New Report Alleges FTX Executives Were Well Aware Of The Alameda Problem, How Much Did They Know?

October 5, 2023 11:04 am Comments

As Sam Bankman-Fried’s trial gets underway, new revelations are coming to light.

According to a recent Wall Street Journal article, employees at FTX stumbled upon the secret ‘backdoor’ between the centralized crypto exchange and its trading arm—Alameda Research.

Upon discovering the secret backchannel, several employees relayed the problem to their managers and higher-level executives at the company.

One of these concerned officers was Julie Schoening, LedgerX’s Chief Risk Officer. Schoening reportedly told her boss, who passed the concerns on to higher-level executives at the company—namely Nishad Singh.

Sources say those concerns were never addressed, and Schoening was fired shortly thereafter; the implication being that she was fired due to her complaints.

The Wall Street Journal broke the story: “Months before FTX’s collapse, some employees discovered the “backdoor” that Alameda Research allegedly used to withdraw billions of customer funds from the cryptocurrency exchange, sources say.”

One of the writer’s of the Wall Street Journal article, Alexander Osipovich, summarized the story: “In spring 2022, some US employees at FTX made a troubling discovery: Alameda Research was getting special treatment on the exchange. The problem never got fixed, and the head of the team was fired a few months later.”

CoinDesk explained:

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.

Satoshi Talks provided this troubling detail about the financial relationship between the two entities: “The Crypto exchange allowed Alameda to have a negative balance of up to $65B, prosecutors say.”

Jim Greco had this to say: “Since the beginning I’ve believed that every single Alameda employee and many more FTX employees knew about the fraud. It would be impossible for it to only be the group of 4 charged.”

Coin Telegraph featured this related report:

Nansen analysts revealed that they had observed dubious on-chain interactions between FTX and Alameda before these reports came to light. Between Sept. 28 and Nov. 1, Alameda sent $4.1 billion FTT tokens to FTX and several continuous transfers of United States dollar-pegged stablecoins amounting to $388 million.

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