Former FTX CTO testifies against Sam Bankman-Fried in fraud trial
Gary Wang, the former CTO of FTX, testified in court that founder Sam Bankman-Fried was involved in fraud. Wang claimed that Alameda Research, where he also worked, withdrew more value from FTX than the exchange made from fees, resulting in a debt of $20 billion at one point. On day 3 of the trial, Paradigm’s Matt Huang revealed that his VC marked down $278 million invested in Sam’s crypto exchange. Additionally, another witness named Adam Yedidia explained a “code error” that allowed Alameda to have unusual control over customer assets. The trial has seen objections from the defense and the prosecution’s search for evidence.
Witness reveals Alameda traded with negative balances on FTX
Gary Wang testified that Alameda had an “allow negative” bypass on its FTX account, enabling secret trading beyond its balance. This allowed Alameda to withdraw $8 billion in customer assets, including fiat and cryptocurrencies like Bitcoin and FTX Tokens. Wang stated that Alameda experienced heavy losses and often lost large amounts of cash. Nishad Singh, a former FTX director of engineering who pled guilty, added the allow negative code to FTX’s engine at Sam Bankman-Fried’s request. Wang also revealed details about FTX’s margin lending system and Alameda’s access to a $65 billion credit line. SBF guaranteed customer asset safety publicly while secretly withdrawing customer crypto from the exchange using its credit line.
Hot Take: Testimony against Sam Bankman-Fried raises concerns about fraud
The testimony provided by Gary Wang during Sam Bankman-Fried’s fraud trial raises significant concerns about fraudulent activities within FTX and Alameda Research. Wang’s claims of secret trading, withdrawals of customer assets, and the manipulation of FTX’s margin lending system suggest a pattern of fraudulent behavior. The involvement of other individuals, such as Nishad Singh and Caroline Ellison, further implicates Bankman-Fried in these activities. The trial will continue to shed light on the extent of the fraud and the impact it may have had on FTX and its customers. The outcome of this trial could have far-reaching implications for the crypto industry and its regulation.
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