Your Honor, IDK
Just days after the trial of ex-FTX CEO Sam Bankman-Fried began in early October, a bombshell Wall Street Journal report revealed that there was a mysterious "back door" in FTX's code allowing Alameda Research, the crypto exchange's closely-tied hedge fund, special access to FTX customer funds.
"Ultimately, I had authority," Bankman-Fried admitted, as quoted by CNN. But "on the other hand, I wasn't much of a programmer."
"I wasn't entirely sure what was happening," he added.
There you have it, folks! As long as you have no idea what's going on beneath you while you're in charge, you're free and clear of any responsibility — an excuse we're simply not buying.
Back Door Blues
According to the allegations against him, it's likely that Bankman-Fried was aware of the situation.
Back in 2021, FTX acquired a smaller crypto company called LedgerX. Somewhere along the way, LedgerX engineers discovered several problematic areas in FTX code where the crypto exchange seemingly mismanaged risk and account liquidations.
Unclear on what he and other engineers had discovered, a LedgerX employee named Jim Outen informed his boss, LedgerX chief risk officer Julie Schoening, of the matter, reportedly telling her in a message that "there are currently a few places in the… code base where Alameda gets special treatment in one way or another."
Schoening decided to run the inconsistencies further up the flag pole, and eventually, to former FTX engineering director and close Bankman-Fried pal Nishad Singh. According to the WSJ, Singh deleted the section entirely shortly thereafter. In August, Schoening was fired.
In short, SBF might not have actually been the one to write the code. But he was still in charge as the CEO, and given his involvement with both companies, among other allegations of doctored Alameda balance sheets and misappropriated FTX customer funds, it's hard to believe he didn't have a grasp on what that "back door" was for — and why, for that matter, it was wrong.
More on SBF's go at the witness stand: Sam Bankman-Fried Admits He Only "Skimmed" FTX's Terms of Service