In a startling revelation, Zixiao "Gary" Wang, a co-founder of FTX alongside Sam Bankman-Fried, testified in court on Friday, affirming that Bankman-Fried knowingly diverted FTX clients' funds without authorization for investments through his personal hedge fund. Wang, who has already confessed to multiple charges connected to the collapse of the crypto trading platform, has entered into a cooperation agreement with federal prosecutors.
This pivotal testimony marks the initial appearance of a major witness in Bankman-Fried's trial, which commenced in New York on Tuesday and is slated to span potentially six weeks. The 31-year-old crypto luminary, widely recognized as "SBF," faces a battery of charges, including fraud, embezzlement, and criminal conspiracy, with the potential of over a century behind bars if convicted.
The cataclysmic turn of events transpired in November of 2022, when Bankman-Fried's cryptocurrency exchange platform crumbled under the weight of a deluge of withdrawal requests. Customers were alarmed to discover that a portion of FTX's assets had been channeled into high-risk ventures managed by Alameda Research, Bankman-Fried's personal hedge fund.
According to Wang, who held the position of technology chief at the time of the platform's collapse, Bankman-Fried exhibited a willingness to flout the law and deceive in order to bolster FTX and Alameda's financial performance. He disclosed that in 2019, shortly after FTX's inception, Bankman-Fried orchestrated alterations to the platform's code, allowing Alameda unfettered access to withdraw funds, a detail hidden from both the public and investors.
While Wang awaits his own sentencing, anticipated to be mitigated due to his cooperation, he testified that Bankman-Fried disseminated falsehoods to journalists and investors, asserting that "Alameda was treated like any other trader on FTX" and that FTX never utilized clients' funds for alternative purposes.
Wang adamantly stated, "Customers did not give us permission to use it for other purposes," referring to the funds now in question, which prosecutors assert were also employed by Bankman-Fried to acquire real estate in the Bahamas. The line of credit extended to Alameda swelled to an astronomical $65 billion, he revealed.
At the time of FTX's insolvency, a staggering $8 billion of clients' funds were unaccounted for, absorbed by Alameda, which proved incapable of reimbursement. Additionally, Wang contended that Bankman-Fried repeatedly insisted on shifting customer losses onto Alameda's balance sheet, a stratagem intended to shield these transactions from public scrutiny and safeguard FTX's reputation.
The trial is slated to recommence this Tuesday, with the testimony of Caroline Ellison, former CEO of Alameda Research, who has also entered a guilty plea and vowed to assist prosecutors in their pursuit of justice.
