
Prosecutors allege that Alameda Research, a crypto hedge fund founded by FTX's Sam Bankman-Fried, was helped by a back door in the computer code.
As early as May 2022, FTX employees in the US discovered this back door as early as May 2022 - six months before the collapse of the company which resulted in its bankruptcy.
The crypto exchange's regular users went into the red, their holdings were sold off by FTX. Alameda had the ability to lose money, but was exempted from the normal auto-liquidation procedures, a source familiar with the matter told the WSJ.
There were a few places in the code base where Alameda got special treatment in 'one way or another,' said Jim Outen, the chief economist at LedgerX, which FTX acquired in August 2021, according to the report.
Schonening was fired in early August 2022, months after raising these concerns with LedgerX CEO Zach Dexter.
Dexter has reportedly raised the issue with Nishad Singh. He believed the problem was resolved by Singh's removal of a section of the code.
LedgerX has been acquired by Miami International Holdings in the past year.
The company did not immediately respond to a DL News request for comment outside of office hours.