- Kraken has frozen accounts on its platform linked to FTX and Alameda Research in order to “protect their creditors”.
- The exchange has assured users that other accounts “are not affected”.
- The measure is being linked to the alleged FTX hack in which an attacker drained an approximate $600 million worth of funds from the exchange, some of which was moved through Kraken.
- Kraken is reportedly aware of the identity of the alleged hacker.
Crypto exchange Kraken has decided to freeze all accounts related to FTX and Alameda Research after an unknown hacker drained the now-bankrupt exchange of $600 million worth of tokens, a portion of which was moved through the Kraken exchange.
“Kraken has spoken with law enforcement regarding a handful of accounts owned by the bankrupt FTX Group, Alameda Research and their executives. Those accounts have been frozen to protect their creditors,” the exchange disclosed on Twitter on Sunday, November 13th.
United States-based Kraken assured users that unrelated accounts “are not affected”, and that the exchange maintains full reserves.
Kraken’s decision to freeze FTX-related accounts has raised questions as to who is behind the FTX attack. historically, sophisticated hackers have avoided centralized exchanges so as not to reveal their identities, opting instead to use mixers such as U.S. embargoed Tornado Cash. On Saturday, November 12th, Nick Percoco, Chief Security Officer at Kraken, claimed that the exchange has managed to confirm the identity of the attacker in question, but has yet to make this knowledge publicly available.
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Kraken has denied suffering any negative affects from the sudden implosion of FTX. The exchange revealed on Thursday, November 10th, that, while it does hold 9,000 FTT tokens (currently worth around $13,000 USD) on the FTX exchange, it has no exposure or ties to Sam Bankman-Fried owned Alameda Research, which allegedly borrowed billions of dollars in customer funds from FTX to engage in leverage trading.
The U.S. Securities and Exchange Commission (SEC) and Department of Justice (DOJ) have reportedly launched probes into the FTX Group, which includes FTX.com, FTX US, Alameda Research, and West Realm Shires Services, and filed for ‘Chapter 11‘ bankruptcy on Friday, November 11th. The investigation aims to uncover potential instances of fraud. The Royal Bahamas Police Force and the Securities Commission of the Bahamas are also investigating the matter.
In the wake of the collapse of FTX, Kraken’s Founder and outgoing CEO Jesse Powell has encouraged investors to take self-custody of digital assets that are not being actively trading on the centralized exchanges they use.
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In a Twitter Spaces call, Powell emphasized that centralized exchanges can freeze user funds at anytime, and cited the truckers’ protest held in Canada earlier this year and the recent FTX bankruptcy proceedings as examples.
Kraken, founded in 2011 in the U.S., has carried out two Proof of Reserves audits over the past year. In the wake of the FTX fallout, multiple exchanges are scrambling to do the same, with Crypto.com, Binance, Huobi, and Gate.io among them.
On the Flipside
- It is unclear whether Kraken will choose to reveal the identity of the FTX hacker to the public.
Why You Should Care
Kraken is one of the most established centralized crypto exchanges in the world. The measures taken to freeze accounts linked with FTX and Alameda Research indicates that their executives might have engaged in unlawful activity.
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