Alameda Research lost $190 million to scammers and 'questionable' blockchains: Whistleblower

By: Bharggavi Ssayee

October 12, 2023 7:23 AM

Aditya Baradwaj, a former Alameda Research engineer, claims that one trader lost more than $100 million after clicking on a fraudulent link.

According to a former engineer at the firm, FTX's sister hedge fund, Alameda Research, lost no less than $190 million of its trading capital owing to arguably avoidable scams.

According to a post by former Alameda Research engineer turned whistleblower Aditya Baradwaj on X titled "The Hacks," published on October 12, the company's "breathtaking" agility resulted in "major security incidents" as frequently as every few months.

In one of the largest exploits, Baradwaj alleges a trader at Alameda once lost more than $100 million of the firm's capital after opening a malicious link promoted to the top of Google Search results.

According to Baradwaj, the trader was attempting to sign off on a decentralized financing transaction.

In another case, he claimed that Alameda had lost over $40 million because it engaged in "yield farming" on a new blockchain of "questionable legitimacy."

According to Baradwaj, FTX founder Sam Bankman-Fried believed that Alameda and FTX's "single most important thing" was their capacity to react swiftly. According to him, this ethos led to Alameda habitually ignoring industry-standard technical and accounting norms for such enterprises.

"That meant there was hardly any time spent on testing the code, and the books were left unbalanced. Trading safety checks would be added on an as-needed basis," stated Baradwaj.

"The private keys for the blockchain and the API keys for the exchange were kept in a file that numerous workers could view in plaintext."

When an old version of the plaintext documents containing keys to Alameda's wallets was leaked, this resulted in another security breach that cost the company millions of dollars.

According to Baradwaj, the attacker transferred funds out of "some exchanges," and the losses totaled more than $50 million.

He claimed that Alameda had "many more" occurrences of the same magnitude as the ones he'd mentioned, but that many of these occurred before his arrival at the company.

On the sixth day of Bankman-Fried's fraud trial, former Alameda CEO Caroline Ellison took the stand to testify against him. Several former colleagues, including Adam Yedidia and Gary Wang, have presented new evidence against the former billionaire in recent days.

Wang has admitted to designing a particular code that allowed Alameda to trade with an almost limitless line of credit from FTX, and Caroline Ellison has detailed the exact specifics of FTX's alleged financial commingling with Alameda.

Bankman-Fried has pled not guilty to the allegations leveled against him and maintains his innocence throughout the trial.