Former Engineer Reveals Alameda Research’s Poor Security Practices
A former engineer at Alameda Research, the sister hedge fund of FTX, has come forward with revelations of significant trading losses totaling at least $190 million. Aditya Baradwaj has detailed the events in a post titled “The Hacks,” shedding light on the inadequate security practices within the company.
Lack of Robust Risk Management Structures
Reports have highlighted the lack of robust risk management structures at FTX and Alameda Research. Bankruptcy lawyer John Ray III described it as a “complete failure of corporate controls.”
Neglecting Engineering and Accounting Standards
Concrete evidence provided by Baradwaj exposes Alameda Research’s poor operational practices. The company prioritized speed over engineering and accounting standards, engaging in minimal code testing and incomplete balance accounting.
Storing blockchain private keys and exchanging API keys in plaintext exposed the company to frequent security incidents.
Costly Consequences
Baradwaj highlighted several incidents resulting in substantial financial losses. A phishing attack during a DeFi transaction led to losses exceeding $100 million. Participation in yield farming on a questionable blockchain resulted in $40 million in losses. A leaked file of plaintext keys led to fraudulent orders and losses of $50 million.
Addressing Revelations and Regaining Trust
It remains to be seen how Alameda Research and FTX will address these revelations and enhance their security practices to prevent future incidents and regain the trust of clients and stakeholders.
The trial of Sam Bankman-Fried, the former CEO of FTX, is currently underway. If convicted, he could face up to 114 years in federal prison.
Hot Take: Alameda Research’s Security Breaches Expose the Need for Better Risk Management
The recent revelations of poor security practices at Alameda Research highlight the importance of robust risk management structures in the cryptocurrency industry. The prioritization of speed over security has resulted in significant financial losses and compromised client trust. It is crucial for companies like Alameda Research and FTX to address these issues, implement stronger security measures, and regain the confidence of their clients and stakeholders. Moving forward, the industry as a whole must prioritize proper risk management to protect against potential security breaches and ensure the safety of funds and assets.
Source: TradingView.com
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