- Alameda Research allegedly used FTX customer funds without permission.
- A secret line of credit allowed the trading firm to withdraw large sums from the crypto exchange.
In the ongoing fraud trial of Sam Bankman-Fried (SBF), the Co-Founder of FTX, Gary Wang, revealed that Alameda Research started using FTX customer funds shortly after the exchange was launched. This revelation, made in a Manhattan federal court, suggests that the trading firm was effectively “taking customers’ money” without their consent, according to a report by the Financial Times.
Wang, who once shared a college dorm with SBF and later became an integral part of his professional life, disclosed that as early as 2019, he had been instructed to allow Alameda Research to maintain a negative balance on FTX. With an undisclosed “large line of credit”, this arrangement permitted Alameda to use customer deposits for its operations without approval.
Wang emphasized, “The money belonged to customers, and the customers did not give us permission to use it for other things.” This secret operation allowed Alameda Research to withdraw seemingly unlimited sums from FTX, putting customer funds at risk, the jury was told.
Alameda Research’s Unique Financial Privileges
Moreover, Wang disclosed that this unique borrowing facility, available exclusively to Alameda’s accounts, remained active until FTX’s collapse in 2022. During this period, the trading firm’s line of credit was increased several times, eventually reaching a staggering $65 billion.
Wang’s testimony marks a turning point in the trial, as he is a former insider who pled guilty to fraud following FTX’s downfall and has agreed to cooperate with prosecutors. Meanwhile, Caroline Ellison, the former CEO of Alameda Research and a key figure in the crypto mogul’s life, is expected to present her testimony against SBF next week.
Wang’s testimony shed light on Alameda’s “special privileges” at FTX, allowing the cryptocurrency hedge fund to spend $8 billion of customer funds without their knowledge or consent. Ellison, who, like Wang, pleaded guilty to multiple fraud charges, is expected to provide further insights into the complex web of financial dealings that have taken center stage in this high-profile trial.
