FTX Chief Engineer Secretly Changed FTX Code in Mid-2020, Keeping Alameda From Auto-Liquidation Continuing to Borrow Funds

According to Reuters, in mid-2020, the chief engineer of FTX made secret changes to the software of the cryptocurrency exchange. After the code adjustment, Alameda Research, a hedge fund owned by FTX founder Sam Bankman-Fried (SBF), can be exempted from automatic liquidation. That is, even if Alameda loses too much and borrows funds, it can avoid the automatic sale of Alameda's assets. The waiver allows Alameda to continue borrowing from FTX regardless of the value of the collateral securing those loans. The SEC said the billions FTX secretly lent to Alameda over the next two years came not from its own reserves but from deposits from other FTX clients.