During Sam Bankman-Fried’s fraud trial, FTX co-founder Gary Wang revealed further details of the corrupt relationship between Alameda Research and his exchange. Wang claimed that the ability for Alameda to steal client funds had been integrated into FTX’s computer systems in 2019.
One of the special privileges granted to Alameda was the “allow negative” feature, which allowed the firm to trade with more funds than it actually had in its account. Wang stated that Alameda was able to withdraw unlimited funds from FTX. This feature was later exploited by Alameda, leading to the withdrawal of $8 billion worth of fiat and crypto that exceeded what the firm held in its account. Interestingly, this was a similar shortfall to what FTX faced when it failed to fulfill client withdrawal requests in November.
Wang clarified that the extra funds came from FTX customers who had not explicitly agreed to lend out their funds. Although it took years for the scheme to unravel, Wang claimed that he was aware of Alameda’s negative balance as early as 2019. Initially, the withdrawal amount was limited to around $50 million to $100 million, which was roughly equivalent to FTX’s annual revenue. However, by early 2020, Alameda’s negative balance exceeded FTX’s revenue, reaching at least $200 million.
Another privilege granted to Alameda was an outsized $65 billion line of credit from FTX. According to Wang, no other client had access to credit larger than $1 billion. This contradicted Bankman-Fried’s claims that FTX customer funds were untouched.
During cross-examination, Bankman-Fried’s lawyers argued that Alameda’s negative balance was allowed so that it could serve as a market maker for FTX’s native exchange token, FTT. Wang clarified that while Alameda’s exemption from auto liquidation was to some extent due to its large position, it was also because its position could potentially “cause damage.”
This revelation by Wang challenges Bankman-Fried’s assertions that he was unaware of the state of Alameda’s finances leading up to its collapse. Wang claimed that Bankman-Fried had witnessed Alameda’s balance firsthand, contradicting the CEO’s previous statements.
The trial highlights the corrupt relationship between Alameda Research and FTX, with Alameda being granted special privileges and exploiting them to withdraw funds beyond what it held. The testimony raises questions about FTX’s internal controls and oversight, as well as Bankman-Fried’s knowledge of the situation. As the trial continues, more information about the extent of the corruption may be revealed..
#FTX #Hijacked #Customer #Funds #Early #CoFounder
One of the special privileges granted to Alameda was the “allow negative” feature, which allowed the firm to trade with more funds than it actually had in its account. Wang stated that Alameda was able to withdraw unlimited funds from FTX. This feature was later exploited by Alameda, leading to the withdrawal of $8 billion worth of fiat and crypto that exceeded what the firm held in its account. Interestingly, this was a similar shortfall to what FTX faced when it failed to fulfill client withdrawal requests in November.
Wang clarified that the extra funds came from FTX customers who had not explicitly agreed to lend out their funds. Although it took years for the scheme to unravel, Wang claimed that he was aware of Alameda’s negative balance as early as 2019. Initially, the withdrawal amount was limited to around $50 million to $100 million, which was roughly equivalent to FTX’s annual revenue. However, by early 2020, Alameda’s negative balance exceeded FTX’s revenue, reaching at least $200 million.
Another privilege granted to Alameda was an outsized $65 billion line of credit from FTX. According to Wang, no other client had access to credit larger than $1 billion. This contradicted Bankman-Fried’s claims that FTX customer funds were untouched.
During cross-examination, Bankman-Fried’s lawyers argued that Alameda’s negative balance was allowed so that it could serve as a market maker for FTX’s native exchange token, FTT. Wang clarified that while Alameda’s exemption from auto liquidation was to some extent due to its large position, it was also because its position could potentially “cause damage.”
This revelation by Wang challenges Bankman-Fried’s assertions that he was unaware of the state of Alameda’s finances leading up to its collapse. Wang claimed that Bankman-Fried had witnessed Alameda’s balance firsthand, contradicting the CEO’s previous statements.
The trial highlights the corrupt relationship between Alameda Research and FTX, with Alameda being granted special privileges and exploiting them to withdraw funds beyond what it held. The testimony raises questions about FTX’s internal controls and oversight, as well as Bankman-Fried’s knowledge of the situation. As the trial continues, more information about the extent of the corruption may be revealed..
#FTX #Hijacked #Customer #Funds #Early #CoFounder
