February 4, 2023

Overview:

  • FTX was hacked for hundreds of millions in cryptocurrencies just hours after the bankruptcy filing.
  • Paxos quickly froze 11,184 Paxos Gold (PAXG) tokens stolen from the crypto exchange following a request from US federal authorities
  • The on-chain trust firm recovered about $20 million after tracing the assets to four Ethereum addresses.

Paxos rescued $20 million in digital gold stolen from Sam Bankman-Fried’s crypto exchange FTX, according to The Block.

11,184 PAXG stolen from FTX

An unknown hacker stole 11,184 PAXG tokens backed by real gold in Paxos’ custody of FTX shortly after the crypto exchange declared bankruptcy on November 11, 2022. According to reports, the hacker emptied more than $400 million worth of other crypto assets such as DAI and Ether (ETH) from the platform.

Paxos is a regulated cryptotrust and blockchain company. The company is also the publisher of Binance USD (BUSD) stablecoin. After the hack, Paxos tracked the PAXG tokens to four Ethereum addresses and froze the assets in accordance with a request from US federal law enforcement.

Notably, the hacker traded around $300 million worth of virtual currency into ETH, making him one of the largest Ether holders. The Ethereum community began to worry that the attacker might lower the price of ETH in an attempt to launder crypto.

The team reportedly “reclaimed the assets” and transferred $20 million in PAXG tokens from the “FTX Accounts Drainer” wallets to a null address. The Paxos treasury burned the tokens and minted 11,184 new PAXG tokens into a separate crypto wallet.

FTX users in the dark

Billions in assets from the Sam Bankman-Fried flatline exchange remain unknown. The November hacker stole over $400 million in cryptocurrencies and digital assets. The CFTC, SEC and federal prosecutors allege that $4 billion in client funds was funneled to Alameda Research, at the behest of Bankman-Fried.

The SBF trading giant also hid $8 billion in liabilities on the crypto exchange, according to reports. A lawsuit revealed that tens of millions in personal loans had been made to corporate executives, including Bankman-Fried himself.

The company recovered about $1 billion in crypto assets and cash equivalents, according to bankruptcy CEO John Ray III, as he testified before Congress in Washington DC. Ray also noted that recovering assets was a slow process due to a lack of proper bookkeeping in the SBF crypto empire.

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