FTX co-founder Gary Wang testified in court that Sam Bankman-Fried and his inner circle committed wire fraud.
“We allowed Alameda to withdraw unlimited funds,” Wang said on Thursday afternoon, referring to trading desk Alameda Research having access to customer deposits of the crypto exchange FTX.
FTX co-founder Gary Wang pleaded guilty and agreed to cooperate with authorities in the FTX investigation. He’s been friends with Bankman-Fried since high school and helped set up the crypto behemoth FTX, but maintained a much lower profile than Bankman-Fried during the crypto company’s golden years.
The way Wang explained it, Alameda had a large line of credit, a way to place orders that got executed faster on FTX’s platform, could withdraw unlimited funds, and was allowed to carry a negative balance. By the time FTX collapsed, Alameda had withdrawn $8 billion from the platform and had drawn $65 billion on its line of credit, Wang said during his testimony.
Alameda’s indebtedness set it apart from other market makers that traded on FTX, he added, who typically had lines of credit in the single or double-digit millions—not billions.
Wang also disclosed that he had been on a $200,000 annual salary with 17% equity in FTX. Meanwhile, Sam owned “like 65%” of the company, he said during his testimony. And when it came to Alameda Research, Bankman-Fried owned 90% of the company while he retained 10%.
During his time at the company, Wang said he was allowed to withdraw $200,000 from the company to build a house and was given access to up to $300 million to use to invest in other startup companies.
During his testimony, Wang said that Bankman-Fried handled public facing duties like lobbying and talking to the media, while his role was limited to coding.
Court adjourned before Wang could complete his testimony. Judge Lewis Kaplan said the prosecutors could continue tomorrow morning.
Matt Huang, a managing partner at venture capital firm Paradigm, also provided testimony on Thursday, saying that his firm wouldn’t have invested $278 million, which has now marked to zero, he said, in Bankman-Fried’s companies if it had known that the funds would be siphoned off to Alameda Research.
He also said that Paradigm was initially skeptical about what he called FTX’s “unique governance structure.” During cross-examination by Mark Cohen, one of the attorneys representing Bankman-Fried, Huang said that Paradigm had asked that they be granted a seat on FTX’s board and that they weren’t the only investor to have asked about it.
After raising concerns about frontrunning, Huang added that Paradigm was told by Bankman-Fried that Alameda Research received no preferential treatment on FTX’s crypto exchange.
