Alameda Research Loses Over $190M to 'Avoidable' Scams - Whistleblower Reveals
Summary:
Alameda Research, the sister hedge fund of FTX, reportedly lost more than $190 million due to possibly preventable scams, as claimed by ex-employee Aditya Baridwaj. He highlights multiple security incidents caused due to the firm's extraordinary speed of operations. In one case, an Alameda trader accidentally clicked a false link during a DeFi transaction, costing the firm over $100 million. Another episode involved Alameda yield farming on an unreliable new blockchain, leading to losses exceeding $40 million. Baridwaj points out that the rapid pace set by the FTX founder resulted in the routine ignoring of standard practices and code testing.
Alameda Research, the hedge fund allied with FTX, reportedly lost over $190 million due to a series of potential preventable scams, as asserted by a former engineer of the company. In a piece published on an October 12, ex-employee and whistleblower Aditya Baridwaj alleged that recurring "significant security breaches" arose approximately every few months due to the company's sensational speed.
In one shocking incident, Baridwaj indicated that an Alameda trader unintentionally clicked a deceptive link surfaced at the top of Google search results while processing a DeFi transaction, leading to a staggering loss north of $100 million for the company. Another instance of staggering loss was when Alameda participated in yield farming on a dubious new blockchain, which ended up costing the firm over $40 million.
Baridwaj pointed out that, according to FTX founder Sam Bankman-Fried, agility was the topmost priority for Alameda and FTX. However, this approach made the firm overlook standard engineering and accounting practices. Baridwaj indicated that there was little to no testing of codes, insufficient balance accounting, and necessary safety measures for trading were usually an afterthought.
The careless storage of blockchain private keys and exchange API keys in plaintext files accessible to numerous employees also led to a security breach that resulted in another major financial setback. An old plaintext file containing keys to Alameda's wallets was leaked and used by an attacker to transfer out funds from certain exchanges, resulting in losses of over $50 million.
Other notable instances of similar incidents occurred, some dating back to before Baridwaj's tenure at the company. Following the collapse of Alameda and FTX in November of the previous year, the former engineer has been candid about the various shortcomings he observed during his time at the firms.
Although Sam Bankman-Fried, FTX founder, maintains his innocence in his ongoing fraud trial, previous employees such as Adam Yedidia, Gary Wang and former Alameda CEO Caroline Ellison have been providing substantial evidence against him with their testimonies.
Published At
10/12/2023 5:33:10 AM
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