FTX's $415m stolen crypto shows 'authorities risk creating an Aladdin's Cave for criminals every time they freeze or seize assets'
International law firm RPC urges rethink over proposed UK crypto seizure powers
Commenting on the news that $415million worth of crypto has been stolen by hackers from collapsed crypto exchange FTX, Partner Adam Craggs and senior associate Alice Kemp, said:
"The news that around $415m has been stolen from collapsed cryptocurrency exchange FTX since it filed for bankruptcy has highlighted the widening gap in the race between hackers and authorities, as well as the sizeable risks attached to freezing assets, with authorities effectively creating an "Aladdin's Cave" of crypto vulnerable to attack.
"This story is not new and hacks on exchanges are as old as exchanges themselves, but what the FTX story shows is that authorities must think carefully about how to protect frozen cryptoassets against determined hackers.
"It is all very well to freeze trading, but the cryptoassets in that exchange are only as secure as the exchange itself – there is little point in authorities locking the front door if the back door remains wide open.
"Indeed, this may impact proposals for new powers to be given to UK authorities to freeze cryptoassets as this will rely on authorities having the ability to move them – something that may not be possible without the private key.
"The powers also assume the 'frozen' wallet is secure.
"In essence, authorities want the power to move people's money without their consent from their bank account to a potentially insecure Aladdin's Cave that could become a magnet for criminals. Many will question the wisdom of such action.
"So where to from here? The narrative is being framed as a race between 'hackers' and authorities, but there are different types of hackers, including 'white hat' hackers - ethical hackers who use their skills to protect against cyberattacks, and at times for no fee.
"White hat hackers can be an important resource for both closing the gap in the arms race and ensuring that the law, and authorities' powers, are fit for purpose.
"Public authorities should perhaps stop treating all hackers as 'black hat' hackers and consider inviting white hat hackers to help solve some of these potential problems, in the same way that the private sector has already done successfully."