Gary Wang, a former top executive at failed cryptocurrency exchange FTX, testified that Sam Bankman-Fried, the company’s founder, was the ultimate decision-maker at the company and ordered a closely related hedge fund to misuse billions of dollars in money. of FTX clients.
During more than six hours of testimony in Manhattan federal court on Thursday and Friday, Wang said Bankman-Fried was fully aware that a sister cryptocurrency trading firm, Alameda Research, had siphoned $8 billion in money from FTX clients. He said Bankman-Fried had lied in her public statements in November about FTX clients’ assets being safe and secure.
Bankman-Fried called the shots on the big issues at FTX, Wang told the jury of nine women and three men. “In the end, it was Sam’s decision,” she said.
Mr. Wang, 30, who was also a founder of FTX and programmed its codebase, is a crucial witness in Mr. Bankman-Fried’s high-profile criminal fraud trial. Mr. Wang is one of three close advisers to Mr. Bankman-Fried who have pleaded guilty and agreed to cooperate against the businessman, who has been accused of orchestrating a conspiracy to use up to $10 billion of clients’ money. FTX for all kinds of personal purposes. Projects.
The saga of FTX’s rise and fall has captivated audiences for months with its mix of corporate arrogance and personal intrigue. Since the exchange collapsed in November, Bankman-Fried has become a symbol of the cryptocurrency industry’s excesses, with some seeing her trial as a credibility test for the digital currency industry.
A run on deposits last year exposed an $8 billion hole in FTX accounts, which prosecutors say is largely due to “special privileges” that allowed Alameda to access FTX customers’ money. FTX filed for bankruptcy and Bankman-Fried was indicted a month later on wire fraud, securities fraud, money laundering and related conspiracy charges. He has pleaded not guilty and faces what could amount to life in prison if he is convicted.
Within weeks of FTX’s implosion, Wang, a friend of Bankman-Fried’s from high school math camp, pleaded guilty to helping him in that conspiracy. Nishad Singh and Caroline Ellison, two other top executives in the Bankman-Fried business empire, also pleaded guilty and are cooperating with prosecutors.
Wang and Singh, who also programmed the code underlying FTX’s business, admitted to creating a secret backdoor that allowed Alameda to borrow a virtually unlimited amount of money from the exchange. Prosecutors have argued that this backdoor was one of the main drivers of the scheme to steal customer accounts.
Mr. Bankman-Fried’s legal team has argued that FTX and Alameda had an appropriate business relationship and “were not set up to create any major fraudulent scheme.”
In court on Thursday and Friday, Wang walked the jury from FTX’s early days in 2019 to its stunning collapse last year.
Wang said he and Singh had written FTX’s computer code to give Alameda special privileges under Bankman-Fried starting in 2019. “He asked us to do it and we told him we did it,” Mr. said. Wang said.
That effectively allowed the trading platform to make unlimited withdrawals from the exchange, he said. None of that was disclosed to the companies’ customers, investors or lenders, he added.
“We gave special privileges to Alameda Research at FTX,” Wang said. “And we lied about this to the public.”
At first, Alameda was allowed to withdraw only the amount of FTX’s revenue from trading fees, which at the time amounted to about $300 million, Wang said. But that line of credit grew over time, reaching tens of thousands. of millions of dollars, he said. Bankman-Fried said she had no problem with this, Wang said.
Since FTX imploded, Bankman-Fried has repeatedly said he was only vaguely aware of the amount Alameda was borrowing from the exchange. But Wang testified that Bankman-Fried had Alameda’s balance visible on one of his computer screens in the office. Wang said he, Bankman-Fried, Singh and Ellison discussed the money Alameda owed in a meeting in June 2022.
At the end of the meeting at FTX’s office in the Bahamas, Wang said, Bankman-Fried turned to Ellison and told him he could use more client funds to pay Alameda’s creditors.
During cross-examination, Wang said that some special privileges Alameda had were part of its role as a business partner to allow FTX clients to buy and sell cryptocurrencies freely. He is scheduled to answer more questions from defense attorneys when the trial resumes Tuesday.
Wang and Bankman-Fried were classmates at the Massachusetts Institute of technology before founding FTX together in 2019.
Like Bankman-Fried, Wang became enormously wealthy, with a My dear net worth of almost 5 billion dollars. Within FTX, he and Bankman-Fried were considered opposites. While Bankman-Fried was the talkative salesman, Wang was the shy programmer who showed up for work in the middle of the afternoon and worked all night.
They were also close friends who lived along with eight other roommates in a luxury penthouse in the Bahamas, where FTX was based. That relationship ended in December when Wang pleaded guilty to federal fraud charges and said he knew “what he was doing was wrong.”
Before Mr. Wang took the stand, lawyers questioned a witness who was one of Mr. Bankman-Fried’s classmates at MIT, Adam Yedidia. Yedidia, who worked as a developer at FTX, recounted a conversation he had with Bankman-Fried in mid-2022, months before FTX failed, in which the founder admitted that his company was in an unstable situation.
“Sam said something like, ‘We were bulletproof last year, but this year we’re not,’” Yedidia said. She said Bankman-Fried explained that it could take six months to three years for the company to be “bulletproof” again.
Mr. Yedidia was followed on the stand by Matt Huang, founder of Paradigm, a venture capital firm that was one of FTX’s largest backers. Huang said he would have had qualms about authorizing investments in FTX if he had known the full extent of the exchange’s relationship with Alameda.
