By Bitcoinist - 6 months ago - Reading Time: 3 minutes
FTX Fraud: Co-Founder Puts Multiple Nails In Sam Bankman-Fried’s Coffin
The Sam Bankman-Fried (SBF) trial continued on October 6 (Day 4), with FTX Co-founder and SBF’s associate Gary Wang taking the stand once more in continuation of the proceedings from the previous day. Wang was more specific in his testimony this time as the prosecution provided more damning evidence against the defendant.
Wang Reveals Extent Of Fraud Under Sam Bankman-Fried
According to a thread on the X (formerly Twitter) platform by Inner City Press, which was present at the trial, Wang confirmed that Alameda Research enjoyed “special privileges” from FTX. The prosecution had already laid out a premise of a code attached to the FTX wallet page that kept track of the values in a user’s wallet.
There was an “allow negative” command in this code. If checked, such a user could go above their balance, which was how Alameda could trade more than what it had in its account. The trading firm allegedly had a “large line of credit” and could trade faster than others. Wang noted that this was kept secret and never disclosed, contrary to what SBF had said about the loans to Alameda being permitted.
Wang stated that Alameda used this “special privilege” to withdraw nearly $8 billion in fiat and crypto. This money allegedly belonged to FTX’s customers. With the ‘allow negative’ code in place, there was no limit on the amount Alameda could withdraw. This went on since July 2019, when FTX’s Director of Engineering, Nishad Singh, added the code. Interestingly, no one else besides Alameda enjoyed this privilege.
Wang also confirmed that the trading firm had a negative balance in 2019, and even then, Sam Bankman-Fried authorized that Alameda could withdraw up to $100 million. Alameda’s negative balance was so huge that it was more than FTX’s revenue at some point. The firm had a negative balance of “$200 million or more” compared to FTX’s revenue, which was around $150 million.
More And More Loans To Alameda
Following the prosecution’s question regarding the size of the line of credit to Alameda, which Sam Bankman-Fried authorized, Wang stated that the defendant approved $65 billion for Alameda. Noteworthy is that no other customer received up to a billion in loans, and only a dozen customers received up to a million.
It is worth mentioning that SBF had always painted Alameda Research as a liquidity provider for FTX. However, Wang’s testimony shows that it was the other way around as the trading firm kept withdrawing funds from FTX, including part of the $65 billion line of credit that SBF authorized to the company.
The prosecution questioned Wang as to if SBF made public statements about how Alameda Research was treated, of which Wang confirmed that SBF always asserted the trading firm was treated like other customers and didn’t use FTX funds.
Following this, the Prosecution went on to tender SBF’s tweet in 2019 (around the time when the code was just added). The tweet was in reply to another user’s concern about the conflict of interest existing between FTX and Alameda. Sam Bankman-Fried explicitly stated, “Alameda is a liquidity provider on FTX, but their account is just like everyone else’s.”
The trial is set to continue next week on October 10, with the prosecution expected to call more witnesses.
Original source: Bitcoinist