FTX Employees Knew About the Backdoor to Alameda Months Before Collapse: WSJ

Some of FTX's employees in the U.S. knew about the backdoor in the exchange that allowed Alameda Research to withdraw billions in customer funds, according to a Wall Street Journal report on Thursday.

The employees flagged their discovery to FTX's director of engineering Nishad Singh but the problem never got fixed, the WSJ reported, citing people familiar with the matter.

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.

LedgerX's chief risk officer Julie Schoening raised the concerns to her boss Zach Dexter, who then discussed it with Nishad Singh, one of FTX founder Sam Bankman-Fried's closest deputies.

Schoening was fired in August 2022, amid suggestions she had irritated her bosses over highlighting the problems.

“Following a thorough internal investigation, LedgerX has found no evidence that any of its employees were aware of any reported code enabling Alameda to take FTX customer assets, and firmly denies any contrary allegation," Miami International Holdings, LedgerX's new owners, said in a statement to the WSJ.

The news emerges at the start of Bankman-Fried's trial in New York where he faces charges of wire fraud. He has pled not guilty to all charges. Singh, who pleaded guilty, is expected to testify against his former boss.

Neither FTX nor LedgerX immediately responded to CoinDesk's request for comment.

Read More: Unpacking the First Day of Sam Bankman-Fried's Actual Trial