In the courtroom, evidence unveiled that Sam Bankman-Fried had employed customers funds from the crypto exchange FTX to invest in his own hedge fund without obtaining their permission
Former Business Partner Testifies Against Sam Bankman-Fried in Cryptocurrency Trial
In a recent court hearing, Sam Bankman-Fried, a well-known cryptocurrency figure, was accused by his former business partner of using clients’ funds without permission. The partner, Gary Wang Zixiao, who has already pleaded guilty to related charges, testified against Bankman-Fried in court.
The trial, which began on Tuesday in New York, could last up to six weeks. Bankman-Fried, also known as SBF, is facing seven counts of fraud, embezzlement, and criminal conspiracy. If convicted, he could potentially face over 100 years in prison.
The Collapse of FTX
In November 2022, Bankman-Fried’s cryptocurrency exchange platform, FTX, experienced a major collapse. Customers were alarmed to discover that some of FTX’s funds had been invested in risky operations by Bankman-Fried’s personal hedge fund, Alameda Research. This led to a wave of withdrawal requests, causing the platform to implode.
Accusations Against Bankman-Fried
Wang, who was FTX’s chief technology chief at the time, testified that Bankman-Fried was willing to break the law and lie to ensure FTX and Alameda appeared successful. He revealed that in 2019, Bankman-Fried had secretly modified FTX’s software to allow Alameda to withdraw unlimited funds from the platform. This information was not disclosed to the public or investors.
According to Wang, Bankman-Fried falsely claimed to journalists and investors that Alameda was treated like any other trader on FTX and that customers’ money was not used. Wang stated that customers did not give permission for their funds to be used for other purposes, including Bankman-Fried’s alleged purchase of real estate in the Bahamas.
The Astronomical Sum
Wang revealed that the line of credit granted to Alameda was gradually increased and eventually reached an astonishing amount of $65 billion. When FTX went bankrupt, approximately $8 billion of customers’ funds were missing, as they had been borrowed by Alameda and were unable to be reimbursed.
Attempts to Hide Losses
Wang also testified that Bankman-Fried had requested on multiple occasions for customer losses to be recorded under Alameda’s books. This was done to conceal the transactions from the public and avoid damaging FTX’s reputation.
The trial will resume with further testimonies, including that of Caroline Ellison, the former CEO of Alameda Research. She has also pleaded guilty and agreed to cooperate with prosecutors. The outcome of the trial will determine Bankman-Fried’s fate and could have significant consequences for the cryptocurrency industry.