Secret lines of credit, hidden losses, fake accounts: The co-founder of the FTX platform on Friday lifted the veil on the financial antics of former cryptocurrency idol, Sam Bankman-Fried, which ultimately led to his downfall.
• Also Read: Former cryptocurrency star Sam Bankman-Fried tried to commit fraud in New York
FTX’s co-founder with “SBF”, Zixiao “Gary” Wang, was its technical manager at the time of its bankruptcy in November 2022. Charged by the same courts as Sam Bankman-Fried, he pleaded guilty to four charges. and agreed to cooperate with a federal prosecutor in Manhattan.
He was the first key witness to appear in his ex-partner’s trial, which began Tuesday in New York and is expected to last six weeks.
Sam Bankman-Fried is accused of unwittingly diverting clients’ funds on a cryptocurrency exchange platform to finance risky investments by hedge fund Alameda Research, which he controlled, to buy real estate in the Bahamas.
Gary Wong on Friday portrayed FTX and Alameda as willing to break the law and lie to ensure steady growth and profits.
By 2019, a few months after FTX’s creation, “SBF” modified the operating software to allow Alameda to borrow on the platform, in limited amounts only authorized to certain clients.
This amendment was not communicated to the general public or to customers or investors, Gary Wong, who worked with the Public Minister, has yet to pronounce his sentence.
“The clients didn’t give us permission to use this money for other purposes,” explained the computer scientist, whose fortune was estimated at $4.6 billion before the FTX crash, rising just like “SBF.”
To make matters worse, Sam Bankman-Fried told journalists and investors that he “treated Alameda like any other trader” on the platform, according to Gary Wong.
The limit set on this line of credit granted to Alameda was gradually increased, eventually reaching an astronomical sum of $65 billion.
During FTX’s bankruptcy, approximately eight billion dollars belonging to the platform’s customers went missing, having been borrowed by Alameda, which it was unable to repay.
According to Sam Bankman-Fried, co-founder of the platform, the loan was placed in a false account created under the name of a fictitious person.
Sam Bankman-Fried stated that on several occasions, customer losses, exceeding their assets, were realized by Almeda and requested by Gary Wong to hide these transactions from the general public and not tarnish FTX’s image.