Sam Bankman-Fried, Other FTX Execs Committed Financial Crimes, Co-Founder Wang Testifies
FTX’s Sam Bankman-Fried has been accused of committing financial crimes, according to co-founder Gary Wang’s testimony during the trial on Thursday. Wang stated that he, along with Bankman-Fried, Caroline Ellison, and former FTX executive Nishad Singh, engaged in wire fraud, securities fraud, and commodities fraud. Wang also admitted to granting special privileges to Bankman-Fried’s Alameda Research hedge fund, allowing them to withdraw unlimited funds from FTX and concealing this information.
These allegations come as Bankman-Fried faces fraud and conspiracy charges related to the collapse of his crypto empire. Prosecutors claimed that his empire was essentially a “house of cards.” The trial has revealed details about the relationship between Alameda Research and FTX, including Alameda’s authorization to withdraw substantial amounts of funds and their access to a line of credit without limits. Additionally, Wang testified that Alameda was able to place orders slightly faster than other market makers.
Matt Huang, the co-founder of Paradigm, an investment firm, also took the stand as a witness. He revealed that Paradigm had invested approximately $278 million in various rounds of funding for FTX and FTX U.S. However, he testified that Paradigm currently values the FTX equity it holds at zero dollars.
Another key piece of information presented during the trial was a software bug that resulted from FTX’s handling of customer deposits. The bug caused an overstatement of Alameda’s debt to the exchange’s customers by $8 billion. Former FTX developer Adam Yedidia explained that in the early days of FTX, customers deposited fiat by wiring money to Alameda, which complicated the tracking of debts owed to customers. Yedidia discovered the bug in accounting software in June 2022, which falsely stated that Alameda owed FTX customers $16 billion. He expressed concern about an $8 billion debt, prompting Bankman-Fried’s remark that they were not as invincible as before.
Yedidia eventually resigned from FTX after learning that Alameda was using customer funds to repay creditors. He confirmed that Alameda had used FTX customer deposits for this purpose.
The defense began cross-examining Yedidia, causing the judge to reprimand the defense attorney for repeating questions excessively. Bankman-Fried appeared in court, acknowledging people in the gallery and searching for his parents, who were present. Throughout the testimony, Bankman-Fried fidgeted and sporadically worked on his laptop.
The trial continues to shed light on the alleged financial crimes committed by Bankman-Fried and his associates. As the proceedings move forward, more details may emerge regarding the extent of the fraud and the impact it had on Bankman-Fried’s crypto empire.
