The trial against former FTX CEO Sam Bankman-Fried has seen revelations of “special privileges” granted to Alameda Research at FTX, along with the likelihood of former Alameda CEO Caroline Ellison testifying on behalf of the government. The trial explores allegations of fraud and financial crimes.
Alleged “Special Privileges” for Alameda
Gary Wang, a former top executive at FTX, testified that Alameda Research had “special privileges” at FTX, allowing the hedge fund to use $8 billion of exchange customers’ funds. These privileges came under scrutiny during the trial.
Wang revealed that Bankman-Fried directed him to create code that allowed Alameda’s FTX account balance to fall below zero in July 2019, a feature not available to other customers. Bankman-Fried allegedly instructed Wang to ensure that Alameda’s accounts would never be liquidated on FTX.
Wang’s Testimony At Sam Bankman-Fried Fraud Trial
Wang, a key witness for the prosecution, explained complex financial arrangements that allegedly enabled the two companies to misappropriate billions of dollars from FTX customers. He disclosed that Alameda’s “special privileges” initially had limits tied to FTX’s revenue but eventually exceeded those limits.
Wang expressed concerns that the funds used beyond the revenue-based limit did not have customer approval. He believed that the money belonged to the customers and was not meant for other purposes.
FTX’s Backstop Fund
Wang revealed that FTX’s displayed backstop fund amount was not based on reality. They calculated the figure using a formula without a real foundation, which misled users about the fund’s actual size.
He further testified that he increased Alameda’s line of credit on FTX several times, initially starting at $1 billion and eventually reaching $65 billion. This provided Alameda with virtually unlimited credit on the exchange, and Bankman-Fried approved of the increase.
“Korean Friend” Accounts
The trial also touched on accounts referred to as “Korean friend” accounts. One such account had a negative $8 billion balance, hidden from Alameda’s main accounting to avoid interest payment calculations.
Bankman-Fried’s parents were also present in court, with his mother appearing attentive and his father maintaining composure. The jury also displayed mixed reactions as they listened to the complex crypto-related testimony, with some jurors taking notes and others reclining.
At the start of the proceedings, a juror reported an encounter with one of Bankman-Fried’s lawyers in an elevator to the judge, who reassured jurors not to feel offended if witnesses or lawyers did not respond when greeted.
Consequently, the trial against Sam Bankman-Fried continues with ongoing revelations about alleged fraudulent practices and financial irregularities involving FTX and Alameda Research. Caroline Ellison is expected to testify as the next witness, providing further insights into the case.