The second-largest global exchange, FTX, reportedly had security that left a lot to be desired, according to new revelations. The new CEO of the exchange, John Ray III, who took charge of the bankruptcy process, affirms that the private keys of customer accounts were stored in the clear, and that access to accounts was not secure. Update on the subject.
FTX’s lack of security protocols
Since the beginnings of the FTX affair, we learn that the internal processes of the company were far from being as precise as one could imagine. Ephemeral messages on Signal, concentration of powers and blocked communication: the platform seemed to have improvised some key elements of its operation. And it would have gone it seems up to the security of user accounts.
Current CEO John Ray III, who was put in place to oversee the company’s bankruptcy, gave testimony to the US House of Representatives Financial Services Committee. It details of the “unacceptable managerial practices» and a lack of employee access control. With notably :
“The storage of certain private keys that allowed access to hundreds of millions of dollars in crypto assets no security checks or encryption.»
Furthermore, the hierarchy of FTX would have had free access to client accounts without “security controls that would have prevented them from redirecting those assets“. It is occasionally recalled that Sam Bankman-Fried admitted to diverting funds from FTX users to Alameda Research. This is also a problem pointed out by John Ray III, who reveals that Alameda Research had the ability to borrow from the FTX group “without effective limit“.
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No risk management, frenzied spending
The continuation of FTX’s list of questionable practices is equally damning. The testimony of John Ray III tells us that the FTX group did not clearly document its investments, that financial audits were missing, and that there was no risk management department strictly speaking. When you consider the size of FTX at the height of its glory – the company was worth 32 billion dollars – you can only be surprised by these serious shortcomings.
Furthermore, the testimony underlines that the investments of FTX, which had acquired a large number of companies in 2021 and 2022, turned out to be unprofitable :
“FTX Group went on a spending spree […] during which approximately $5 billion was spent buying up a myriad of businesses and investments, which for some are only worth a fraction of what was paid.»
The deluge of information that we have received in recent weeks on the FTX affair can make you dizzy. Considered particularly solid within the crypto community, the company nevertheless seems to have been built around a blatant lack of reliable processes. This is what Sam Bankman-Fried, who was recently arrested, will also have to answer.
👉 More on this – Sam Bankman-Fried has been arrested and should be extradited to the United States
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Source: House Financial Services Committee, press release
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Journalist at Cryptoast, I fell into the pot of cryptocurrencies a few years ago. I am passionate about the innovative technologies that stem from the blockchain and I like to find the most crispy information to share with you.
Marine Debelloir
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