FTX CTO Gary Wang Reveals Fraudulent Practices At Crypto Exchange During Bankman-Fried Trial

Alameda Research enjoyed unique access on the FTX platform, enabling the crypto hedge fund to utilize $8 billion of the exchange's client funds, revealed Gary Wang, the former chief technology officer (CTO), during Sam Bankman-Fried's trial on Friday. 

Wang, who was instrumental in founding both companies alongside Bankman-Fried, disclosed that a covert feature was implemented in July 2019, shortly after FTX's inception, Coindesk reported.

This feature, exclusive to Alameda, allowed its FTX account balance to dip below zero.

Wang quoted, “Sam told me to make sure Alameda’s accounts would never get liquidated on FTX.”

This revelation comes ahead of the much-anticipated Benzinga's Future of Digital Assets conference on Nov. 14, where such topics are expected to be discussed in depth.

Wang, previously recognized as FTX's reserved CTO, is among the first of several insiders who, after admitting to financial wrongdoings, are now testifying against Bankman-Fried in his ongoing fraud trial.

He detailed the intricate financial setups that, as per the government, facilitated the illicit appropriation of billions from FTX's clientele.

Wang elaborated on a specific code, “allow negative equals zero,” tailored for Alameda's accounts, which was commissioned by Bankman-Fried to finance expenses related to FTX's FTT token.

Wang mentioned, “Sam said that he wanted to pay for FTT-related expenses from Alameda accounts."

However, Alameda's expenditures expanded and persisted.

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Wang highlighted Alameda's unique access was initially intended to match FTX's revenue.

Upon noticing discrepancies, Wang approached Bankman-Fried multiple times, stating, “I trusted his judgment.”

When probed about the source of the surplus funds, Wang denied it being from FTX clients, emphasizing, “The money belonged to the customers and they didn’t give us permission to use their funds for other things.”

Further, Wang shed light on FTX's "backstop fund," an alleged emergency reserve.

Contrary to the displayed amount on FTX's website, the actual fund was considerably less, with Wang noting the displayed figure was a mere fabrication.

Additionally, Alameda's credit line saw multiple extensions due to its role as FTX's primary market maker.

On this, Wang recalled Bankman-Fried's stance, “He said that he’s fine with that."

In the courtroom, Bankman-Fried's parents were in attendance, with the mother occasionally glancing at her son. Some jurors actively took notes during Wang's testimony, while others simply observed.

The day commenced with a disclosure by the defense counsel about a juror's brief interaction with one of Bankman-Fried's attorneys.

The judge clarified to the jury that any casual greetings exchanged with trial participants shouldn't be misconstrued if not reciprocated.

Wang, like former Alameda Research CEO Caroline Ellison, plead guilty to multiple fraud charges last December. She is expected to take the stand next Tuesday (Oct. 10).

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