Cryptocurrency

Alameda had $65B artificial credit line, 43,000% more than FTX market makers

Hull Invest

Recent court filings in FTX’s bankruptcy case reveal a “$65 billion backdoor” between Alameda and FTX. The filing includes materials detailing the current findings of the FTX Group’s funding.

The deck contains a diagram of the FTX liquidation process and a code sample allegedly representing the Alameda backdoor.

The customer was auto-cleared under the margin terms offered by FTX, but Alameda is said to have been exempt from auto-liquidation. Additionally, Alameda was not required to present real collateral for the transaction. Instead, it was allowed to trade with “artificial capital.” This crime alone, if proven true in court, would make him one of the most significant examples of fraud in history.

Alameda back door
Source: FTX Case Docket

Even worse, the deck also confirms the existence of a “God Mode” where a small group of individuals were able to move funds from the exchange. An example code for each group is provided via a specific “account setting code” in the exchange’s codebase.

ftx god mode
Source: FTX Docket

With 7 million standard customer access codes in place, you can’t borrow if your balance is zero. The company’s market makers had credit limits of up to $150 million. At first glance, 4,000 markets had credit limits up to $1 million, and a further 41 markets between He $1 million and He $150 million.

But Alameda had access to $65 billion. This is approximately 43,000% higher than the maximum credit limit granted to other market makers. Additionally, Alameda’s line of credit was classified as part of a “God Mode” that granted special privileges. This facility allowed Alameda to withdraw cash or cryptocurrency even with negative balances. All of these transactions were recorded on FTX’s Amazon AWS servers.

In addition, the “small group of individuals” had the ability to transfer funds “away from the AWS Ledger”, allowing them to move funds without a trace. These transfers were available for all cryptocurrencies held by FTX, but not cash. A user with this level of clearance had access to a particular wallet’s private key and could initiate her transactions directly on-chain.

A flowchart of FTX’s AWS money flow is also shown within the deck. The chart below shows how money flows to multiple parties between FTX and FTX.US.

ftx aws
Source: FTX Docket

Speaking to the House of Representatives in December, FTX CEO John Ray III described FTX’s financial record as one of the worst of his career, citing a mix of assets and a lack of internal controls. , mentioned unacceptable management practices.Control

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