In a startling revelation, a former engineer at Alameda Research, Aditya Bharadwaj, has exposed how the sister hedge fund of FTX lost a staggering $190 million in trading funds due to avoidable scams and security lapses.
Baradwaj’s account, shared in a post titled “The Hacks,” highlights the firm’s “breathtaking” agility, which, ironically, led to major security incidents happening as frequently as every few months. One of the most significant exploits detailed by Baradwaj involves a trader losing over $100 million after clicking on a malicious link, cleverly promoted to the top of Google Search results. This incident occurred during an attempt to sign off on a decentralized finance transaction.
Another alarming revelation is Alameda’s risky yield farming on a blockchain of “questionable legitimacy,” resulting in losses exceeding $40 million.
Baradwaj underscores the firm’s obsession with speed, often at the expense of industry-standard engineering and security practices. This approach meant minimal code testing and incomplete balance accounting, with safety checks being added only as needed.
Security breaches, such as storing private keys in plaintext files accessible to several employees, resulted in multi-million-dollar losses.
The former engineer’s disclosures shed light on the reckless actions of Alameda and FTX’s founder, Sam Bankman-Fried, who justified these actions under the guise of Effective Altruism.
As this information emerges, former Alameda CEO Caroline Ellison is testifying against Bankman-Fried in a fraud trial. Allegations of commingling of funds and high-risk trading practices have surfaced, with the defendant maintaining his innocence.
This exposé serves as a significant moment in the history of cryptocurrency journalism, highlighting the importance of transparency and accountability.