Gary Wang, the co-founder and former chief technology officer of FTX, has testified in court during the ongoing criminal trial of former CEO Sam “SBF” Bankman-Fried. Wang’s testimony focused on the connections between FTX and Alameda Research, shedding light on questionable practices within the cryptocurrency exchange.
According to reports, Wang returned to a New York courtroom on October 6th and revealed that Alameda’s account on FTX had special privileges that allowed it to trade more than it had available. This feature, known as “allow negative,” was reportedly implemented at Bankman-Fried’s request in 2019. Wang disclosed that this addition to the FTX code allowed Alameda to achieve a negative balance of $200 million in 2020, surpassing FTX’s revenue of $150 million. He further testified that Bankman-Fried had provided Alameda with a secret line of credit worth $65 billion, despite making public statements to the contrary about the relationship between the two companies.
Wang recounted a conversation with Bankman-Fried where he expressed concerns about Alameda’s balances being off by billions. In response, Bankman-Fried asked Wang to meet him at the Bahamas office where he discussed the issue and instructed Caroline Ellison, the former CEO of Alameda, to return the borrowed funds. Wang stated that Bankman-Fried justified Alameda’s “special privileges” on FTX by linking them to the FTX Token (FTT), which Alameda used for trading when its account balance was below zero. This arrangement allegedly allowed Alameda to withdraw funds directly from FTX.
The prosecution’s case against Bankman-Fried centers around allegations that he used FTX user funds at Alameda without the customers’ consent. Wang, who had already pleaded guilty to fraud charges in December 2022, admitted to committing crimes alongside Bankman-Fried and Ellison during his testimony on October 5th.
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Sheila Warren, CEO of the Crypto Council for Innovation, emphasized that the trial should not be viewed as a reflection on the crypto industry as a whole. She said, “Just as the Elizabeth Holmes trial was not about diagnostic testing, the SBF trial is not about crypto. Sam is having a spectacular and ongoing implosion, and as this trial continues, we expect to see further evidence that Sam was out there primarily for himself.”
The criminal trial is expected to continue throughout November, with Ellison and Singh, the former FTX engineering director, likely to testify against Bankman-Fried. Bankman-Fried remains in jail after his bail was revoked by Judge Lewis Kaplan in August. It is uncertain whether Bankman-Fried will take the stand himself.
The revelations from Wang’s testimony raise questions about the integrity and transparency of FTX and the relationship it had with Alameda Research. The trial will provide further insights into the operations and actions of these entities, exposing any potential misconduct within the cryptocurrency landscape.
As the trial unfolds, it serves as a reminder of the importance of trust and accountability within the crypto industry. Users and investors must exercise caution when dealing with exchanges and conduct thorough due diligence to ensure the safety of their funds. Additionally, regulatory bodies and authorities should continue to monitor and investigate suspicious activities to maintain the integrity of the cryptocurrency ecosystem.
Looking ahead, this trial could potentially impact the regulatory framework surrounding cryptocurrency exchanges and highlight the need for stricter oversight and enforcement measures. By holding individuals accountable for their actions, the industry can strive towards greater transparency and trust, fostering a healthy and sustainable environment for all participants.
