According to testimony given in court on Friday by Sam Bankman-Fried’s former business partner, the disgraced crypto billionaire intentionally utilized FTX clients’ money without their consent to invest through his personal hedge fund.
Zixiao “Gary” Wang, who founded FTX alongside Bankman-Fried, has previously admitted guilt on several counts relating to the shocking failure of the cryptocurrency trading platform and has pledged to collaborate with federal investigators.
At his former partner’s trial, which started on Tuesday in New York and could last up to six weeks, he is the first significant witness to make an appearance.
The 31-year-old Bankman-Fried, also known as “SBF,” is accused of seven counts of fraud, embezzlement, and criminal conspiracy and faces a maximum sentence of more than 100 years in prison if found guilty.
In November 2022, Bankman-Fried’s cryptocurrency exchange platform disintegrated because it was unable to handle the numerous withdrawal demands from consumers who were alarmed to hear that part of FTX’s assets had been invested in dangerous ventures by Bankman-Fried’s own hedge fund, Alameda Research.
Wang, who oversaw technology at the time of the collapse, claimed on Friday that Bankman-Fried was prepared to breach the law and tell lies to help FTX and Alameda achieve impressive growth and financial success.
He claimed that in 2019, just a few months after FTX was established, Bankman-Fried had the platform’s software changed to permit Alameda to make unlimited withdrawals.
According to Wang, whose sentence has not yet been announced but is anticipated to be lightened as a result of his cooperation, that code was not released to the general public or investors.
Bankman-Fried falsely told journalists and investors that “Alameda was treated like any other trader on FTX” and that FTX “didn’t use customers’ money,” Wang testified.
“Customers did not give us permission to use it for other purposes,” Wang said of the funds, which prosecutors also allege were used by Bankman-Fried to purchase Bahamas real estate.
The line of credit granted to Alameda was gradually raised, eventually reaching the astronomical sum of $65 billion, he said.
Around $8 billion in money belonging to clients were missing at the time of FTX’s insolvency; Alameda had borrowed them but was unable to pay them back.
Wang further said that Bankman-Fried frequently asked for customer losses to be recorded on Alameda’s books in order to conceal the transactions from the public and protect FTX’s reputation.
The former CEO of Alameda Research, Caroline Ellison, who has also pleaded guilty and agreed to cooperate with the prosecution, is anticipated to testify when the trial resumes on Tuesday.
