FTX co-founder Gary Wang testified that Sam Bankman-Fried’s group committed wire fraud, revealing big money moves and allegations in the crypto world.
Alameda Research had unusual access and debt levels on FTX, setting it apart from other market players, according to Wang.
In an unexpected courtroom revelation, Gary Wang, one of the co-founders of the cryptocurrency platform FTX, has made a surprising statement against his long-standing associate, Sam Bankman-Fried. Wang’s testimony implicates Bankman-Fried and his inner circle in an alleged wire fraud case that has sent shockwaves through the cryptocurrency community. These startling developments offer a rare glimpse into the intricate financial dealings within their cryptocurrency empire.
During his court appearance, Gary Wang made an astounding claim. He asserted that Sam Bankman-Fried and his close associates had engaged in activities amounting to wire fraud. The core of Wang’s testimony revolves around the actions of Alameda Research, a trading desk founded by Bankman-Fried.
Unprecedented Access for Alameda Research
Wang revealed that Alameda Research enjoyed unparalleled privileges in dealing with customer deposits, which FTX held, and its associated sister company. These privileges included unfettered access to withdraw funds without limitations. Notably, Alameda Research maintained a significant line of credit, providing them a distinct advantage in executing orders on FTX’s trading platform.
The extent of Alameda Research’s involvement in FTX operations is nothing short of astounding. According to Wang’s testimony, by the time FTX faced its eventual downturn, Alameda Research had withdrawn an astonishing $8 billion from the platform. In addition, they had accrued an eye-popping debt of $65 billion through their line of credit. Such indebtedness set Alameda Research apart from other market makers operating on FTX, as these entities typically held lines of credit in the single or double-digit millions.
Gary Wang also provided valuable insights into the ownership structure and compensation practices within FTX. At the same time, he disclosed receiving a $200,000 annual salary and possessing a 17% equity stake in the company. It became evident that Sam Bankman-Fried held a significantly larger share of the company’s equity, approximately 65%.
Distinct Roles within the Organization
Wang’s testimony highlighted the clear division of roles within the organization. He explained that Sam Bankman-Fried primarily handled outward-facing responsibilities, including lobbying and media interactions during his tenure. In contrast, Wang’s primary focus revolved around the technical facets of the company, specifically in the software development.
Matt Huang, a managing partner at Paradigm, a venture capital firm, also took the stand during these legal proceedings. Huang expressed deep regret, stating unequivocally that his firm would not have invested a substantial sum of $278 million in Bankman-Fried’s ventures had they been aware of the ultimate redirection of these funds to Alameda Research. The fallout from this revelation has been a complete write-off of Paradigm’s investment.
Governance Concerns Emerge
Huang’s testimony further touched upon concerns related to FTX’s governance structure. Paradigm had sought a seat on the board of FTX, signaling growing unease among investors regarding the management and decision-making processes within the cryptocurrency exchange.
Huang disclosed that Paradigm had voiced these concerns, but Bankman-Fried reassured them there was no preferential treatment for Alameda Research on FTX’s cryptocurrency exchange.
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