Founder of FTX Claims Sam Bankman-Fried Misused Funds

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Gary Wang, a former top executive of the failed FTX cryptocurrency exchange, testified in federal court in Manhattan on Thursday and Friday that Sam Bankman-Fried, the company’s founder, had directed a closely related hedge fund to misuse billions of dollars in customer money. He said Bankman-Fried was fully aware of the $8 billion in customer money siphoned off from FTX, and lied in his public statements in November that customer assets were safe and secure. Mr. Wang also stated that Bankman-Fried called the shots on big issues at the firm.

The saga of FTX’s rise and fall has gripped the public for months, with its mixture of corporate hubris and personal intrigue. After the exchange collapsed in November, Bankman-Fried was charged with wire fraud, securities fraud, money laundering, and related conspiracy charges. He has pleaded not guilty and faces a potential life sentence if convicted. Three close advisers of his, including Mr. Wang, have pleaded guilty and agreed to cooperate with prosecutors.

Mr. Wang testified that he and Nishad Singh, the other programmer of FTX’s code base, had written the code to grant Alameda special privileges at Bankman-Fried’s direction since 2019. This allowed the trading platform to make unlimited withdrawals from the exchange, without disclosing it to customers, investors, or lenders. Mr. Wang stated that Bankman-Fried was aware of the amount that Alameda was borrowing from the exchange, and had discussed the money at a meeting in June 2022.

Defense lawyers argued that FTX and Alameda had an appropriate business relationship, and weren’t set up for fraud. Mr. Wang countered that they had given Alameda special privileges, and had lied about it to the public. Adam Yedidia, one of Bankman-Fried’s MIT classmates, testified that Bankman-Fried had said that the company was not “bulletproof” in mid-2022. Matt Huang, a founder of Paradigm, a venture capital firm that was one of FTX’s biggest backers, said he would have had qualms about investing if he had known the full extent of the relationship between the two firms.

Mr. Wang and Bankman-Fried were classmates at the Massachusetts Institute of Technology before founding FTX together in 2019. While Bankman-Fried was the garrulous pitchman, Mr. Wang was the shy coder who showed up for work in the middle of the afternoon and labored through the night. They were close friends who lived together in a luxury penthouse in the Bahamas. That relationship ended in December when Mr. Wang pleaded guilty to federal fraud charges, saying he knew “what I was doing was wrong.”

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