BitGo Refused to Unwrap $50M in WBTC For Alameda

December 16, 2022

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BitGo CEO Mike Belshe confirmed in a Twitter Spaces held by MakerDAO delegate and Blec Report founder Chris Blec, that his firm refused to unwrap $50 million in wrapped bitcoin, days before FTX and its sister firm Alameda Research went bankrupt.

WBTC is a tokenized form of bitcoin usable on the Ethereum network with BitGo as its custodian. Belshe said someone from Alameda asked BitGo to unwrap 3,000 WBTC worth $50 million prior to Nov. 11 bankruptcy filing. BitGo had never dealt with the Alameda representative who requested redemption.

Belshe said BitGo knows all WBTC owners’ operational staff. He added that the representative had failed its security check and was not familiar with WBTC burns.

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“So, we [Bitgo] held it up and said this is not what a burn looks like and we need to know who this person was,” Belshe stated while further adding,

“While we were holding it, waiting for a response on those issues, they [Alameda] went bankrupt and of course, once they went bankrupt, everything halted.”

On-chain evidence from Etherscan shows Alameda sent 3,000 WBTC to the WBTC controller contract on Nov. 9. Sending tokens to the burn address destroys them.

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BitGo had Security Concerns

In normal circumstances, BitGo would have redeemed 3,000 BTC to Alameda, but it must authorize all redemption requests. The WBTC dashboard indicates this redemption effort as pending, and WBTC is overcollateralized by 3,000 BTC.

Belshe praised BitGo’s response as evidence of the company’s strong security. BitGo’s CEO stated the redemption attempt may have been valid but didn’t follow protocols. Belshe stated the company won’t deal with the 3,000 BTC that is related to the WBTC in question.

The Wrapped Bitcoin (WBTC) DAO, the community that oversees WBTC projects, has recently moved to a new smart contract Multisig, expanding its membership, and revising its voting limit in an effort to boost the effectiveness of WBTC. To do this, it got rid of 11 of the companies that had signed before, including FTX, MarkerDAO, and Airswap.