A recent report shows that the bankrupt crypto exchange, FTX, stored private keys to its customers’ wallets on Amazon Web Services (AWS). This information came from the first interim report of the current FTX CEO published on April 9.
The FTX crypto exchange collapsed within 10 days in November 2022. Its crash caused massive losses for investors at the time. After it filed for bankruptcy, investigations revealed mismanagement of funds and other business malpractices as the causes of its failure.
FTX Stored Crypto Wallet Private Keys On AWS
A recently published court document has revealed the findings of the current CEO of FTX, John J. Ray III, about the issues with FTX’s management. In the report, CEO Ray explained how the exchange poorly carried out its control processes and record keeping.
The document showed the negative dealings of the crypto exchange, which became so prominent that it drew the attention of certain regulatory bodies. It further revealed that poor control and lack of record-keeping were more visible in finance accounting, management, governance, and information.
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It also highlighted the necessity for a company that handles the funds of investors and customers to be apt in keeping data sources, identifiable records, and processes. Notably, these pieces of information are useful in protecting and identifying the total funds of the platform, but the FTX Group neglected them.
Another notable area the court filing disclosed was the exchange stored private keys to its users’ crypto wallets on Amazon’s cloud computing platform AWS. The revelation has raised concerns about the security of FTX’s users’ funds, as storing private keys on a third-party platform like AWS increases the risk of hacks and breaches.
Private keys are essential passwords allowing users to access their cryptocurrency holdings and transact. Any compromise of these keys could result in the loss of funds if it falls into the hands of bad actors.
FTX Is Fully Aware Of Its Action
The report stated that FTX Group was fully aware of how a transparent digital asset exchange should function. This was why the executives made up lies when asked how far it had implemented cold storage.
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As such, the court has summoned the FTX executives for the deliberately wrong action and response they provided about the safety and storage of crypto assets.
This news comes when the cryptocurrency industry is already facing heightened regulatory scrutiny. It remains to be seen how this revelation will further impact FTX’s reputation and whether the exchange executives will take steps to defend its actions.
Featured image from Pixabay and chart from Tradingview.com