On the fourth day of Sam Bankman-Fried’s crypto fraud trial, a key witness for prosecutors began his testimony, admitting that both he and the disgraced founder and former CEO of the now-defunct FTX exchange committed financial crimes and lied to the public before the collapse of their cryptocurrency trading platform.
Gary Wang, co-founder of FTX, told jurors at the Manhattan Court that he committed wire fraud, securities fraud, and commodities fraud while serving as chief technical officer at the company. He also admitted to illegally withdrawing $8 billion worth of FTX funds from Alameda Research, a cryptocurrency hedge fund that he and SBF started in 2017, under the direction of Bankman-Fried.
Gary Wang Admits To Committing Financial Crimes Along With Bankman-Fried
Wang also shared ownership of Alameda Research, which was headed by SBF’s ex-girlfriend Caroline Ellison.
He is one among the three business partners who had agreed to testify against Bankman-Fried in exchange for a reduced jail sentence. His crucial testimony comes on the second day of the trial as federal prosecutors are trying to prove that SBF stole billions of dollars from investors and customers to enrich himself and his business associates, including Wang, and also make political contributions to influence cryptocurrency regulations in the United States.
Bankman-Fried, who has been in prison since August, was extradited to the United States from the Bahamas, where his crypto empire was based, last December after being charged by the Manhattan federal court. He pleaded “not guilty” to seven counts of financial fraud and conspiracy to commit fraud.
Before the trial began, the crypto conman’s lawyers said he had no criminal intent and only did what was necessary to save his business after the cryptocurrency market had collapsed in 2022. However, prosecutors promised the jury that they would use testimony from Bankman-Fried’s “trusted inner circle” to prove that he intentionally stole customer and investor funds and then lied about his actions.
Alameda Research Had A Credit Line Of $65 Billion On FTX
During his testimony, Wang revealed that both he and Bankman-Fried allowed Alameda Research to withdraw unlimited funds from FTX and admitted to lying to customers about the relationship between both companies. Earlier last year, when investors raised concerns about the hedge fund, SBF said they were only a client of FTX’s.
The former FTX CTO also said Alameda was given permission to maintain negative balances and open unlimited open positions on the exchange. Wang testified that the computer code used to control FTX’s operations was specially written to provide the crypto hedge fund a credit line of $65 billion, as directed by Bankman-Fried.
The 30-year-old was paid an annual salary of $20,000, along with the option to own 10% of Alameda Research and 17% of FTX. He admitted to lending himself $1 million to purchase a home and between $200 million and $300 million to make investments outside of the company.
Before its collapse in November 2022, FTX was the third-largest crypto exchange by trading volume and Alameda Research held over $30 billion in assets under management. The company shares owned by Wang were valued so high that they were enough to make him a billionaire.
Gary Wang is the first of the trio of former top FTX and Alameda executives who agreed to testify against Bankman-Fried. The others are former Alameda Research CEO Caroline Ellison and Nishad Singh, the former director of engineering at FTX.
Former Software Lead Was Concerned About FTX’s Financial Position Months Ahead Of Collapse
Earlier in the trial, jurors also heard from another former FTX employee and a close friend of SBF’s, Adam Yedidia.
Yedidia was a senior software developer at the company and developed the software used by FTX to lend money to Alameda Research. He quit his position in November 2022 after growing concerned about the firm’s $8 billion liability.
Yedidia, who lived with SBF and the other executives in a luxury penthouse in the Bahamas, testified that he had questioned Bankman-Fried about the company’s financial position months ahead of its bankruptcy. At the time, the FTX founder responded by saying the exchange was “bulletproof last year” but was “not bulletproof this year”.
The software engineer said the $8 billion owed by FTX represented customer funds that were deposited on the platform, and the money was illegally transferred to Alameda accounts without the depositors’ knowledge to settle the hedge fund’s creditors.
When Yedidia asked how long it would take for FTX to become bulletproof again, SBF replied that it could take somewhere between three months to three years. He left the company after learning that Alameda Research, which was supposed to be a separate entity from FTX, was misappropriating FTX customer funds.
Both FTX exchange and Alameda Research filed for Chapter 11 bankruptcy after company executives, including SBF, Gary Wang, Caroline Ellison, and Nishad Singh were found to have misplaced over $10 billion worth of customer and investor funds.