{"id":155419,"date":"2023-04-13T23:46:59","date_gmt":"2023-04-13T23:46:59","guid":{"rendered":"https:\/\/culture.org\/?p=155419"},"modified":"2023-04-13T23:46:59","modified_gmt":"2023-04-13T23:46:59","slug":"ftxs-downfall-a-shocking-tale-of-cybersecurity-chaos-and-reckless-mismanagement","status":"publish","type":"post","link":"https:\/\/culture.org\/special-interest\/ftxs-downfall-a-shocking-tale-of-cybersecurity-chaos-and-reckless-mismanagement\/","title":{"rendered":"FTX&#8217;s Downfall: A Shocking Tale of Cybersecurity Chaos and Reckless Mismanagement"},"content":{"rendered":"           <!--  <script type=\"text\/javascript\">\r\n                jQuery(document).ready(function() {\r\n                    jQuery(\".key-accordion-item .key-menu\").on(\"click\", function() {\r\n                        if (jQuery(this).parent().hasClass(\"active\")) {\r\n                            jQuery(this).next().slideUp();\r\n                            jQuery(this).parent().removeClass(\"active\");\r\n                        } else {\r\n                            jQuery(\".key-content\").slideUp();\r\n                            jQuery(\".key-accordion-item\").removeClass(\"active\");\r\n                            jQuery(this).parent().addClass(\"active\");\r\n                            jQuery(this).next().slideDown();\r\n                        }\r\n                    });\r\n                })\r\n            <\/script> -->\r\n\r\n\r\n            <!-- start html -->\r\n\r\n            <div class=\"news-key-takeaway-wapper\">\r\n                                <span style=\"background-color:#39b54a;\">Key Takeaways<\/span>\r\n                <ul class=\"news-key-nbox\" style=\"border-color:#39b54a;background-color:rgba(57, 181, 74, 0.1);\">\r\n                                                        <li>The recent bankruptcy report on FTX, a once highly regarded crypto exchange, reveals shocking cybersecurity negligence and mismanagement by the company's leadership.<\/li>\r\n                                                                    <li>FTX failed to allocate the necessary resources and personnel to ensure the security of its customers' assets, with no dedicated cybersecurity staff and a lack of expertise in dealing with cyber threats.<\/li>\r\n                                                                    <li>FTX also failed to store customers' crypto assets securely, relying on hot wallets instead of industry-standard cold storage, and misled third parties about their use of cold storage.<\/li>\r\n                                                                    <li>FTX mishandled sensitive client information, storing cryptographic keys and seed phrases in unencrypted plaintext documents, and failed to implement widely accepted identity and access management controls.<\/li>\r\n                                                                    <li>FTX's collapse is attributed to the \"hubris, incompetence, and greed\" of its founder and key executives, who neglected proper oversight and risk management and used customer assets to fund high-risk bets. Employees who voiced concerns about the company's practices faced retaliation.<\/li>\r\n                                                <\/ul>\r\n            <\/div>\r\n            \n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">The recent bankruptcy report on the once highly regarded crypto exchange, FTX, provides an in-depth look at the company&#8217;s shockingly poor cybersecurity practices.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Despite being responsible for protecting tens of billions of dollars in crypto assets, FTX failed to allocate the necessary resources and personnel to ensure the security of its customers&#8217; assets.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">One of the most alarming findings in the report was the complete absence of a dedicated cybersecurity staff at FTX.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The company opted to rely on two software developers with no formal training in security, rather than hiring a Chief Information Security Officer (CISO) and a team of experts to manage its risks.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This lack of expertise and established processes for dealing with cyber threats left the company highly vulnerable to attacks.<\/span><\/p>\n<h2><strong>Asset Management and Storage Failures<\/strong><\/h2>\n<p><span style=\"font-weight: 400;\">The report also highlights FTX&#8217;s failure to store customers&#8217; crypto assets securely.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The company did not use cold storage, an offline hardware-based storage solution considered the industry standard for securing digital assets.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Instead, FTX chose to store virtually all customer assets in hot wallets, which are software-based accounts connected to the internet and significantly more susceptible to hacking.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">FTX executives were found to have misled third parties about their use of cold storage, claiming that they followed industry best practices.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In reality, however, the company only used cold storage in Japan, where they were legally required to do so.<\/span><\/p>\n<h2><strong>Unencrypted Keys and Inadequate Authentication Measures<\/strong><\/h2>\n<p><span style=\"font-weight: 400;\">Another concerning finding in the report was FTX&#8217;s mishandling of sensitive client information. The company stored cryptographic keys and seed phrases in unencrypted plaintext documents, making them easily accessible by staff.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This lack of proper security measures exposed wallets containing tens of millions of dollars to potential theft.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In addition to these glaring security lapses, FTX failed to implement widely accepted identity and access management controls, such as multi-factor authentication (MFA) and single-sign-on services.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This lack of basic security measures further exacerbated the company&#8217;s vulnerability to cyber threats.<\/span><\/p>\n<h2>                        <!-- <div class=\"container-c\"> -->\r\n                        <!-- <div class=\"row justify-content-between\"> -->\r\n                        <!-- <div class=\"col-post-800\"> -->\r\n                        <!-- start html -->\r\n                        <div class=\"blockquote-wapper\">\r\n                            <div>\r\n                                <span class=\"text_quot\">\r\n                                    <p>The company&#8217;s collapse is attributed to the &#8220;hubris, incompetence, and greed&#8221; of its founder, Sam Bankman-Fried, and key executives Nishad Singh and Gary Wang.<\/p>\n                                <\/span>\r\n\r\n                                <div class=\"quot_icon\">\r\n                                    <img decoding=\"async\" src=\"https:\/\/culture.org\/wp-content\/themes\/culture\/icons\/i_quot.svg\" type=\"image\/svg+xml\">\r\n                                <\/div>\r\n                            <\/div>\r\n\r\n                            <img decoding=\"async\" class=\"quot_tick\" src=\"https:\/\/culture.org\/wp-content\/themes\/culture\/icons\/i_quot_tri.svg\" type=\"image\/svg+xml\">\r\n                        <\/div>\r\n                        <!-- end html -->\r\n                        <!-- <\/div> -->\r\n                        <!-- <\/div> -->\r\n                        <!-- <\/div> -->\r\n                                    <\/h2>\n<h2><strong>Mismanagement and Unprofessionalism<\/strong><\/h2>\n<p><span style=\"font-weight: 400;\">The FTX bankruptcy report also exposes the company&#8217;s unprofessional financial management and record-keeping practices.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The company relied on informal communication platforms like Slack to submit and approve expenses and invoices, often using emojis as a form of approval.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This approach left little to no formal records of transactions involving millions of dollars.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The company&#8217;s collapse is attributed to the &#8220;hubris, incompetence, and greed&#8221; of its founder, Sam Bankman-Fried, and key executives Nishad Singh and Gary Wang.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Their lack of proper oversight and risk management ultimately led to FTX and Alameda Research&#8217;s downfall after customer assets were used to fund high-risk bets by Alameda.<\/span><\/p>\n<h2><strong>Retaliation Against Concerned Employees<\/strong><\/h2>\n<p><span style=\"font-weight: 400;\">The report further reveals that employees who voiced concerns about the company&#8217;s practices faced severe consequences.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The former president of FTX.US resigned after disputes over authority and key hires, with his bonuses significantly reduced after raising issues.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">A company lawyer was also fired after expressing concerns about Alameda&#8217;s lack of corporate controls and risk management.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">FTX&#8217;s downfall serves as a cautionary tale for the emerging crypto industry, illustrating the severe consequences of neglecting security, financial management, and corporate responsibility.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"","protected":false},"author":18,"featured_media":155417,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[411],"tags":[],"class_list":["post-155419","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-special-interest"],"acf":[],"_links":{"self":[{"href":"https:\/\/culture.org\/wp-json\/wp\/v2\/posts\/155419"}],"collection":[{"href":"https:\/\/culture.org\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/culture.org\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/culture.org\/wp-json\/wp\/v2\/users\/18"}],"replies":[{"embeddable":true,"href":"https:\/\/culture.org\/wp-json\/wp\/v2\/comments?post=155419"}],"version-history":[{"count":0,"href":"https:\/\/culture.org\/wp-json\/wp\/v2\/posts\/155419\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/culture.org\/wp-json\/wp\/v2\/media\/155417"}],"wp:attachment":[{"href":"https:\/\/culture.org\/wp-json\/wp\/v2\/media?parent=155419"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/culture.org\/wp-json\/wp\/v2\/categories?post=155419"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/culture.org\/wp-json\/wp\/v2\/tags?post=155419"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}