Hacked crypto exchange secures $120m in debt funding from FTX

An estimated $91.5m was stolen from Liquid Global during last week's hack

Crypto exchange FTX will lend $120 million in debt financing to fellow Japanese exchange Liquid Global to assist in its recovery efforts following last week’s attack.

The new funds will be used primarily to accelerate new capital generation projects for Liquid and to strengthen its capital position. The funds will also provide much-needed liquidity for the exchange, which Liquid says “underpins its commitment to premier customer support and regional leadership in the blockchain industry”.

Additionally, the financing will be used to improve Liquid’s balance sheet and bolster its key regulatory metrics, which “further corroborates its ongoing licensing opportunities in the key jurisdictions of Japan and Singapore”.

Liquid went on to thank FTX for its “vote of confidence” and announce it has entered into good faith discussions with FTX and will be pursuing further collaborative opportunities.

“We are encouraged by the support of FTX and look forward to accelerating Liquid’s roadmap of initiatives to bring innovative products in the markets we serve in Japan and the world,” said Seth Melamed, COO of Liquid Group.

“By collaborating with FTX, we see enormous opportunities to drive innovation and change the future of finance with blockchain technology.”

The liquid hack saw an estimated $91.5m in funds stolen from its hot wallets in an attack on the exchange’s multi-party computation (MPC) wallets.

According to a blog post, Liquid’s MPC wallet – QUOINE PTE – which is used for the warehousing and delivery management of its assets and overseen by its Singaporean subsidiary, was damaged by hacking.

In a more recent update, Liquid provided reassurances that users will not suffer any loss due to the incident and that there will be no impact on existing user balances.

Crypto adoption in Japan

The Liquid hack on Thursday August 19 coincided with the launch of Coinbase’s latest international venture into Japan, which saw the American exchange partner with Japanese bank MUFG. The partnership will enable more than 40 million MUFG customers to easily buy and sell cryptocurrencies.

Coinbase previously got regulatory approval earlier this year to operate in Japan and aims to increase the use of crypto by “bringing a best-in-class product” to Japanese customers.

Liquid operates through its parent company Quoine Corporation, which was one of the first exchanges to be granted a crypto-asset exchange operator license under Japan’s Payment Services Act. Currently, 31 companies are registered to trade cryptocurrencies.

The recent spate of activity has attracted the attention of Japanese financial regulators, who are seeking to impose regulations on the crypto space on Japan. In an attempt to better protect investors from exploits and risky investments, the Japanese FSA will establish dedicated departments to oversee digital and decentralised finance and track the development of a proposed central bank digital currency (CBDC) initiative.

Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.

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