In a shocking turn of events, FTX co-founder Gary Wang has admitted in court to committing wire fraud and engaging in deceitful practices alongside former FTX boss Sam Bankman-Fried. This revelation has brought to light the extent of their financial crimes, which ultimately led to the collapse of the cryptocurrency trading platform.
Collusion in Financial Crimes and Fraudulent Activities
As the chief technical officer at FTX and co-owner of Alameda Research, a cryptocurrency hedge fund founded by Wang and Bankman-Fried, Wang confessed to committing wire, securities, and commodities fraud. He revealed the shocking fact that they illegally withdrew an astonishing $8 billion from FTX funds through Alameda Research. Furthermore, Wang claimed that Bankman-Fried directed these illicit actions, implicating him as the mastermind behind their fraudulent activities.
This testimony was given on the second day of a trial that is expected to last up to six weeks. The prosecution aims to prove that Bankman-Fried systematically stole billions of dollars from investors and customers. Allegedly, these funds were used for personal enrichment, such as the purchase of luxury beachfront properties, as well as making significant political contributions exceeding $100 million to influence cryptocurrency regulations.
Bankman-Fried’s Legal Battle and Defense Strategy
Bankman-Fried, who has been in custody since August, was extradited from the Bahamas to the US last year. He pleaded not guilty to the charges. Leading up to the trial, the prosecution promised to present testimony from Bankman-Fried’s “trusted inner circle” to establish his deliberate theft from customers and investors. However, defense attorneys argue that Bankman-Fried had no criminal intent and took actions to salvage his businesses following the collapse of the cryptocurrency market.
During Wang’s brief testimony, he affirmed that both he and Bankman-Fried had allowed Alameda Research to withdraw funds from FTX without restrictions while deliberately deceiving the public. Wang disclosed, “We allowed Alameda to withdraw unlimited funds,” and further revealed that the hedge fund maintained negative balances and unlimited open positions using a computer code designed to provide a line of credit amounting to a staggering $65 billion. Judge Lewis Kaplan sought clarification on the magnitude of this number, confirming that it referred to billions rather than millions. Wang also testified that Bankman-Fried personally directed the implementation of these special computer code features.
The history between Wang and Bankman-Fried dates back over a decade to their high school years when they first crossed paths at a summer camp. Wang, who owned 10% of Alameda Research and 17% of FTX, admitted that his holdings would have made him a billionaire if the businesses had not collapsed.
Wang is the first of three former top executives scheduled to testify against Bankman-Fried. These individuals have pleaded guilty to fraud charges and have entered into cooperation agreements that may lead to reduced sentences. The other two witnesses are Carolyn Ellison, former CEO of Alameda Research and Bankman-Fried’s former girlfriend, and Nishad Singh, former engineering director at FTX.
Prior to the trial, Adam Yedidia, a software developer who had worked for FTX, gave his testimony. Yedidia left the company in November after discovering that Alameda had used investor funds to pay off creditors. He recalled expressing his concern about Alameda’s massive debt to FTX to Bankman-Fried, who acknowledged their vulnerability and estimated it could take anywhere from three months to three years to regain stability.
