Attorney for FTX Andrew Dietderich told the Delaware bankruptcy court on Wednesday that Gary Wang was told to create the secret line of credit of customer funds from FTX to the hedge fund.
Dietderich told the court that Wang ‘created this backdoor by inserting a single number into millions of lines of code for the exchange’ creating the line of credit, which ‘customers did not consent’ to.
The FTX attorney testified that the backdoor was a ‘secret way for Alameda to borrow from customers on the exchange without permission,’ Business Insider reported.
A bombshell testimony has revealed that the co-founder of cryptocurrency exchange FTX was ordered 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 code for the exchange, creating a line of credit from FTX to Alameda, to which customers did not consent,’ Dietderich testified.
‘And we know the size of that line of credit. It was $65 billion.’
Bankman-Fried had moved $10 billion between the two companies, with a further $2 billion still unaccounted for, according to sources told Reuters in November.
The lawyer’s testimony corroborates allegations made by the Commodity Futures Trading Commission, the independent federal agency which ‘regulates derivatives such as futures and swaps,’ according to their website.
Last month, the CFTC filed charges against Wang and Alameda Research CEO Caroline Ellison, who was also Bankman-Fried’s on-again, off-again 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 firm dollar value.
Wang and Ellison both pleaded guilty to federal charges including fraud and conspiracy. They have been cooperating with investigators.
Attorney for FTX Andrew Dietderich told the Delaware bankruptcy court on Wednesday that Gary Wang was told to create the secret line of credit of customer funds from FTX to the hedge fund
Bankman-Fried was seen arriving for a plea hearing at U.S. Federal Courthouse in New York, Jan 3. He plead not guilty to fraud and other criminal charges
Bankman-Fried, who was arrested and extradited to the US from his home base in the Bahamas last month, is under house arrest at his parents’ $4 million Palo Alto home as per the conditions of his $250 million bond release.
While awaiting trial, Bankman-Fried published a Substack blog post on Thursday in which he professed his innocence.
‘I didn’t steal funds, and I certainly didn’t stash billions away,’ Bankman-Fried wrote.
‘Nearly all of my assets were and still are utilizable to backstop FTX customers.’
The 30-year-old disgraced former crypto king accused Binance boss Changpeng ‘CZ’ Zhao of waging a lengthy campaign to destroy his empire.
DailyMail.com uncovered a picture from March 2021, which shows SBF, 30, with his arm around ex-girlfriend Caroline Ellison, 28, from his 29th birthday. They’re pictured with FTX co-founder Gary Wang (left)
A judge set SBF’s trial to begin on October 3 during his plea hearing on Jan 3
He alleged that Zhao’s ‘fateful tweet’ on Nov 6 capped an ‘extremely effective months-long PR campaign against FTX.’
‘In November 2022, an extreme, quick, targeted crash precipitated by the CEO of Binance made Alameda insolvent,’ Bankman-Fried wrote.
The disgraced FTX founder’s business collapsed shortly after Zhao tweeted that Binance was dumping its position on FTX’s in-house digital token FTT.
The tweet started a domino effect that pushed Bankman-Fried’s crypto hedge fund Alameda Research into insolvency and FTX having to file for bankruptcy on Nov 11.
Bankman-Fried is now facing eight criminal counts, accusing him of defrauding FTX investors whose money he was holding. He made his first appearance in a Manhattan court last month, when a judge released him on bail on a $250million bond.
On January 3 he plead not guilty to fraud and other criminal charges. A judge has set his trial to begin on October 3.
Continuing to speak out publicly like this is likely to raise eyebrows, as he ignore lawyers that advised he should ‘recede into a hole.’ Attorneys said such statements will likely make life more difficult for the defense lawyers in his upcoming trial.