Sam Bankman-Fried ordered ‘special privileges’ for Alameda account on FTX

Gary Wang, FTX’s co-founder and former chief technology officer, again appeared in court on the fourth day of the criminal trial of former CEO Sam “SBF” Bankman-Fried to speak on the connections between the crypto exchange and Alameda Research.

According to reports from Inner City Press, Wang returned to a New York courtroom on Oct. 6 and testified that Alameda’s account on FTX was the only one authorized to trade more than it had available — a feature called “allow negative.” The former chief technology officer reportedly claimed Bankman-Fried had ordered Wang and former FTX engineering director Nishad Singh to implement the feature in 2019.

The “allow negative” addition to FTX code’s, according to Wang, allowed Alameda to achieve a negative balance that was more than FTX had in revenue in 2020 — $200 million versus $150 million. He reportedly testified that Bankman-Fried had given Alameda a $65-billion line of credit despite making contrary statements to the public on the relationship between the two firms.

“We had said we wouldn’t use funds like this,” said Wang, according to reports. “After I said the Alameda balances were off by billions, [SBF] asked to meet in the Bahamas office. He asked me about the bug, and then he told Caroline [Ellison] Alameda can go ahead and return the borrows.”

According to Wang, Bankman-Fried claimed Alameda’s “special privileges” on FTX were centered around the exchange’s FTX Token (FTT), which the firm used for trading “when its account balance was below zero.” The former chief technology officer reportedly testified Alameda had been able to withdraw funds directly from FTX.

Subscribe to our ‘1 Minute Letter’ NOW for daily deep-dives straight to your inbox! ⚖️ Be the first to know every twist and turn in the Sam Bankman-Fried case! Subscribe now: https://t.co/jQOIYUv6IW #SBF pic.twitter.com/gp7zJu5sgy

— Cointelegraph (@Cointelegraph) October 5, 2023

At the center of the prosecution’s case against Bankman-Fried are allegations that the former CEO was responsible for using FTX user funds at Alameda without customers’ consent. During his testimony on Oct. 5, Wang admitted to committing crimes with Bankman-Fried and former Alameda CEO Caroline Ellison, having already pleaded guilty to fraud charges in December 2022.

“Just as the Elizabeth Holmes trial was not about diagnostic testing, the SBF trial is not about crypto,” Sheila Warren, CEO of the Crypto Council for Innovation, told Cointelegraph. “Sam is having a spectacular and ongoing implosion, and as this trial continues, we expect to see further evidence that Sam was out there primarily for himself.”

Bankman-Fried’s criminal trial is expected to continue through November, as Ellison and Singh are also likely witnesses against the former CEO. Between his stints in court, SBF will likely remain in jail through the trial following Judge Lewis Kaplan revoking his bail in August. It’s unclear if Bankman-Fried plans to take the stand himself.

Magazine: Can you trust crypto exchanges after the collapse of FTX?