A few months before FTX collapsed, some of its employees in the United States discovered a so-called backdoor that Alameda Research allegedly used to withdraw billions of dollars in client funds from the cryptocurrency exchange, according to people familiar with the matter.
The employees who made the discovery reported it to the head of their department, who discussed it with a deputy of Sam Bankman-Fried, the founder of FTX, according to some people familiar with the matter.
But the problem was never solved. In the summer of 2022, the team leader who had raised concerns about Alameda's special treatment was fired.
This "back door" features prominently in the allegations against Bankman-Fried. His trial on criminal fraud charges began this week in a federal court in New York. The former head of FTX has pleaded not guilty to all charges.
Prosecutors said Bankman-Fried stole money from FTX customers, in part by secretly ordering the writing of "special function" programs that enabled his cryptocurrency trading firm Alameda to use FTX as a giant slush fund. A line of code buried deep in the FTX code allowed Alameda to have a negative balance of up to $65 billion on the exchange, according to court documents.