In a significant breakthrough, law enforcement authorities have charged three individuals in connection with a sophisticated SIM-swapping scam that drained over $400 million from FTX, leading the cryptocurrency exchange to the brink of bankruptcy. The hackers took advantage of FTX’s weak security and the turmoil caused by its founder’s resignation and fraud conviction, according to Bloomberg.
FTX, once valued at $32 billion, filed for bankruptcy on Nov. 11, 2022, after its CEO, Sam Bankman-Fried, was found guilty of multiple charges of fraud and money laundering. He stepped down from his position and faced a long prison sentence. That same night, FTX’s crypto wallets were emptied by hackers who transferred the funds to various decentralized exchanges.
Bankman-Fried claimed he had nothing to do with the hack and suggested it might have been an inside job. However, the Department of Justice (DOJ) revealed that the culprits were actually a SIM-swapping crew that had been targeting FTX and other victims for two years.
FTX Targeted In $400M SIM-Swapping
SIM-swapping is a technique that involves tricking or bribing telecom employees to switch the phone number of a target to a device controlled by the hacker. This allows the hacker to intercept text messages and phone calls, including those that contain authentication codes or password reset links. With these codes, the hacker can access the target’s online accounts, such as email, social media, banking, and crypto wallets.
As per the Department of Justice (DOJ), Robert Powell from Illinois, Emily Hernandez from Colorado, and Carter Rohn from Indiana have been charged with orchestrating a series of SIM swap attacks. They used fake IDs, personal data, and online aliases to impersonate their victims and convince the phone companies to port their numbers. They also used VPNs and encrypted messaging apps to communicate and coordinate their attacks.
The indictment, filed in a federal court in Washington, does not mention FTX by name, but refers to it as “victim company-1”. Two sources confirmed to the media that FTX was indeed the target of the $400 million heist. The indictment also lists about 50 other individuals who were victimized by the SIM-swapping gang.
The FTX hack
On November 11, 2022, the FTX hack transpired when Hernandez used fake ID containing the details of an FTX employee to convince AT&T to transfer the employee’s phone number to a SIM card under her possession. Powell, identified as the leader of the group and known online as ‘R$’ and ElSwapo1, subsequently utilized the employee’s phone number to obtain authentication codes, enabling access to FTX’s cryptocurrency wallets.
Subsequently, the hackers transferred the pilfered funds to various decentralized exchanges, including Uniswap and SushiSwap, facilitating the conversion into alternative cryptocurrencies or cash. In an attempt to obfuscate their trail, the hackers resorted to mixers and tumblers, services designed to obscure the origin and destination of cryptocurrency transactions
As per the DOJ, a SIM-swapping gang absconded with over $400 million from FTX. However, certain reports indicate that the figure might have reached as high as $1 billion. Pinpointing the precise amount proves challenging due to the constant fluctuations in the value of cryptocurrencies.
The DOJ charged Hernandez, Powell, and Rohn with fraud and identity theft, and they face up to 20 years in prison if convicted. Powell’s lawyer, Gal Pissetzky, declined to comment on the case, while Hernandez and Rohn could not be reached. The DOJ also said that the investigation is ongoing and that more arrests and charges may follow.
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