A change in software allowed FTX to use customers' money

He modified the code to exempt Alameda Research, a hedge fund owned by FTX founder Sam Bankman-Fried, from a feature on the trading platform that would have automatically sold Alameda's assets if it lost too much borrowed money.

In a note explaining the change, engineer Nishad Singh stressed that FTX should never sell Alameda positions. "Be very careful not to liquidate," Singh wrote in the commentary for the platform's code, which he showed helped the author. Reuters has reviewed the code base, which has not previously been reported. exemption allowed Alameda to continue to borrow funds from FTX, regardless of the value of the collateral securing those loans. The U.S. Securities and Exchange Commission, which charged Bankman-Fried with fraud on Tuesday. Moreover, the billions of dollars that FTX secretly lent to Alameda over the next two years did not come from its own reserves, but rather from the deposits of other FTX clients, the SEC said.

The SEC and a spokesperson for Bankman-Fried declined to comment for this story. Singh did not respond to multiple requests for comment.

The regulator, who qualified the The "house of cards" exchange alleged that Bankman-Fried concealed that FTX was diverting client funds to Alameda in order to make undisclosed venture capital investments, luxury real estate purchases and political donations. The Futures Trading Commission has also filed separate criminal and civil charges, respectively. as well as previously undeclared FTX documents seen by Reuters and three people familiar with the crypto exchange provide new insights into how Bankman-Fried dipped into client funds and spent billions more than FTX was earning without the knowledge of investors, its customers and most employees.

The police of the Bahamas, where FTX was based, arrested Bankman-Fried on Monday evening, causing a stunning drop in thanks for the 30-year-old former billionaire. His business collapsed in November after users rushed to withdraw their deposits and investors shunned his demands for additional funding. FTX declared bankruptcy on November 11 and Bankman-Fried resigned as CEO. >Bankman-Fried apologized to customers, but said he personally did not believe he had criminal liability.

The self-liq...