The Sam Bankman-Fried (SBF) trial entered its fourth day on October 6, with FTX co-founder Gary Wang taking the stand once again. Wang’s testimony became more detailed as the prosecution presented additional incriminating evidence against SBF.
Inner City Press, which was present at the trial, shared a thread on the X. According to the post, Wang acknowledged that Alameda Research received “special privileges” from FTX. This revelation aligns with the prosecution’s claims about a code linked to the FTX wallet page that monitored the contents of a user’s wallet.
Gary Wang’s Testimony on Misuse of Users’ Funds
Just days before the digital asset exchange FTX filed for bankruptcy, SBF took to Twitter to offer reassurance to customers. He stated that the exchange and its assets were in good shape. However, Gary Wang, on his second day as a prosecution witness in the fraud trial, testified that it was a lie.
“FTX was not fine, and the assets were not fine.”
During his more than four hours on the witness stand, Wang provided a vivid image of FTX’s final days. He revealed meticulous details on how he and Bankman-Fried allegedly implemented a multibillion-dollar fraud scheme, resulting in the exchange’s downfall.
Wang had pleaded guilty in December 2022 and agreed to cooperate with authorities. During the trial, he delved into the nitty-gritty of how he, allegedly under Bankman-Fried’s direction, modified the exchange’s backend code back in 2019.
This resulted in a “special advantage” that allowed Alameda Research, an affiliated hedge fund, to effectively borrow unlimited FTX customers’ funds. By the fall of 2022, Alameda had borrowed $14 billion from FTX, an amount it was unable to repay. Wang stated that he knew it was wrong:
“The money belonged to customers, and the customers did not give us permission to use it for other things.”
Wang’s testimony holds immense significance in the federal prosecutors’ case against SBF. He stands as one of the government’s primary witnesses, alongside former Alameda CEO Caroline Ellison, who also has a personal history with Bankman-Fried, and former FTX engineering chief Nishad Singh. Ellison is scheduled to provide her testimony next week, further solidifying the case against the defendant.
No Liquidation Rules for Alameda
Wang testified that Sam Bankman-Fried had asked for the addition of a “negative balance” feature to the backend specifically for Alameda. Moreover, Bankman-Fried allegedly gave orders to exempt Alameda from the liquidation rules applied to other FTX accounts.
Notably, during Thursday’s proceedings, venture capital firm Paradigm’s Matt Huang, who was an investor in FTX, provided testimony. Huang acknowledged that his firm was aware of the relationship between Alameda and the exchange but was given assurances that there was no preferential treatment involved.
Huang emphasized that if they had known that Alameda was exempt from liquidation rules, it would have been “a concern.” He stated:
“It would’ve meant Alameda could trade with leverage on the platform and could incur negative balances that would need to be repaid somehow,” Huang said, adding, “Given crypto prices are volatile, the business could be insolvent. It would also be damaging to the brand and customers’ trust.”