A former Alameda engineer, Aditya Baradwaj has revealed that Alameda Research lost over $190 million due to scams that could have been avoided. The scams appear to have been the result of the lack of adequate safeguards and risk management practices at Alameda. This is another example of the oversight that led to the eventual collapse of Alameda and its sister company, FTX.”
According to Baradwaj, the crypto trading firm suffered a series of major security incidents every few months due to a lack of oversight and risk management. Aditya Baradwaj, who wrote a post on X, claimed that the firm’s ‘breathtaking’ agility was a double-edged sword, leading to frequent security incidents.
Baradwaj post listed some of the company’s most significant exploits, including one instance in which a trader at Alameda Research lost over $100 million after clicking on a malicious link at the top of Google Search results, to attempt to sign off on a decentralized finance transaction.
In another example, he revealed that Alameda was yield farming on a new blockchain that turned out to be dubious. The firm ended up losing over $40 million in this venture.
In addition, Baradwaj claimed that FTX founder Sam Bankman-Fried encouraged the company to prioritize speed over safety, leading to Alameda routinely ignoring industry-standard engineering and accounting practices which may have resulted in most of their losses.
“Blockchain private keys and exchange API keys were stored in plaintext in a file that several employees could access.”
An old version of the firm’s plaintext files containing keys to the company’s wallets were leaked, leading to most of their security incidents that cost the firm millions afterward.
The attacker exploited the company’s funds and transferred funds out of “some exchanges”. Baradwaj mentioned that the incurred losses piled up to more than $50 million after the incident.
The ex-Alameda engineer acknowledged that Alameda had a history of similar incidents that he did not know about firsthand. However, the fact that these incidents occurred before he joined the company does not excuse the firm’s lack of security standards.
Since November 2022, Baradwaj has publicly discussed the events surrounding the collapse of Alameda and FTX, particularly the role of Sam Bankman-Fried and his ideology of Effective Altruism. Baradwaj argues that Bankman-Fried’s adherence to this philosophy led to some of his ‘ridiculous’ decisions.
The revelations of former Alameda employees come at a time when the trial of Sam Bankman-Fried is in full swing. Caroline Ellison, former CEO of Alameda, has testified about the close relationship between Alameda and FTX. She has also shed light on the alleged commingling of funds between the two companies.
Bankman-Fried has pleaded not guilty to the charge and continues to deny the charges brought against him.
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