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WSJ Reveals FTX Staff Were Aware of Alameda's Backdoor Prior to Collapse

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Oct 7, 2023 at 01:02 pm

In a recent investigation by the Wall Street Journal, it has come to light that specific employees within FTX's U.S. division were aware of a backdoor access within the exchange. This security loophole facilitated substantial withdrawals of customer funds by Alameda Research.

Insiders familiar with the situation disclosed that these employees promptly reported their findings to Nishad Singh, the Director of Engineering at FTX. Unfortunately, no action was taken to address this issue, as detailed in the WSJ report.

The revelation emerged during an inquiry led by a team associated with LedgerX, a crypto derivatives exchange that FTX acquired in 2021. The team was evaluating the feasibility of implementing FTX's core exchange code within the U.S.

Upon discovering the backdoor, Julie Schoening, Chief Risk Officer at LedgerX, promptly raised concerns with her superior, Zach Dexter. Subsequently, this matter was discussed with Nishad Singh. It is worth noting that Nishad Singh holds a significant level of trust as one of the closest confidants to FTX founder, Sam Bankman-Fried.

In August 2022, Schoening was relieved of her role amidst speculation that her persistence in addressing these concerns had led to discontent among her superiors.

Miami International Holdings, the current owners of LedgerX, vehemently denied the allegations. They stated:

 "Following a thorough internal investigation, LedgerX has found no evidence that any of its employees were aware of any reported code enabling Alameda to take FTX customer assets, and firmly denies any contrary allegation," in response to the WSJ"

This revelation coincides with the commencement of Bankman-Fried's trial in New York, where he faces wire fraud charges. Bankman-Fried has entered a plea of not guilty to all charges. Meanwhile, Singh, who has entered a guilty plea, is anticipated to offer testimony against his former employer.

As of now, neither FTX nor LedgerX have provided prompt responses to inquiries from Bitsday.

Read more: Unlocking the Global Tapestry of Cryptocurrency Aspirations: Bitget's Eye-Opening Survey Reveals Insights

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