Exclusive: How a secret software change allowed FTX to use client money
In congressional testimony on May 12, Bankman-Fried called FTX’s software “safe, tested and conservative.”
“By quickly unwinding the riskiest, most undercollateralized positions, the risk engine prevents build-up of credit risk that could otherwise cascade beyond the platform, resulting in contagion,” Bankman-Fried testified.
He did not tell lawmakers about the software change to exempt Alameda. Indeed, he told investors that Alameda received no preferential treatment from FTX, the SEC complaint said.
Bankman-Fried had directed subordinates to update the software in mid-2020 to enable Alameda to maintain a negative balance on its account, the SEC complaint said. No other customer account at Alameda was allowed to do so, the complaint added. This would allow Alameda to keep borrowing more FTX funds without the need to provide more collateral.
