A bombshell testimony has revealed that the co-founder of cryptocurrency exchange FTX was instructed by Sam Bankman-Fried to create a “secret” backdoor to funnel money to Alameda Research.
FTX attorney Andrew Dietderich told the Delaware bankruptcy court Wednesday that Gary Wang was ordered to set up FTX’s secret line of credit for client funds to the hedge fund.
Dietderich told the court that Wang “created this backdoor by inserting a single number into millions of lines of exchange code” to create the line of credit that “customers didn’t agree to.”
The FTX attorney testified that the backdoor was a “secret way for Alameda to borrow money from the exchange without permission from customers,” Business Insider reported.
A bombshell testimony has revealed that the co-founder of cryptocurrency exchange FTX was instructed by Sam Bankman-Fried to create a “secret” backdoor to funnel money to Alameda Research
“Wang created this backdoor by inserting a single number into millions of lines of exchange code, creating a line of credit from FTX to Alameda that customers didn’t agree to,” Dietderich testified.
“And we know the amount of that credit line. It was $65 billion.”
Bankman-Fried had moved $10 billion between the two companies, with another $2 billion yet to be booked, sources told Portal in November.
The attorney’s testimony confirms claims made by the Commodity Futures Trading Commission, the independent federal agency that “regulates derivatives such as futures and swaps,” according to its website.
Last month, the CFTC filed indictments against Caroline Ellison, CEO of Wang and Alameda Research, who was also Bankman-Fried’s recurring girlfriend.
The CFTC accused Wang of creating a “virtually unlimited” secret line of credit. Dietderich’s testimony is believed to be the first time an FTX official has given the line of credit a fixed dollar value.
Wang and Ellison both pleaded guilty to federal charges including fraud and conspiracy. You cooperate with investigators.
FTX attorney Andrew Dietderich told the Delaware bankruptcy court Wednesday that Gary Wang was ordered to set up FTX’s secret line of credit for client funds to the hedge fund
Bankman-Fried was seen arriving in New York for a hearing in US federal court on January 3. He pleaded not guilty to fraud and other criminal charges
Bankman-Fried, who was arrested from his home base in the Bahamas and extradited to the US last month, is under house arrest at his parents’ $4 million Palo Alto home under the terms of his $250 million bond release.
While awaiting trial, Bankman-Fried published a Substack blog post Thursday, pleading his innocence.
“I haven’t stolen any funds, and I certainly haven’t hidden billions,” Bankman-Fried wrote.
‘Almost all of my assets were and still are usable to hedge FTX clients.’
The 30-year-old disgraced former crypto king accused Binance CEO Changpeng “CZ” Zhao of leading a protracted campaign to destroy his empire.
DailyMail.com has spotted a March 2021 picture showing SBF, 30, with his arm around ex-girlfriend Caroline Ellison, 28, from his 29th birthday. They are pictured with FTX co-founder Gary Wang (left).
A judge scheduled SBF’s trial for October 3 during his Jan. 3 hearing
He claimed that Zhao’s “fatal tweet” on November 6 capped an “extremely effective months-long public relations campaign against FTX.”
“In November 2022, an extreme, rapid, targeted crash engineered by Binance’s CEO rendered Alameda insolvent,” Bankman-Fried wrote.
The disgraced FTX founder’s business collapsed shortly after Zhao tweeted that Binance would divest its position on FTX’s internal digital token FTT.
The tweet triggered a domino effect that bankman-fried’s crypto hedge fund Alameda Research bankrupted and FTX filed for bankruptcy on November 11th.
Bankman-Fried now faces eight counts of defrauding FTX investors whose money he held. He made his first appearance in a Manhattan court last month when a judge released him on $250 million bail.
On January 3, he pled not guilty to fraud and other criminal charges. A judge has scheduled his trial for October 3.
Continuing to speak out so publicly is likely to raise eyebrows as he ignores lawyers who advised him to “retire into a hole”. Lawyers said such statements would likely make life harder for defense attorneys at his upcoming trial.