• FTX, a bankrupt crypto exchange, stored private keys to its customers‘ wallets on Amazon Web Services (AWS).
• An interim report of the current FTX CEO revealed mismanagement of funds and other business malpractices as the causes of its failure.
• Storing private keys on a third-party platform like AWS increases the risk of hacks and breaches.
FTX Crypto Exchange Collapsed
A recent report shows that the bankrupt crypto exchange, FTX, 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
The first interim report of the current FTX CEO published on April 9th highlighted how the exchange poorly carried out control processes and record keeping. It further revealed that poor control and lack of record-keeping were more visible in finance accounting, management, governance, and information. The court filing disclosed that the exchange stored private keys to users‘ crypto wallets on Amazon’s cloud computing platform AWS which has raised concerns about security risks such as hacks and breaches.
Private Keys Are Essential Passwords
Private keys are essential passwords allowing users to access their cryptocurrency holdings and transact. Any compromise of these keys could result in loss if they fall into bad actors’ hands. The report stated that FTX Group was fully aware of how a transparent digital asset system works but still chose not to follow any rules or regulations related to security protocols or data protection standards.
Risk Of Compromised Funds
Storing private keys on a third-party platform like AWS increases the risk for customers’ funds being compromised due to potential hacks or breaches by malicious actors who can gain access through vulnerabilities in Amazon’s cloud infrastructure system. As such, proper controls must be in place to protect customer assets from theft or fraud attempts by external parties who may have access to confidential information stored on these services .
Conclusion
In conclusion, storing private keys on a third-party platform like AWS is a risky practice that puts customers’ funds at risk due to potential hacks or breaches by malicious actors who can gain access through vulnerabilities in Amazon’s cloud infrastructure system. To mitigate this risk, companies need to ensure proper controls are in place to protect customer assets from theft or fraud attempts by external parties who may have access to confidential information stored on these services