In a dramatic turn of events, Zixiao “Gary” Wang, the former business partner of crypto titan Sam Bankman-Fried (SBF), has testified in court that SBF knowingly utilized FTX clients’ funds without permission for personal gain. Wang, a co-founder of FTX, has already pleaded guilty to various charges related to the collapse of the crypto trading platform and has now agreed to cooperate with federal prosecutors. This testimony marks a significant moment in SBF’s trial, which commenced on Tuesday in New York and is expected to last up to six weeks.
At the heart of the trial are the seven charges of fraud, embezzlement, and criminal conspiracy faced by the 31-year-old SBF. If convicted, he could potentially face a staggering prison sentence of over 100 years. The collapse of the cryptocurrency exchange platform in November 2022 sent shockwaves through the industry, as customers discovered that FTX’s funds had been utilized for risky operations conducted by Alameda Research, SBF’s personal hedge fund.
Wang, who held the position of technology chief during the collapse, provided a damning account of SBF’s actions. According to Wang’s testimony on Friday, a few months after the establishment of FTX in 2019, SBF had the platform’s software modified to allow Alameda to withdraw unlimited funds. This crucial piece of code was intentionally concealed from the public and investors. Wang revealed that Bankman-Fried made false claims to journalists and investors, stating that “Alameda was treated like any other trader on FTX” and that customers’ funds were not being utilized.
Wang’s revelation exposes the severe breach of trust experienced by FTX customers. Their hard-earned funds were allegedly deployed without their explicit permission and used for personal purposes, including the purchase of Bahamas real estate. The line of credit granted to Alameda was raised incrementally, eventually reaching the astonishing sum of $65 billion. Sadly, when FTX faced bankruptcy, approximately $8 billion of customers’ funds were missing, as they had been borrowed by Alameda and could not be repaid.
Wang’s testimony also shed light on SBF’s alleged attempts to conceal the misuse of funds. According to Wang, Bankman-Fried purportedly requested that customer losses be recorded in Alameda’s books, in an effort to hide these transactions from the general public and protect FTX’s reputation. This startling revelation adds another layer to the mounting evidence against SBF.
The trial is scheduled to resume on Tuesday, with further testimony anticipated from Caroline Ellison, the former CEO of Alameda Research. Like Wang, Ellison has already pleaded guilty and committed to cooperating with federal prosecutors. As the case unfolds, the crypto community eagerly awaits justice and hopes for measures that will prevent such alleged misuses of funds from occurring in the future.
The allegations against Sam Bankman-Fried paint a troubling picture of a once-trusted figure in the cryptocurrency industry. If proven guilty, the consequences for SBF could be severe, both in terms of potential prison time and the substantial tarnishing of his reputation. Furthermore, this trial underscores the importance of transparency and accountability within the crypto space, as the trust of customers and investors is paramount for the industry’s continued growth and prosperity.