FTX cofounder testifies he and Sam Bankman-Fried let crypto hedge fund withdraw unlimited funds from exchange
Prosecutors went to the heart of their case against FTX founder Sam Bankman-Fried on Thursday as the company’s co-founder began his testimony, telling a New York jury that he and Bankman-Fried committed financial crimes and lied to the public before the cryptocurrency trading platform collapsed last year.
Gary Wang, 30, said he committed wire, securities and commodities fraud as the chief technical officer at FTX after also sharing ownership in Alameda Research, a cryptocurrency hedge fund that he and Bankman-Fried started in 2017 and eventually used to withdraw $8 billion in FTX funds illegally. He said Bankman-Fried directed the illegal moves.
His assertions came on the second day of testimony at a trial expected to last up to six weeks as prosecutors try to prove that Bankman-Fried stole billions of dollars from investors and customers to buy luxury beachfront real estate, enrich himself and make over $100 million in political contributions aimed at influencing cryptocurrency regulation.
Bankman-Fried, 31, who has been jailed since August, was brought to the United States from the Bahamas last December after he was charged in Manhattan federal court. He has pleaded not guilty.
Before the trial began Tuesday, prosecutors promised to use testimony from Bankman-Fried’s “trusted inner circle” to prove he intentionally stole from customers and investors and then lied about it. Defense lawyers say Bankman-Fried had no criminal intent as he took actions to try to save his businesses after the cryptocurrency market collapsed.
In just over a half hour of testimony, Wang said he and Bankman-Fried allowed Alameda Research to withdraw unlimited funds from FTX “and we lied to the public.”
Wang said not only was Alameda Research permitted to maintain negative balances and unlimited open positions, but the computer code that controlled its operations was written to provide a line of credit of $65 billion, a number so large that Judge Lewis A. Kaplan questioned Wang briefly to ensure he was talking about billions rather than millions.
Wang testified that the special computer code features were directed by Bankman-Fried, a man he met over a decade ago at a high school summer camp after moving to the United States from China and growing up in Minnesota.
Wang said he was paid $200,000 in salary, along with owning 10% of Alameda and 17% of FTX, enough shares to be a billionaire before the businesses collapsed.
He said money flowed so freely at Alameda that he was able to borrow a million dollars for a home and between $200 million and $300 million to make investments.
Wang is the first of a trio of former top executives slated to testify against Bankman-Fried after pleading guilty to fraud charges in cooperation deals that could win them substantial leniency at sentencing.
The others are Carolyn Ellison, Alameda Research’s former chief executive and a former girlfriend of Bankman-Fried, and Nishad Singh, the former engineering director at FTX.
Earlier in the day, jurors heard testimony from Adam Yedidia, who said he developed software for FTX before quitting the company when he learned last November that Alameda had used money from investors to pay creditors.
He said he lived with Bankman-Fried and other top executives in June or July of 2022 when he told Bankman-Fried one day that he was concerned that Alameda owed FTX a large debt. He said he wanted to know if things were OK.
“Sam said something like, ‘We weren’t bulletproof last year. We’re not bulletproof this year,’” he recalled. When he asked how long it might take to become bulletproof again, he said a seemingly nervous and worried Bankman-Fried responded that it could take three months to three years.
