In a startling turn of events, Zixiao “Gary” Wang, co-founder of FTX, testified on Friday that Sam Bankman-Fried knowingly utilized FTX clients’ funds without authorization to invest through his personal hedge fund. As the first major witness in Bankman-Fried’s trial, Wang, who has already pleaded guilty to multiple charges related to FTX’s collapse, shed light on the alleged fraudulent activities that led to the crypto trading platform’s downfall.
Bankman-Fried, widely known as “SBF,” is facing seven counts of fraud, embezzlement, and criminal conspiracy. If convicted on all charges, the 31-year-old crypto titan could potentially be sentenced to over 100 years in prison. The trial, which commenced on Tuesday in New York, is expected to last up to six weeks, laying bare the extent of the allegations against Bankman-Fried.
According to Wang’s testimony, Bankman-Fried willfully breached the trust of FTX’s clients by diverting their funds without their knowledge or permission. In 2019, just months after the establishment of FTX, Bankman-Fried allegedly modified the platform’s software to enable Alameda Research, his personal hedge fund, to withdraw unlimited funds. Wang revealed that this unauthorized code remained undisclosed to the public and investors, magnifying the deception at play.
Wang recounted instances where Bankman-Fried falsely represented the relationship between Alameda and FTX. The disgraced crypto titan reportedly misled journalists and investors by claiming that Alameda was treated similarly to any other trader on FTX, assuring them that customers’ funds were not utilized for any other purposes. However, Wang affirmed that these claims were far from the truth, as FTX clients’ funds were unlawfully used, allegedly even for Bankman-Fried’s personal purchase of real estate in the Bahamas.
Further exposing Bankman-Fried’s alleged misconduct, Wang disclosed that the line of credit granted to Alameda increased progressively over time, ultimately reaching a staggering sum of $65 billion. This exorbitant amount, borrowed by Alameda, contributed to FTX’s eventual bankruptcy and the disappearance of approximately $8 billion in customers’ funds. The inability of Alameda to reimburse these funds left countless customers in financial ruin.
Wang also revealed Bankman-Fried’s alleged attempts to conceal incriminating transactions from the public eye. On multiple occasions, Bankman-Fried purportedly requested that customer losses be recorded on Alameda’s books, aiming to protect FTX’s reputation and image. This deliberate manipulation of financial records further eroded the trust that FTX clients had placed in the platform.
The trial will resume on Tuesday, with Caroline Ellison, former CEO of Alameda Research, expected to provide her testimony. Like Wang, Ellison has already pleaded guilty to charges related to the collapse of FTX and has committed to assisting federal prosecutors in their investigation.
The revelations brought forth by Wang’s testimony shed light on an alleged betrayal of trust by Sam Bankman-Fried. The charges against him highlight the magnitude of his alleged misconduct and the potential consequences he may face. As the trial progresses, it remains to be seen whether the evidence presented will prove Bankman-Fried’s guilt or innocence in this high-stakes case that has rocked the world of cryptocurrency.