Former FTX CTO Testifies Against CEO Sam Bankman-Fried
Gary Wang, co-founder of FTX, provided a compelling testimony accusing CEO Sam Bankman-Fried of diverting billions from customer accounts to benefit his hedge fund, Alameda Research. Wang revealed that Bankman-Fried instructed him to create a specialized trading tool that allowed Alameda to overdraw its account and use FTX clients’ funds without their knowledge. Contrary to Michael Lewis’ portrayal of FTX’s success, Wang painted a bleak picture of the company’s internal operations, stating that assets were not fine.
The “Allow Negative” Feature and Alameda’s Expansive Use
Wang explained how he and developer Nishad Singh engineered the “allow negative” feature, giving Alameda the ability to trade on unbacked credit. Although Bankman-Fried justified its creation for specific purposes, Wang revealed that the tool was used extensively. Alameda was able to overdraw up to $100 million from customer funds, leading to a negative balance of over $200 million. This balance was sourced directly from FTX’s clients.
Bankman-Fried’s Deception and Repayments
Wang accused Bankman-Fried of deceiving clients about the safety of their funds while allowing Alameda’s deficit to reach a staggering negative $20 billion. Prosecutors presented a spreadsheet highlighting this discrepancy in court. Wang also claimed that repayments to lenders like Genesis Trading were sourced from FTX’s user base, contradicting Bankman-Fried’s public denials.
The Bahamas and Collaboration with U.S. Authorities
Amidst the crisis, Wang accompanied Bankman-Fried to the Bahamas where they sought more accommodating regulators after FTX’s bankruptcy declaration. However, Wang quickly exited the Caribbean and began collaborating with U.S. authorities the following day. He expressed his hope for no prison time as a result of his cooperation.
Hot Take: Bankman-Fried’s Alleged Misappropriation of Funds Exposed
The testimony provided by Gary Wang during the trial against FTX CEO Sam Bankman-Fried reveals shocking allegations of misappropriation of client funds. Wang’s detailed account of how Alameda Research was able to tap into FTX clients’ funds without their knowledge highlights serious concerns about the company’s internal operations. If proven true, these actions could have significant consequences for Bankman-Fried and FTX as a whole. It remains to be seen how this trial will unfold and what impact it will have on the cryptocurrency industry.
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