Gary Wang, the co-founder and former chief technology officer of crypto exchange FTX, testified in court on the fourth day of the criminal trial of former CEO Sam “SBF” Bankman-Fried. Wang provided insights into the connections between FTX and Alameda Research, shedding light on questionable practices within the companies.
According to reports, Wang testified that Alameda Research’s account on FTX was the only one authorized to trade more than it had available because of a feature called “allow negative.” He claimed that Bankman-Fried had instructed him and former FTX engineering director Nishad Singh to implement this feature in 2019. Wang explained that the “allow negative” addition to FTX’s code allowed Alameda to achieve a negative balance greater than FTX’s revenue in 2020, amounting to $200 million compared to $150 million.
Furthermore, Wang stated that Bankman-Fried had given Alameda a secretive $65 billion line of credit, contradicting his public statements about the relationship between the two firms. Wang recalled a conversation where he mentioned the billions of dollars in Alameda’s unbalanced accounts, and Bankman-Fried responded by arranging a meeting in the Bahamas office. During their discussion, Wang claimed that Bankman-Fried inquired about the bug and later instructed Caroline Ellison, the former CEO of Alameda, to return the borrowed funds.
Wang revealed that Bankman-Fried justified Alameda’s “special privileges” on FTX by referring to the usage of FTX Token (FTT) for trading when the account balance was below zero. The former chief technology officer also testified that Alameda had the ability to withdraw funds directly from FTX.
The prosecution’s case against Bankman-Fried focuses on allegations that he used FTX user funds at Alameda without their consent. Wang admitted to committing crimes with Bankman-Fried and Ellison, as he had already pleaded guilty to fraud charges in December 2022. Sheila Warren, CEO of the Crypto Council for Innovation, stated that the SBF trial is not about crypto but rather about Bankman-Fried’s personal actions and motives.
Bankman-Fried’s criminal trial is expected to last until November, with Ellison and Singh likely to testify against him. Bankman-Fried remains in jail as his bail was revoked by Judge Lewis Kaplan in August. It is unclear whether Bankman-Fried plans to testify during the trial.
These revelations regarding the connections between FTX and Alameda Research raise concerns about the ethical practices within the crypto industry. As the trial unfolds, further evidence may surface regarding Bankman-Fried’s motivations and actions. Trust in crypto exchanges, such as FTX, may be further undermined by the revelations surrounding this case.
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