FTX CEO Slams Former Management for Storing Private Keys on Amazon Web Services
On Monday, FTX CEO John Ray III submitted a filing to the court, claiming that the now-bankrupt exchange kept the majority of its digital assets in hot wallets and stored their private keys in Amazon Web Services (AWB). This move did not sit well with him, calling it a poor risk management practice.
Ray had previously called out the former FTX management for conducting accounting using QuickBooks. At the time, he said QuickBooks was a very good tool but not for a company worth billions of dollars.
Now yesterday, the CEO suggested that the use of Amazon Web Services to keep private keys could have been the reason behind the unauthorized transactions that saw over $430 million in customer funds stolen from the company’s wallets a day after filing for bankruptcy.
FTX filed for bankruptcy protection in November after it failed to honor withdrawals due to liquidity issues. It is alleged that the former CEO, Sam Bankman-Fried, along with other executives, misappropriated customer funds and used them to place risky trades through the FTX sister company Alameda Research.
Bankman-Fried is now facing several charges, including money laundering and wire fraud. The other accused have already pleaded guilty to the charges brought against them.
Ray’s Accusations Against Former FTX Leadership
Monday’s court filing by Ray sheds more light on how the ex-leadership handled FTX crypto wallets. In the filing, he argued that Amazon Web Services and its competitors are all vulnerable to attacks. Ray explained that AWS had been targeted for the last five years, with data belonging to millions of Instagram users, voters, shoppers, bank customers, and travelers exposed.
He continued to say that the FTX ex-leadership knew how a crypto exchange must be operated but chose to ignore. Instead, it lied about using cold storage when external parties asked how FTX crypto assets were stored. Ray evidenced his statement by pointing to a tweet by Bankman-Fried claiming that the exchange used both cold wallets and hot wallets.
Ray, however, said Bankman-Fried and his team never used offline, geographically distributed, and encrypted wallets to secure the firm’s digital assets. The CEO included a message from a top employee of derivatives exchange LedgerX, which is owned by FTX although not involved in the bankruptcy proceedings, urging FTX to consider using cold wallet storage. However, the company never bothered.
How Crypto Wallets Function
Crypto wallets usually use a linked set of private and public keys to approve transactions. In simple terms, a public key can be described as an identifier displayed in the ‘to’ and ‘from’ fields on blockchain explorers such as Etherscan. Everyone is able to see the public key of any wallet, but only the wallet’s owner, who keeps the corresponding private key, has the power to access funds and initiate transactions.
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