A former engineer at Alameda Research, the sister hedge fund of FTX, alleges that the firm incurred losses exceeding $190 million due to preventable scams. Aditya Baradwaj, the whistleblower, emphasized the frequent “significant security incidents” resulting from the firm’s fast-paced operations. These allegations were documented in a post titled “The Hacks” on the platform X.

Baradwaj reported a significant incident where a trader at Alameda lost more than $100 million of the company’s funds by clicking on a malicious link that appeared as a top result in a Google search. The trader intended to authorize a decentralized finance transaction.

Inside Alameda’s Risky Practices

Baradwaj exposed that Alameda engaged in yield farming on a new blockchain platform of dubious legitimacy, eventually resulting in losses exceeding $40 million.

PART 3: THE HACKS

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How poor security practices at Alameda Research caused the company to lose hundreds of millions of dollars

(1/n) 🧵#SBF #FTX pic.twitter.com/RFocE7w3Gx

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

Baradwaj stated that Sam Bankman-Fried, the founder of FTX, believed the ability to move quickly was the “single most important thing” for both Alameda and FTX. This philosophy led Alameda to frequently disregard industry-standard engineering and accounting practices followed by similar firms.

Baradwaj detailed that this approach resulted in minimal code testing and incomplete balance accounting. Safety checks for trading were only implemented when deemed necessary. This lax approach led to a significant security incident where an outdated version of plaintext files containing keys to Alameda’s wallets was leaked.

The attacker then moved funds out of several exchanges, resulting in losses exceeding $50 million. Baradwaj mentioned that Alameda experienced numerous incidents similar to those he described, although many occurred prior to his tenure at the company.

Since the collapse of Alameda and FTX in November of the previous year, the former engineer has publicly discussed the various shortcomings of both entities. He has explained how the founder, Sam Bankman-Fried, justified many of his actions, which Baradwaj deemed “ridiculous,” under the guise of an idealistic philosophy known as Effective Altruism.

SBF’s Inner Workings Exposed in Trial

Baradwaj’s revelations coincide with former Alameda CEO Caroline Ellison testifying against Bankman-Fried on the sixth day of his fraud trial. In the preceding days, several former colleagues, including Adam Yedidia and Gary Wang, provided substantial new evidence against the former billionaire.

Wang openly admitted to coding specific algorithms that enabled Alameda to trade with a nearly limitless credit line from FTX. Meanwhile, Caroline Ellison has provided detailed explanations regarding the alleged mingling of funds between FTX and Alameda.

Meanwhile, Bankman-Fried has pleaded not guilty to the charges against him and continues asserting his innocence throughout the ongoing trial.