Insights from Former Alameda Engineer on Pre-Collapse Operations
Security and risk assessments were deemed lacking within the company, yet the sudden collapse of the trading firm caught insiders off guard, revealed a former employee.
According to the ex-engineer, Aditya Baradwaj, insiders at Alameda Research were oblivious to the impending implosion until former CEO Caroline Ellison came forward with a confession. In a recent interview on Bitsday TV, Baradwaj recalled, "It pretty much seemed like business as usual, right up until the end. The days before the company collapsed, it just seemed like a few really busy days of trading. We had no idea that anything was going on until the very last day, and that's when Caroline pulled us aside and told us what had been going on behind closed doors."
Founded by Sam Bankman-Fried, Caroline Ellison, and Sam Trabucco, Alameda was a cryptocurrency trading fund. Despite efforts to create some distance between Alameda and its sister company, the cryptocurrency exchange FTX, it was eventually revealed that the two were intricately linked. Bitsday's report highlighted that a substantial portion of Alameda's balance sheet was comprised of FTX's FTT exchange token.
This revelation ultimately led to the downfall of both Alameda and FTX, accompanied by criminal charges against Sam Bankman-Fried, who is currently facing trial on fraud and conspiracy charges.
Baradwaj's employment at Alameda was confirmed through a review of provided payslips by Bitsday.
He further pointed out that the internal security protocols and checks at the trading firm were notably deficient. This deficiency led to a "fat finger" trade in 2021, temporarily causing a significant dip in the price of Bitcoin by up to 87%. Bitsday's previous report, also citing Baradwaj, outlined how a misplaced decimal resulted in a substantial trade that sold Bitcoin for a fraction of its value.
"Alameda's poor security and risk checks stood out, especially when you consider that traditional firms would've had these measures in place. The environment at both Alameda and FTX was one where huge monetary decisions were made with minimal oversight. While there were many issues, we never expected outright illegal activities."
In Michael Lewis’ book 'Going Infinite,' it's noted that:
"FTX had switched off Alameda’s risk limits to make itself more appealing," with later remarks indicating that the "losses caused by this unsettling policy were in any case trivial."