The trial has started regarding the FTX bankruptcy, which is among the reasons for the collapse in the cryptocurrency world in 2022. Witnesses are currently being heard in court. Accordingly, as the statements of witnesses come in, important information continues to emerge. The latest information is about the funds belonging to the exchange’s customers. Let’s look at the details.
FTX and use of client funds
Important information is on the agenda regarding some employees of the FTX exchange in the United States. Accordingly, it was revealed that they were aware of a backdoor within the exchange that allowed Alameda Research to withdraw billions of customer funds. This alarming discovery was highlighted in a Wall Street Journal report published Thursday. The employees reported their findings to Nishad Singh, FTX’s director of engineering. But despite this, the problem has not been resolved, according to people familiar with the situation.
The discovery of this problematic backdoor occurred in 2021. The discovery was made by a team working for LedgerX, the crypto derivatives exchange acquired by FTX. Accordingly, the team discovered this harsh reality while investigating the feasibility of using FTX’s primary ticker within the United States.
Serious concerns have been raised
LedgerX’s chief risk officer, Julie Schoening, voiced her concerns about the backdoor to her supervisor, Zach Dexter. Dexter began negotiations with Nishad Singh, a close aide of FTX exchange founder Sam Bankman-Fried.
Unfortunately, the repercussions of voicing these concerns were severe for Julie Schoening. Accordingly, he was dismissed from his position in August 2022. Speculation arose that his insistence on these issues may have played a role in his dismissal. LedgerX’s new owners, Miami International Holdings, conducted an extensive internal investigation. They categorically denied allegations that LedgerX employees were aware of code that allowed Alameda to access FTX client assets. Miami International Holdings flatly denied such allegations in a statement to the WSJ.
The case continues
The revelation came at the start of FTX founder Sam Bankman-Fried’s trial on fraud charges in New York. Bankman-Fried has categorically denied all accusations. In a significant development, the move of Nishad Singh, who has already pleaded guilty, will attract attention. Accordingly, it is expected that he will serve as a witness against his former boss during the trial.
As Kriptokoin.com, the course of the case and where it will go continues to be a matter of curiosity. Because the FTX crash continues to be one of the important developments in the crypto world. On the other hand, the negativities experienced have created serious distrust in the sector. Let’s see what will happen at the end of the process.
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