FTX Co-Founder Admits to Fraud and Reveals Internal Financial Advantage
The ongoing trial of Sam Bankman-Fried, the co-founder of cryptocurrency exchange FTX, took a dramatic turn as Gary Wang, FTX’s co-founder and CTO, took the stand and admitted to committing wire fraud, securities fraud, and commodities fraud. Wang also shed light on the “special privileges” enjoyed by Alameda Research, the crypto trading firm started by Bankman-Fried and Wang.
Key Takeaway:
Wang testified that Alameda had a staggering $65 billion line of credit, far surpassing what is typical for large businesses. These advantages, including unlimited withdrawals and negative balances, were not disclosed to the public. The funds came from FTX customers, with a special code added to transactions to redirect money to Alameda.
Unveiling Alameda’s Financial Advantage
During his testimony, Wang revealed that Alameda Research had undisclosed financial advantages, thanks to the “special privileges” granted by FTX. These privileges allowed Alameda to access a $65 billion line of credit, a stark contrast to the millions typically held by large businesses. The company had withdrawn a staggering $8 billion by the time both Alameda and FTX filed for bankruptcy in November 2022.
Wang disclosed that these internal financial advantages were unknown to the public. Alameda and FTX were both founded by Bankman-Fried and Wang, with their ownership split 90% and 10%, respectively. Nishad Singh and Caroline Ellison, who pleaded guilty and are cooperating with the government, were also involved in the crimes committed with Wang.
The Origins of Alameda Research
Wang also shed light on how the company name, Alameda Research, was strategically chosen. By selecting a name that did not have explicit crypto-related connotations, such as “Alameda” (derived from Alameda County in California) and “Research,” Bankman-Fried believed it would be easier to navigate traditional business practices, including obtaining bank accounts, rental leases, and investors.
Wang explained that the initial funds for Alameda came from Bankman-Fried himself and various lenders. Additionally, he revealed that Alameda had “loaned” him around $200 million to $300 million, which was directed towards investments FTX made into other companies, rather than being deposited into his personal bank account.
The trial is set to continue on Friday morning with further testimony from Wang, expected to conclude by midday.
