A Wired Investigation has revealed how, FTX, once valued at $32 billion found itself on the edge of a financial precipice on the evening of November 11 last year filing for bankruptcy. Just after the company’s CEO, Sam Bankman-Fried, handed over control to the new CEO, John Ray III to help FTX navigate through the challenges of bankruptcy, an unidentified entity began siphoning off hundreds of millions of dollars worth of cryptocurrency.
Amidst this chaos, a frantic response was initiated by the remaining FTX staff, advisers, and consultants. In a Google Meet session flagged as “urgent,” more than 20 individuals joined forces to assess the situation. FTX’s wallets were being emptied and publicly visible in real-time on Etherscan, leaving the team in shock.
One proposal, initially suggested by Gary Wang, FTX’s CTO, was met with scepticism. Wang proposed changing the secret keys guarding the vulnerable wallets. However, this idea was swiftly dismissed; it was akin to changing the locks while the intruder was already inside.
Meanwhile, Zach Dexter, the CEO of FTX subsidiary LedgerX, took a different approach. He contacted digital asset trust company BitGo, negotiating the creation of secure “cold storage” wallets, which would remain offline, impervious to immediate threats. BitGo agreed to expedite the process, aiming to have these secure wallets ready within half an hour.
In a race against time, the FTX team sought an even quicker solution. Kumanan Ramanathan, an advisor from Alvarez & Marsal, offered to temporarily store the vulnerable funds on his personal Ledger Nano USB drive, a hardware wallet. This device provided a secure offline option, buying critical time until the cold storage wallets could be implemented.
