Big-name dealers should make sure there are rigorous security standards and precautions in place to guard against hacking and phishing attempts, both of which are commonplace in the crypto sector.Not Alameda Research though.According to recent allegations made by ex-employee Aditya Baradwaj, the troubled Sam Bankman-Fried managed trading company lost at least $200 million to a number of widespread attack vectors that run rampant in the industry.
“SBF believed that the single most important thing for a startup like Alameda or FTX was being able to move very, very fast,” Baradwaj posted on social app X earlier today. “This meant virtually no code testing and incomplete balance accounting.”
“Blockchain private keys and exchange API keys were stored in plaintext in a file that several employees could access,” Baradwaj added.
Through yield farming on a “new blockchain of questionable legitimacy,” where the network’s developer held the company’s assets hostage, Alameda lost $40 million.Negotiations continued for several months, but it’s not known if the money was ultimately recouped.Supplying tokens to a blockchain-based financial application is known as “yield farming,” which is a common method of earning rewards.However, applications created by malevolent parties may prevent withdrawals once they have attracted a sizeable quantity of capital, which would result in losses.
An additional security blunder happened when private keys or a password to a secure crypto storage were disclosed, “likely by a former employee.”Alameda lost $50,000,000 in various tokens as a result of the attack.The loss of $100 million caused by Alameda being duped into clicking a phony phishing link in a Google Ad was the worst blow, though.The phony site had risen to the top of Google searches and was probably imitating a DeFi protocol.According to Baradwaj, there have been numerous security errors at Alameda, and these occurrences are just a fraction of them.
According to Michael Lewis’s recently published history of Bankman-Fried, the company’s founder lost at least $500,000 a day in the early days and once lost XRP tokens worth more than $4 million.
These thefts demonstrate both Alameda’s deficient security procedures and the apparent negligence of its staff.Every one of these attacks could have been prevented if private keys were kept more securely and DeFi transactions were thoroughly examined before shifting millions of dollars in funds.Such losses did not just affect Alameda.Crypto exchange FTX, another business owned by Bankman-Fried, suffered a $400 million loss shortly after filing for bankruptcy in November 2022.Poor private key management, which could have cost the company more than $1 billion, has been identified as the attack’s root cause.