FTX’s Codebase and Special Treatment for Alameda Research
According to reports, FTX’s codebase contained a secret backdoor that gave special privileges to Alameda Research, a hedge fund. This allowed the fund to have a negative balance of up to $65 billion. Among other allegations, FTX founder Sam Bankman-Fried is accused of co-mingling funds between the FTX crypto exchange and Alameda Research.
A discovery was made by LedgerX employees, who found the backdoor in FTX’s codebase. LedgerX is a regulated derivative trading platform acquired by FTX.US. In May 2022, one employee named Jim Outen alerted their team lead about the special treatment given to Alameda Research in the code. The team lead acknowledged this and mentioned the need to clean it up.
The issue was reported to higher-ups, including Zach Dexter and Nishad Singh, who worked closely with Bankman-Fried. Singh later pleaded guilty to fraud charges along with other members of the inner circle. Schoening, the team lead who reported the issue, was fired before FTX’s collapse.
Sam Bankman-Fried’s Trial
During Sam Bankman-Fried’s trial, which began on October 3rd and is expected to last at least six weeks, 12 jurors were selected. If convicted of all charges, Bankman-Fried could face life imprisonment.
Hot Take: The Allegations Against FTX and Sam Bankman-Fried
The allegations surrounding FTX and its founder, Sam Bankman-Fried, are serious and could have significant consequences for both parties involved. The discovery of a backdoor in FTX’s codebase that gave special privileges to Alameda Research raises concerns about fairness and transparency within the crypto industry. If proven true, it would undermine trust in FTX as a cryptocurrency exchange and raise questions about its regulatory compliance.
Furthermore, the potential co-mingling of funds between FTX and Alameda Research is a serious breach of trust and could have severe financial implications. Investors and users of FTX may be rightfully concerned about the security and integrity of their funds.
The outcome of Sam Bankman-Fried’s trial will have far-reaching implications for the crypto industry as a whole. It will serve as a test case for accountability and regulation within the industry, setting a precedent for how such allegations are handled in the future. As the trial progresses, it will be crucial to closely monitor developments and assess their impact on the broader crypto ecosystem.
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