Clients’ funds were used by changing the software of the bankrupt crypto exchange FTX last month. The exchange’s chief engineer changed the code to allow Alameda Research, the firm of FTX founder Sam Bankman Fried, to sell its assets even if it took a loss on the borrowed money.
Giving information about the change, Engineer Nishad Singh had said that exchange should never sell Alameda Research positions. Reuters has looked at the code base. This exemption allowed the firm to borrow funds from FTX regardless of the value of the collateral. This change in code has been caught by the US Securities and Exchange Commission (SEC). The SEC stated that this would allow Alameda Research without limit credit was being given Billions of dollars were loaned to the firm in secret over two years.
A spokeswoman for the SEC and Sam declined to comment. Sam was arrested in the Bahamas on Monday at the request of the US government. Criminal charges have been filed against Sam in the US. Authorities in the US and the Bahamas launched an investigation against Sam after the exchange went bankrupt.
The second largest international crypto exchange FTX filed for bankruptcy early last month after running short of funds. Bahamas Attorney General Ryan Pinder said that Sam would be extradited after receiving information about the charges against him and making a formal request to the US authorities. FTX is headquartered in the Bahamas and since its bankruptcy, Sam has made the Bahamas his base. His spokesperson did not comment on this. They have the right to oppose their extradition. This may delay extradition. Sam, one of America’s richest men, has an estimated net worth of more than $30 billion. Troubles for the exchange started last month when its balance sheet was questioned. After this, the customers of the exchange tried to withdraw billions of dollars from it, but most of them could not take their money.
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