Alameda's Multi-Million Dollar Mistakes: Inside the Alleged Negligence

Alameda Research, the sister hedge fund of FTX, faced staggering losses of at least $190 million due to potentially avoidable scams.

by Faruk Imamovic
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Alameda's Multi-Million Dollar Mistakes: Inside the Alleged Negligence
© Getty Images News/Spencer Platt

Alameda Research, the sister hedge fund of FTX, faced staggering losses of at least $190 million due to potentially avoidable scams. This explosive revelation was made by Aditya Baradwaj, a former engineer at the firm, in a recent post titled “The Hacks”.

According to Baradwaj, the hedge fund’s rapid pace and desire for "breathtaking" agility often led to significant security lapses, resulting in "major security incidents" with shocking regularity. Highlighting one such incident, Baradwaj recounted a jaw-dropping exploit where a trader lost over $100 million of the company’s assets.

The unfortunate event occurred when the trader mistakenly clicked on a rogue link, which was cunningly positioned atop Google Search results. This link was encountered during the trader's attempt to authenticate a decentralized finance transaction.

In a subsequent blunder, Baradwaj pointed out that Alameda delved into yield farming on a newly established blockchain, one he described as having “questionable legitimacy”. This venture saw the firm sustain losses surpassing $40 million.

Ignoring Best Practices: A Costly Gamble

Baradwaj’s exposé further delves into the core ethos of Alameda and its leadership, particularly its founder, Sam Bankman-Fried. According to Baradwaj, Bankman-Fried maintained that agility and speed were paramount for both Alameda and FTX.

This singular focus, however, allegedly led to a perilous neglect of standard practices. “This meant virtually no code testing and incomplete balance accounting. Safety checks for trading would only be added on an as-needed basis,” Baradwaj asserted.

An even more alarming claim was the alleged manner in which sensitive data, such as "blockchain private keys and exchange API keys," was handled. These critical elements were allegedly stored in plaintext files, readily accessible to several employees.

This purported oversight resulted in yet another security breach, where an older version of these plaintext files was leaked. Consequently, attackers could siphon funds from various exchanges, causing Alameda to incur losses north of $50 million.

The Legal Aftermath

These revelations couldn’t have come at a more inopportune time for FTX’s founder, Sam Bankman-Fried, who is currently in the midst of a fraud trial.

Former Alameda CEO Caroline Ellison has also taken the stand, testifying against him. As the trial unfolds, testimonies from other past associates, such as Adam Yedidia and Gary Wang, promise to shed even more light on the alleged indiscretions of the embattled former billionaire.

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