The Wall Street Journal has confirmed that Alameda Research used a secret backdoor in FTX, the defunct exchange, to withdraw billions of dollars of customer funds, and some of the exchange’s U.S.-based employees were aware of it.
In spring 2022, a group of employees at LedgerX discovered a backdoor in the system that allowed Alameda Research, a third-party company, to transfer customer funds.
Although concerns were raised about the “special code,” it was not addressed, and a senior manager was later fired.
FTX staff became aware of the situation after LedgerX employees reported the “special features” they had uncovered.
Once the issue was brought to the attention of LedgerX’s chief risk officer, Julie Schoening, she notified her boss, Zach Dexter, who discussed the backdoor with Nishad Singh, the co-lead engineer of FTX Trading Ltd.
Details of those discussions remain unclear, but sources say Dexter was convinced that the issue was resolved after Singh removed the code.
A spokesperson for Miami International Holdings said in a written statement that after a “thorough internal investigation,” LedgerX has found “no evidence that any of its employees were aware of any reported code enabling Alameda Research to take FTX customer assets, and firmly denies any contrary allegation.”
In August 2022, Schoening was fired allegedly because she identified problems with FTX’s risk management.
The two reportedly agreed to a $5 million settlement. However, the paperwork was never finalized due to the FTX collapse in November 2022.