Sam Bankman-Fried lost nearly $200 million in phishing attacks on Alameda, a former engineer says

Reputable traders would be expected to maintain a high level of security and take measures to protect against phishing attacks and hacks, both of which put the crypto ecosystem at risk.

But not Alameda Research. The troubled trading company led by Sam Bankman-Fried lost at least $200 million to a variety of common attack vectors running amok in the industry, according to new claims from former employee Aditya Baradwaj.

“SBF believed that the most important thing for a startup like Alameda or FTX was to move very, very quickly,” Baradwaj wrote on the social app X today. “That meant virtually no code testing and incomplete accounting.”

“Private blockchain keys and exchange API keys were stored in plain text in a file that was accessible to multiple employees,” Baradwaj added. CoinDesk has confirmed that Baradwaj was an employee of Alameda based on pay stubs he provided.

Alameda lost $40 million through yield farming on a “new blockchain of questionable legitimacy,” with the network’s founder holding the company’s funds hostage. Months of negotiations followed, but it is unclear whether these funds were eventually recovered.

Yield farming is a popular method of earning rewards by providing tokens to a financial application on a blockchain. However, applications created by malicious actors can block withdrawals after attracting a significant amount of capital – resulting in losses.

Another security blunder occurred when private keys or a password for a secure crypto storage facility were leaked “probably from a former employee.” The attack cost Alameda over $50 million in various tokens.

But the biggest hit was a $100 million loss after Alameda was tricked into clicking on a fake phishing link in Google Ads. The fake link likely mimicked a DeFi protocol and had risen to the top of Google searches.

Michaels Lewis’ recently published biography of Bankman-Fried claims the founder lost at least $500,000 every day in Alameda’s early days and once misplaced over $4 million worth of XRP tokens.

Taken together, these losses highlight Alameda’s lax safety practices and apparent employee negligence. Each of these attacks could have been avoided if private keys had been stored more securely and if DeFi transactions had been carefully vetted before moving millions of dollars in capital.

Such losses were not limited to Alameda. Bankman-Fried’s other company, crypto exchange FTX, lost over $400 million shortly after bankruptcy in November 2022. The attack was apparently caused by poor private key management – which could have cost the company over $1 billion.

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