddered and filed for bankruptcy protection.

Following the bankruptcy registration in Delaware, FTX US users started to complain about withdrawal issues. Then reports on Nov. 12, at around 3:00 a.m. (ET) indicated that FTX wallets may have been hacked. Some of the funds were sent to Kraken and Kraken’s chief security officer, Nick Percoco, told the public they have identified the user.

Interestingly, roughly around the same time, people started to notice FTX wallets were getting drained, Flightradar24’s official Twitter account tweeted about the most tracked flight at around 3:33 a.m. on Nov. 12, 2022.

“Most tracked flight right now,” Flightradar24 wrote. “According to tweets, the founder and former CEO of [FTX] is en route to Argentina after the FTX collapse earlier this week.”

4. Bitcoin Price Analysis: Dominant Technicals - 13 November 2022.

Bitcoin (BTC/USD) continued to suffer from elevated risk aversion early in the Asian session as the pair orbited short-term technical levels related to the recent appreciation from 15512 to 18140.62.  Buying pressure emerged around the 16516.13 level, representing the 61.8% retracement of the appreciating range and selling pressure emerged around the 23.6% retracement of the appreciating range.  The recent low around the 15512 area following the massive sell-off represents an exact downside price objective associated with recent selling pressure that intensified around the 21478.80 and 18495.50 areas.  This technical significance of this price objective that eventually served as the exact relative two-year low during the ongoing move was validated when Stops were elected below corresponding downside price objectives at the 17573.96 and 16651.45 areas.  Associated downside price objectives below current price activity include the 13369, 8837, and 7538 levels. 

The recent depreciation intensified after Stops were elected below the 16990, 16966, and 16503 levels, areas associated with historical appreciating ranges that commenced around the 3858 and 9819 levels.   Technicians continue to eye the 14500.15 and 10432.73 areas as major downside targets.  Additional downside price objectives include the 14613, 10727, and 9682 levels, areas that are related to selling pressure that intensified around the 20894.96 and 18495.50 areas.  Following the recent move lower to two-year lows, areas of potential technical resistance include the 16920, 17791, 18495, 19199, 20070, and 20201 levels.  Traders are observing that the 50-bar MA (4-hourly) is bearishly indicating below the 100-bar MA (4-hourly) and below the 200-bar MA (4-hourly).  Also, the 50-bar MA (hourly) is bearishly indicating below the 100-bar MA (hourly) and below the 200-bar MA (hourly).

Price activity is nearest the 50-bar MA (4-hourly) at 19248.01 and the 50-bar MA (Hourly) at 17028.17.

Technical Support is expected around 15512/ 13369.11/ 10727.75 with Stops expected below.

Technical Resistance is expected around 18495.40/ 19199.48/ 20070.64 with Stops expected above.  

On 4-Hourly chart, SlowK is Bearishly below SlowD while MACD is Bullishly above MACDAverage.

On 60-minute chart, SlowK is Bearishly below SlowD while MACD is Bearishly below MACDAverage.      

5. Kraken’s CSO Claims To Have Identified The $600 Million FTX Hacker

Nick Percoco, CSO of Kraken Exchange, has tweeted that the FTX hacker's identity has been finally uncovered by his team.    

Just an hour ago, in response to Mario Nawfal, Nick Percoco, the CSO of Kraken Exchange, tweeted that the Kraken team now knows the name of the user who hacked FTX.

How It Was Easy for Kraken To Identify
Kraken’s KYC (Know Your Customer) mechanism was enough for the Kraken team to be able to identify the hacker since he used the exchange to dump the stolen funds during the hack.

IBCgroup.io’s founder and CEO, Mario Nawfal, wrote on Twitter that the hacker is very likely an incompetent insider.

6. Hackers keeping stolen crypto: What is the long-term solution?

In the long run, the industry needs to come together and step up its cybersecurity game in a big way rather than seek out such temporary fixes.

Even as the ongoing Binance-FTX saga continues to dominate the crypto airwaves, there has been a growing trend — an uneasy one at that — that has been garnering the attention of many digital currency enthusiasts in recent months, i.e., hackers returning partial funds for discovering exploits within a protocol. 

In this regard, just recently, the bad actors behind the $14.5 million Team Finance attack revealed that they would be allowed to stay in possession of 10% of the stolen funds as a bounty. Similarly, Mango Markets, a Solana-based decentralized finance (DeFi) network that was recently exploited to the tune of over $110 million, revealed that its community of backers was working toward reaching a consensus, one that would allow the hacker to be awarded $47 million as a reward for exposing the exploit.

Pasfield, chief technical officer for decentralized money market Fringe Finance, told Cointelegraph that while the idea of giving hackers a fraction of the money they cart away for discovering loopholes can be seen as unhealthy and almost unsustainable, the fact of the matter remains that ultimately the hacked projects have no choice but to utilize this approach. “This is a better alternative than resorting to law enforcement’s approach to nab the perpetrators and recover the funds, which takes a very long time, if successful at all,” he added.