A new report by The Wall Street Journal reveals that some employees of FTX, a leading crypto exchange, knew about a secret backdoor that allowed Alameda Research, a hedge fund affiliated with FTX, to access and withdraw funds from FTX customers’ accounts without their consent.
FTX’s Collapse Drama Continues to Unfold
According to the report, the backdoor was discovered by two FTX engineers in March 2022, when they noticed that Alameda had a special code that bypassed FTX’s security checks and enabled them to move funds from FTX to Alameda’s own wallets.
The engineers alerted Nishad Singh, FTX’s director of engineering, but he did not take any action to fix the problem. The report also claims that Julie Schoening, LedgerX’s chief risk officer, raised the issue to her boss Zach Dexter, who then discussed it with Singh.
LedgerX is another crypto exchange that was acquired by FTX in October 2021. Schoening was fired in August 2022, allegedly for irritating her bosses over the backdoor. FTX collapsed in September 2022, after a massive hack that drained over $1 billion worth of crypto from its customers’ accounts. The hack was later traced to Alameda, which admitted that it had exploited the backdoor to siphon funds from FTX.
Alameda’s founder and CEO, Sam Bankman-Fried, who is also the founder and CEO of FTX, apologized for the incident and claimed that he was unaware of the backdoor.
However, the WSJ report casts doubt on Bankman-Fried’s claim and suggests that he and his close deputies were aware of and benefited from the backdoor for months before the collapse. The report cites sources familiar with the matter and documents obtained by the WSJ.
Both FTX and LedgerX did not respond to requests for comment. LedgerX’s new owners, Miami International Holdings, said in a statement that they found no evidence that any of their employees knew about the backdoor and denied any contrary allegation.
