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Bankruptcy of a Global Exchange FTX
[image=Reuters Yonhap News]
On November 11th, FTX, a global cryptocurrency exchange, filed for Chapter 11 bankruptcy protection in a Delaware court. According to the bankruptcy petition submitted by FTX, the company's debts are estimated to be as much as $50 billion, which could result in significant losses for investors.
![[Reconstitution of an Article by earthweb.com]](https://www.notion.so/image/https%3A%2F%2Fs3-us-west-2.amazonaws.com%2Fsecure.notion-static.com%2F673b3310-5dcf-4c06-a6cd-98febdba05b0%2FUntitled_(6).jpg?table=block&id=70f121ed-d391-41a8-b8fe-2ee52974ad9a&cache=v2)
According to analytics firm EarthWeb, as of August, users from South Korea accounted for the largest proportion (6.21%) of visitors to the FTX exchange. Note that this is based on the number of visitors and not the amount of trading volume, but it is likely that there were also many users from South Korea who were affected by the bankruptcy.
Immediate Hacking after Bankruptcy
![[FTX Telegram]](https://www.notion.so/image/https%3A%2F%2Fs3-us-west-2.amazonaws.com%2Fsecure.notion-static.com%2Fc5d6d127-7078-46ad-98f1-d2b994e3fc4d%2FUntitled.png?table=block&id=b58d06c6-da28-4d80-b509-90df73114631&cache=v2)
![[Etherscan records as of November 18th 2022]](https://www.notion.so/image/https%3A%2F%2Fs3-us-west-2.amazonaws.com%2Fsecure.notion-static.com%2Fb3ed4029-0310-4067-ba6c-0901999b2c22%2FUntitled.png?table=block&id=c3634a4b-7c22-4bae-b621-9f34665b5bb9&cache=v2)
On the 12th, the day after FTX filed for bankruptcy, media reports such as CoinDeskUS reported that USD 662 million (about KRW 872.8 billion) of assets were withdrawn from the FTX trading platform overnight.
On the 13th, according to Etherscan tracking results, at 11:20am on the 12th, a specific wallet (0x59ABf3837Fa962d6853b4Cc0a19513AA031fd32b) from the FTX exchange wallet withdrew 9,500 ETH, and later USDT and LINK were also withdrawn.
It is said that some of the withdrawn tokens were moved to decentralized exchanges like 1inch and Uniswap.
Insider Job?
The above large-scale hacking occurred immediately after FTX filed for bankruptcy, leading to suspicions that it was an inside job to withdraw funds.
The CEO of Hacken, the largest white hacker group in the blockchain industry, stated that the possibility of an inside job is high. The CSO of Kraken, a cryptocurrency exchange, also reported on Twitter that they have confirmed the identity of users involved in moving funds from FTX.
![[Source=Watcher.Guru]](https://www.notion.so/image/https%3A%2F%2Fs3-us-west-2.amazonaws.com%2Fsecure.notion-static.com%2F86f6b2f8-7051-43c5-8373-b555f0f8dc9a%2FUntitled.png?table=block&id=f9153db8-3bbe-4808-8936-3159b21e3537&cache=v2)
According to a report by blockchain media Watcher.Guru on the 17th, a document has been released that the massive withdrawal of FTX is believed to be the work of founder Sam Bankmam-Fried under the direction of the Bahamas government.
In an FTX bankruptcy filing filed in Delaware, the media reported that co-founder Gary Wang stated that "the Bahamas regulator ordered CEO Sam Bankman Fried to transfer debtor assets to the Bahamas," suggesting that it may not be an outsider's.
The Response of the Korean Market
![[Korbit disclosing their Crypto Assets on the Website]](https://www.notion.so/image/https%3A%2F%2Fs3-us-west-2.amazonaws.com%2Fsecure.notion-static.com%2F81c968fe-4f8f-4ab2-9558-87a23efe131a%2F%25E1%2584%2589%25E1%2585%25B3%25E1%2584%258F%25E1%2585%25B3%25E1%2584%2585%25E1%2585%25B5%25E1%2586%25AB%25E1%2584%2589%25E1%2585%25A3%25E1%2586%25BA_2023-01-19_%25E1%2584%258B%25E1%2585%25A9%25E1%2584%2592%25E1%2585%25AE_4.55.13.png?table=block&id=9fd6b8c2-e1b2-48ce-83e1-577c222d1875&cache=v2)
Korean and foreign crypto exchanges are showing moves to prove the amount of crypto assets they possess in order to alleviate the suspicions of investors regarding the centralized trading method that may occur due to the FTX incident.
The first Korean exchange to show this movement is Korbit. Korbit is revealing the amount of crypto assets it holds and the wallet address in an effort to prevent leakage of investors.
![[On November 14th, at the 4th Civil-Government-Political Special Committee for Digital Assets at the National Assembly, the Chairman of the Policy Committee of the People Power Party, Seong Il-jung, made a statement. Source=Yonhap News]](https://www.notion.so/image/https%3A%2F%2Fs3-us-west-2.amazonaws.com%2Fsecure.notion-static.com%2Fefc75700-54a7-4adc-8a9d-e545299653f9%2FUntitled.png?table=block&id=a0c1e315-6641-485a-880b-f8a3193a7391&cache=v2)
Also, lawmakers from both parties are considering measures to alleviate market concerns through internal policy meetings and cross-party consultations.
Decentralized trading : Removal of Moral Hazard
Moral Hazard
a phenomenon where both parties of a contract neglect their obligations to each other due to asymmetry of information. The term is used to describe the unethical behavior of insurance policyholders in the United States. It refers to actions that are morally or legally unacceptable, such as exploiting legal or institutional loopholes or neglecting one's own responsibilities. The term has been expanded to encompass any behavior that neglects one's best obligations under the law or system.
[Economic Dictionary of Current Affairs, Ministry of Strategy and Finance]
As the FTX case shows, even a centralized exchange with a technically secure security system always has risks such as Moral Hazrd of the enterprise. This is not just a problem in the crypto asset industry, it is a risk that exists in general companies.
One way to address this is through strong regulation by regulatory authorities, but this can lead to market rigidity.
Therefore, in a decentralized market where moral hazard and owner risk cannot exist inherently, the most ideal solution would be to have minimal safeguards in place that can legally protect participants.
For safe WEB 3.0 travel