• FTX recently filed for bankruptcy, revealing a „$65 billion backdoor“ between Alameda and FTX.
• This backdoor allowed for Alameda to trade with „artificial capital“ without posting any real collateral for trades.
• A ‚god mode‘ was also discovered, allowing a small group of individuals to move funds off the exchange without consequence.
The recent bankruptcy filing of FTX has revealed the existence of a „$65 billion backdoor“ between Alameda and FTX. This backdoor allowed for Alameda to trade with „artificial capital“ without posting any real collateral for trades. Additionally, a ‚god mode‘ was discovered, allowing a small group of individuals to move funds off the exchange without consequence.
The news of the backdoor and ‚god mode‘ was released in a recent court filing detailing the current findings relative to FTX group funds. The filing included a deck illustrating the liquidation process alongside a code sample that allegedly represented the Alameda backdoor. The deck also confirmed the existence of a ‚god mode‘ by which a small group of individuals were able to move funds off the exchange.
The code included in the filing showed that while customers were auto-liquidated based on the margin terms offered by FTX, Alameda was allegedly exempt from auto-liquidation. Examples of the code for each group were illustrated via a specific „account setting code“ in the exchange’s codebase. Seven million standard customers‘ access codes were set so they could not borrow if their balances were zero. Market makers for the company had credit limits of up to $150 million. Seemingly, 4,000 market markets had credit limits up to $1 million, with a further 41 between them having access to up to $65 billion.
This news comes as a shock to many in the crypto community, as it’s one of the largest examples of fraud ever seen. The sheer magnitude of the backdoor and the ability of a select few to move funds off the exchange with impunity is concerning, and has left many questioning the legitimacy of the entire cryptocurrency market.
It will be interesting to see how this story plays out in the court case, and what, if any, repercussions the individuals involved will face. In the meantime, it’s important to remember that while cryptocurrency can be a great investment, it’s important to be aware of the risks involved and to exercise caution when dealing with exchanges.