Whistleblower says Alameda Research lost $190 million to fraud and “questionable” blockchains

FTX’s sister hedge fund, Alameda Research, lost at least $190 million of its trading funds to fraud, according to a former engineer at the company.

In a post from October 12th about months.

Incident #1:

An Alameda trader fell victim to phishing when he attempted to complete a DeFi transaction by accidentally clicking on a fake link displayed at the top of Google search results.

Client: $100M+

Postmortem: Implemented additional controls in our internal wallet software

— Adi (e/acc) (@aditya_baradwaj) October 11, 2023

As an example of one of the biggest exploits, Baradwaj claims that an Alameda trader lost more than $100 million in company funds after clicking on a malicious link that appeared at the top of Google search results.

The trader was trying to confirm a decentralized finance transaction, Baradwaj said.

In another example, he said Alameda mined a new blockchain with “questionable legitimacy” — a move that led the trading firm to incur losses of more than $40 million.

Baradwaj wrote that FTX founder Sam Bankman-Fried believed that the “most important thing” for Alameda and FTX was their ability to trade quickly. That ethos led Alameda to routinely ignore industry-standard technical and accounting practices for such companies, he said.

“Private blockchain keys and exchange API keys were stored in plain text in a file that multiple employees had access to.”

This led to another security incident that cost the company millions after an old version of text files containing Alameda wallet keys was leaked.

The attacker transferred funds from “some exchanges,” and the resulting losses amounted to more than $50 million, Baradwaj explained.

These are just a few incidents – there are many more, including those that predate my time at the company.

FTX has had its own problems, including the MobileCoin fiasco that Gary recently witnessed during the trial.

— Adi (e/acc) (@aditya_baradwaj) October 11, 2023

He said Alameda suffered from “many other” incidents similar in magnitude to those he described, but many of them occurred before his time at the company.

The former engineer has spoken publicly about Alameda and FTX’s many failures following their collapse in November last year, telling Cointelegraph how its founder Sam Bankman-Fried justified many of his “ridiculous” actions under the guise of an idealistic philosophy known as effective altruism .

Baradwaj’s comments come as former Alameda CEO Caroline Ellison testifies against Bankman-Fried on the sixth day of his fraud trial. In recent days, several former colleagues, including Adam Yedidia and Gary Wang, have come forward with a trove of new evidence against the former billionaire.

Wang admitted to writing special code that allowed Alameda to trade with a near-unlimited credit line from FTX, while Caroline Ellison explained the intricate details of FTX’s alleged commingling of funds with Alameda.

Bankman-Fried has pleaded not guilty to the charges against him and maintains his innocence throughout the ongoing trial.

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