Sam Bankman-Fried requested FTX special privileges for the Alameda account: Gary Wang
October 7, 2023 10:59 AM
According to court documents, FTX's former chief technology officer alleged that then-CEO Sam Bankman-Fried permitted Alameda Research's account to trade more cash than it had available.
Gary Wang, co-founder and ex-CTO of FTX, testified about the company's ties to Alameda Research on the fourth day of the criminal trial of former CEO Sam "SBF" Bankman-Fried.
As reported by Inner City Press, on October 6 Wang testified in a New York courtroom that Alameda's FTX account was the only one authorized to trade more than it had available, using a mechanism called "allow negative." According to the ex-CTO, Bankman-Fried allegedly told him to have Wang and the ex-FTX engineering director Nishad Singh make the change in 2019.
According to Wang, Alameda was able to generate a negative balance in 2020 of $200 million, which was greater than FTX's income of $150 million. This was made possible by the "allow negative" change to FTX's code. Despite publicly contradictory assertions regarding the nature of the relationship between the two companies, he reportedly claimed that Bankman-Fried had extended Alameda a $65 billion line of credit.
"We had said we wouldn't use funds like this," Wang was quoted as saying. I was requested to meet in the Bahamas office by SBF after I reported that the Alameda balances were incorrect by several billion dollars. Before telling Caroline [Ellison] to return the borrowed items, he inquired as to the status of the bug.
Wang reports that Bankman-Fried asserted that FTX Token (FTT) was at the heart of Alameda's "special privileges" on the exchange, since that's what the company used to trade "when its account balance was below zero." According to the testimony of the ex-CTO, Alameda had been allowed to make direct withdrawals from FTX.
The prosecution's case against Bankman-Fried revolves around charges that the ex-CEO illegally used FTX user funds at Alameda. Wang, who pleaded guilty to fraud charges in December 2022, testified on October 5 that he and Bankman-Fried and former Alameda CEO Caroline Ellison committed crimes.
"Just as the Elizabeth Holmes trial was not about diagnostic testing, the SBF trial is not about crypto," said Sheila Warren, CEO of the Crypto Council for Innovation, in an interview with Cointelegraph. We should expect further proof that Sam was only looking out for himself as the trial progresses because "Sam is having a dramatic and ongoing implosion."
The criminal prosecution against Bankman-Fried is scheduled to last until November, with Ellison and Singh as possible witnesses against the ex-CEO. After having his bail revoked by Judge Lewis Kaplan in August, SBF is expected to spend the duration of the trial in jail, with the exception of his scheduled court appearances. Bankman-Fried might take the stand himself, but it's not obvious.