FTX co-founder Gary Wang is on the stand today in the trial of Sam Bankman-Fried, the cryptocurrency exchange’s other co-founder. Wang, Bankman-Fried’s MIT roommate, is the first of three star witnesses testifying for the government.
(Bloomberg) — FTX co-founder Gary Wang is on the stand today in the trial of Sam Bankman-Fried, the cryptocurrency exchange’s other co-founder. Wang, Bankman-Fried’s MIT roommate, is the first of three star witnesses testifying for the government.
Wang spent less than an hour on the witness stand yesterday but quickly testified that he and Bankman-Fried committed multibillion dollar fraud at the cryptocurrency exchange. Wang, 30, pleaded guilty to fraud and criminal conspiracy last December, a month after FTX’s collapse, in a cooperation deal with federal prosecutors
Prosecutors kicked off the trial this week by portraying SBF as a calculated criminal who knowingly committed fraud by embezzling FTX customer money and confiding to his inner circle about it.
Bankman-Fried’s lawyers hinted at his defense strategy, arguing he was a math nerd who built two successful companies that were hit by market downturns in 2022. Risk management at FTX and sister hedge fund Alameda Research was flawed, they argued, but he never intended to steal customer funds.
Here’s the latest from court (All times are NY):
‘The Money Belonged to Customers,’ Wang Says (10:40 a.m.)
Alameda was the only account allowed to have a negative balance, without limit, Wang said Friday. The company policy stated that other customers would have positions liquidated and accounts closed if the positions were losing too much value and the balances nearing zero.
One Alameda trader asked Bankman-Fried if Alameda could keep borrowing funds from the FTX exchange despite the negative balance, Wang said. Bankman-Fried replied as long as the amount Alameda withdraws from FTX is less than what FTX’s total trading volume at the time, then it’s fine to allow Alameda to keep withdrawing.
“The money belonged to customers and the customers did not give us permission to use it for other things,” Wang said.
Wang also told the jury that Alameda accessed FTX funds through a line of credit with the exchange, which Bankman-Fried eventually authorized to be $65 billion. He explained that no other customers had line of credit beyond $1 billion, and that only “a few thousand customers” had single to double digit of millions in line of credit.
Alameda Had “Special Advantages” (9:40 a.m.)
Wang entered the courtroom without making eye-contact with Bankman-Fried, speedily walking down the aisle to take the stand. Wang began by explaining technical issues for the jury, including the difference between front-end code, which controlled client-facing elements on the FTX site, and back-end code, which was used to track and value trades and keep track of accounts.
Wang, FTX’s former chief technology officer, testified that Alameda Research was given “special advantages” in FTX’s code, including an “allow negative” feature to borrow “money belonging to other customers of FTX.” When FTX melted down in November, Alameda had a negative balance of $8 billion.
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