Sam Bankman-Fried’s Alameda Research lost at least $190 million due to lax security practices, a former programmer at the trading firm claims.
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
Aditya Barathwaj recalled that after the collapse of FTX and affiliate Alameda, there was a lot of talk about the shortcomings of the risk management structures in both companies. John Ray, who headed the exchange during bankruptcy, called the situation “a complete failure of corporate control.”
“Sam believed that the most important thing for startups like Alameda or FTX was the ability to move very, very quickly. So much so that I decided to ignore the methods software engineers and accounting, which are considered standard in technology companies and financial services firms,” Baratwaj noted.
SBF believed that the single most important thing for a startup like Alameda or FTX was being able to move very, very fast
So much so that he decided to ignore engineering and accounting practices that are considered standard at tech companies and financial services firms
— Adi (e/acc) (@aditya_baradwaj) October 11, 2023
According to him, this approach has indeed allowed development at a “breakneck speed.” But the downside was the security incidents that occurred every few months.
In one case, an Alameda trader was subjected to a phishing attack, as a result of which the firm lost $100 million. While trying to complete a DeFi transaction, the employee clicked on a fake link, which Google search brought up in the top, Baratwaj clarified.
The second incident occurred when the company began farming revenue on a new blockchain of “questionable legitimacy.” As a result, the protocol developers simply misappropriated assets worth more than $40 million, the programmer said.
In another example, Baratwaj talked about an old version of a text file containing Alameda keys being leaked online. As a result, the attacker was able to transfer funds from some exchanges and place “bad orders”, which led to a loss of over $50 million.
Baratwaj emphasized that there were many more similar cases, including before he joined the company. Alameda responded every time, implementing fixes to its risk and safety management systems on the fly.
“Was the trade-off worth it? Sam seemed to think so. Even after all these incidents, no serious attempt was made to change the way we work. It seems that this risk is working… until it has an impact,” the programmer wrote.
Was the tradeoff worth it?
Sam certainly seemed to think so. Even after all these incidents, no serious attempt was made to change the way we operated.
It’s the kind of risk-taking that seems to work… until it doesn’t.
— Adi (e/acc) (@aditya_baradwaj) October 11, 2023
Let us recall that Baratwaj previously revealed what caused the Bitcoin rate to fall by 87% on the Binance.US platform in 2021.
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