Bessie Liu

FTX-owned Japanese exchange Liquid Global will halt all withdrawals including both fiat and cryptocurrencies.



Withdrawals were suspended so that the company could be in compliance with requirements of voluntary Chapter 11 proceedings in the United States, according to a <a href="https://twitter.com/Liquid_Global/status/1592458596750856192">tweet</a> by the company.&nbsp;



“This is not a security related halt,” the exchange tweeted.&nbsp;



Adding, “Until further notice we would suggest to not deposit either FIAT or Crypto.”



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Fiat and crypto withdrawals have been suspended on Liquid Global in compliance with the requirements of voluntary Chapter 11 proceedings in the United States. Until further notice we would suggest to not deposit either FIAT or Crypto We will provide updates when available.&mdash; Liquid Global Official (@Liquid_Global) <a href="https://twitter.com/Liquid_Global/status/1592458596750856192?ref_src=twsrc%5Etfw">November 15, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Liquid Global had been the victim of a <a href="https://cms.blockworks.co/news/ftx-lends-liquid-global-120-million-following-hack/">$97 million hack</a> in August 2021, where the exchange revealed that its “warm” wallets had been compromised.&nbsp;



Soon after the hack, Liquid Global announced in a <a href="https://blog.liquid.com/liquid-ftx-dept-financing">blog post</a> that it had received a $120 million loan from FTX.



At the time, the exchange said it was “grateful for the vote of confidence from FTX and the valuable support of its users.”



“The financing will also improve Liquid’s balance sheet and, in turn, its key regulatory metrics, which further corroborates its ongoing licensing opportunities in the key jurisdictions of Japan and Singapore,” Liquid Global added.



FTX <a href="https://cms.blockworks.co/news/ftx-acquires-liquid-group-expanding-presence-in-japan/">subsequently acquired the company</a> and Liquid Global’s parent company, Quoine, in February 2022. Quoine was one of the first exchanges to be granted a digital asset operating license under Japan’s Payment Services Act in 2017. It is in the process of acquiring similar approval from the Monetary Authority of Singapore, and FTX’s bankruptcy filing last week <a href="https://www.straitstimes.com/business/ftxcom-not-required-to-migrate-s-pore-users-to-local-subsidiary-quoine-mas">will likely affect its application</a>.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.

FTX Contagion’s Next Victim: A Japanese Exchange

Casey Wagner

<div id="highlights-block_6127f4c6b6a64" class="highlights">
 <ul>
 <li>Earlier this month, Liquid Global revealed that its warm wallets, which sit between cold and hot storage, had been compromised</li>
 <li>Liquid Global announced the close of the debt financing in a blog post on Thursday</li>
 </ul>
 
</div>



In the wake of its estimated $97 million hack, cryptocurrency exchange Liquid Global has received a $120 million loan from fellow exchange FTX.&nbsp;



“We always look to work closely with our customers and regulators to address their security-related concerns,” Sam Bankman-Fried, CEO of FTX told Blockworks. “Our first priority is the users, and the same is true of Liquid.”



Liquid Global announced the close of the debt financing in a <a href="https://blog.liquid.com/liquid-ftx-dept-financing" target="_blank" rel="noreferrer noopener">blog post</a> on Thursday.&nbsp;&nbsp;



“The new funds come at an important point in Liquid’s development and will strengthen its capital position,” the company wrote. “The financing will also improve Liquid’s balance sheet and, in turn, its key regulatory metrics, which further corroborates its ongoing licensing opportunities in the key jurisdictions of Japan and Singapore.”



Japan-based Liquid Global announced the hack via <a href="https://twitter.com/Liquid_Global/status/1428176357515612165?s=20" target="_blank" rel="noreferrer noopener">Twitter</a> earlier this month. The exchange revealed that its warm wallets, which sit between cold and hot storage, had been compromised.&nbsp;



The advantage of the hybrid warm wallet is added security, in theory, plus the ability to make transactions, which cold wallets do not support. Liquid Global said that it moved other assets into cold wallets for added protection following the hack.&nbsp;&nbsp;



The hack highlighted the need for greater security in the cryptocurrency space, which regulators across the world have pushed for recently.&nbsp;



“Security and regulation have always been central to our operations as an exchange,” said Bankman-Fried. “As regulators get more active and the space continues to grow, there are more opportunities to become licensed, and we fully expect the security of user funds to be a key consideration in order to secure those licenses.”&nbsp;



Liquid Global parent company Quoine became one of the first exchanges to be granted a digital asset operating license under Japan’s Payment Services Act in 2017. In 2021, the exchange applied for the Major Payment Institution licence under the Singapore Payment Services Act for the provision of digital payment token services, according to the company’s <a href="https://www.liquid.com/company/" target="_blank" rel="noreferrer noopener">website</a>.&nbsp;



“Helping the wider crypto community and a fellow team of like-minded builders was the key benefit for us,” said Bankman-Fried. “We look forward to Liquid continuing to lead the way in crypto regulation and emerging from this stronger than before.”&nbsp;



Want more investor-focused content on digital assets?&nbsp;<a target="_blank" href="https://cms.blockworks.co/events/digital-asset-summit-2021-2/" rel="noreferrer noopener">Join us</a>&nbsp;September 13th and 14th for the Digital Asset Summit (DAS) in NYC. Use code ARTICLE for $75 off your ticket.&nbsp;<a target="_blank" href="https://cms.blockworks.co/events/digital-asset-summit-2021-2/" rel="noreferrer noopener">Buy it now</a>.

FTX Lends Liquid Global $120 Million Following Hack

<div id="highlights-block_611ffe603cf95" class="highlights">
 <ul>
 <li>Japanese exchange Liquid Global was hacked for an estimated $97 million this week</li>
 <li>While hacks exist in DeFi, they are becoming less prevalent overtime, experts say </li>
 </ul>
 
</div>



Just over a week after the greatest decentralized finance (DeFi) security breach in history, Japanese cryptocurrency exchange Liquid Global was hacked Thursday, resulting in more than $90 million in stolen assets. The hacks highlight vulnerabilities that exist on decentralized exchanges and signal that further regulation, which policymakers have <a href="https://cms.blockworks.co/sec-reportedly-could-look-to-regulate-defi-projects/">promised is coming</a>, may help advance the industry, experts say. 



“Every time there&#8217;s a major security hack, professional investors and the crypto industry in general, take note,” said Matt Hougan, chief investment officer at Bitwise. “It&#8217;s like a persistent reminder that we&#8217;re still extremely early in this space.”&nbsp;



Liquid Global announced the hack via <a href="https://twitter.com/Liquid_Global/status/1428176357515612165?s=20">Twitter</a>, where the exchange revealed that its warm wallets had been compromised. Warm wallets sit between hot wallets, which are connected to the internet, and cold wallets, which operate offline. The advantage of the hybrid warm wallet is added security, in theory, plus the ability to make transactions, which cold wallets do not support. Liquid Global said that it moved other assets into cold wallets for added protection following the hack.&nbsp;&nbsp;



The exchange did not reveal an estimate for the amount stolen, but blockchain analytics company <a href="https://www.elliptic.co/">Elliptic</a> estimates that hackers made off with about $97 million in digital assets.&nbsp;



“I know it seems like these hacks happen all the time, but the frequency of hacks versus the scale of the market is diminishing over time,” said Hougan. “It is a reminder that this space is still new, it&#8217;s still evolving and still uncertain. I think it&#8217;s one of the things that drives institutional and professional investors to go with large, established trusted brands, which is definitely a trend that we&#8217;re seeing.”&nbsp;



Hacks, others point out, are not unique to the digital asset space.&nbsp;



“These hacks seem to happen more frequently, so many people get scared of trading or using cryptocurrencies,” said Laurin Bylica, co-founder of TheStandard.io, a DeFi infrastructure project. “However, this is not particularly a downfall of the crypto space, as hacks also happen every day in the world of fiat money.”&nbsp;&nbsp;



The hack comes shortly after US Securities and Exchange Commission Chair Gary Gensler hinted that the DeFi space needs greater regulatory <a href="https://cms.blockworks.co/sec-reportedly-could-look-to-regulate-defi-projects/">oversight</a>, which may advance the industry in the long run, Hougan said.&nbsp;



“DeFi is not immune to regulatory oversight. I think that clear regulation in the DeFi space is what will unlock the next major bull market,” he said. “One of the criticisms of DeFi is that it only operates inside the confines of crypto, and I think for it to move beyond that it&#8217;s going to need regulatory clarity.”&nbsp;



Regulation is, of course, fundamentally at odds with the founding principles of cryptocurrencies, Hougan acknowledged.&nbsp;



“Crypto comes from a sort of anarchic, anti-regulatory origin story, and that ethos still permeates part of the community who would argue that these platforms don&#8217;t need to be regulated, and it is up to the users to make sure they&#8217;re not subject to fraudulent activity,” he said. “I don’t think that washes with everyday reality.”&nbsp;



Want more investor-focused content on digital assets?&nbsp;<a target="_blank" href="https://cms.blockworks.co/events/digital-asset-summit-2021-2/" rel="noreferrer noopener">Join us</a>&nbsp;September 13th and 14th for the Digital Asset Summit (DAS) in NYC. Use code ARTICLE for $75 off your ticket.&nbsp;<a target="_blank" href="https://cms.blockworks.co/events/digital-asset-summit-2021-2/" rel="noreferrer noopener">Buy it now</a>.