During the ongoing fraud trial of Sam Bankman-Fried, co-founder of FTX exchange, Gary Wang made alarming statements regarding the corrupt relationship between FTX and Alameda Research. Wang disclosed that Alameda had the ability to pilfer client funds, a capability that had been embedded into FTX’s computer systems as far back as 2019.
According to Wang’s testimony, Alameda enjoyed three distinct privileges that set it apart from other customers. One of these was the “allow negative” feature, which allowed Alameda to trade with more funds than it actually possessed in its account. This enabled the trading firm to withdraw an astounding $8 billion worth of fiat and cryptocurrency beyond its account balance, mirroring the shortfall that FTX encountered when it failed to meet client withdrawal requests in November.
Wang admitted that the additional funds were taken from unsuspecting FTX customers who had not explicitly agreed to lend out their funds. Shockingly, Wang was aware of Alameda’s negative balance as early as 2019, which was initially limited to around $50 million to $100 million. However, within just one year, Alameda’s negative balance surpassed FTX’s annual revenue of $150 million, ultimately exceeding $200 million.
Furthermore, Alameda enjoyed an unprecedented line of credit amounting to $65 billion from FTX, a privilege not granted to any other client. This directly refutes Bankman-Fried’s repeated assertions that customer funds on FTX remained untouched. Wang affirmed that these claims were witnessed firsthand by Bankman-Fried himself, contradicting Bankman-Fried’s previous statements that he was unaware of Alameda’s financial state prior to its collapse.
During cross-examination, Bankman-Fried’s legal team emphasized that Alameda’s negative balance was allowed to exist in order for it to serve as a market maker for FTT, FTX’s native exchange token. However, the magnitude of the negative balance and the preferential treatment Alameda received raise serious doubts about the integrity of this argument.
Although it took years for the truth to come to light, Wang’s testimony has shed new light on the collusion between FTX and Alameda. The revelations demonstrate a disturbing abuse of power within the crypto industry, where customer funds were misused, and trust was violated. The implications of this case extend far beyond FTX and Alameda, highlighting the need for increased transparency, accountability, and regulation within the cryptocurrency space.
The trial of Sam Bankman-Fried has exposed a deeply troubling relationship between FTX and Alameda Research. The privileges granted to Alameda, including the ability to operate with a negative balance and access an unparalleled line of credit, shine a glaring light on the alleged corruption within the crypto industry. This trial serves as a stark reminder that the pursuit of wealth and power should never come at the expense of loyalty, integrity, and the protection of customer assets.
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