As the collapse of FTX approached, some employees discovered a backdoor in the exchange’s code that allowed Alameda Research, a subsidiary trading firm, to have a negative balance of $65 billion.
According to sources cited by WSJ, the team reported the issue to management, who discussed it with an assistant to FTX founder Sam Bankman-Fried.
However, the backdoor was not removed and one of the managers who raised concerns was fired.
It is expected that the alleged preferential treatment for Alameda will be discussed during SBF’s ongoing trial, where prosecutors are accusing him of stealing client funds through the use of “special functions” in the software.
These functions allegedly allowed Alameda to use the exchange as a lending fund.
