During the investigation, FTX employees found Alameda Research’s backdoor, allowing a negative balance of up to $65 billion, months before the exchange collapsed. Among other charges facing FTX founder Sam Bankman-Fried, he was accused of shuffling billions in customer funds from FTX into Alameda Research. Currently, Sam Bankman-Fried’s trial is ongoing and if he’s found guilty of all seven criminal counts and is given the maximum sentence, SBF would face the prospect of 110 years in prison.
According to a report by The Wall Street Journal, some of FTX’s employees found a secret backdoor months before the exchange’s collapse that allowed Alameda Research to withdraw billions in customer funds. The employees flagged their discovery to FTX’s director of engineering Nishad Singh but the problem never got fixed.
LedgerX is a Commodity Futures Trading Commission (CFTC) is a regulated platform for trading Bitcoin and Ether derivatives that was acquired by FTX.US in August 2021. In May 2023, FTX.US was granted court approval to sell LedgerX at a loss of 83%. Then the team, who worked for LedgerX, the crypto derivatives exchange that FTX acquired in 2021, was examining whether the code for FTX’s main exchange could be used in the U.S when they made the discovery.
LedgerX’s chief risk officer Julie Schoening raised the concerns to her boss Zach Dexter, who then discussed it with Nishad Singh, one of FTX founder Sam Bankman-Fried’s closest deputies. Schoening was fired in August 2022, amid suggestions she had irritated her bosses over highlighting the problems.
The news emerges at the start of Bankman-Fried’s trial in New York where he faces charges of wire fraud. On the second day of Sam Bankman-Fried’s trial, the court chose 12 jurors who will ultimately determine Bankman-Fried’s fate. If he’s found guilty of all charges, Sam Bankman-Fried could spend the rest of his life in prison.