Gary Wang, the FTX co-founder, appeared in court to testify that Sam Bankman-Fried, along with his inner circle, all committed wire fraud.
On Thursday afternoon, Wang said that they had permitted Alameda Research, the sister trading desk founded by Sam Bankman-Fried, to withdraw unlimited amounts of money.
He revealed that the company was given access to the crypto exchange’s customer deposits and its sister firm, FTX.
Wang had pled guilty and is now cooperating with the prosecutors in the investigation into the FTX crypto exchange.
He and Sam Bankman-Fried have been friends since high school and he helped the latter in setting up the crypto exchange.
However, he had opted to keep a low profile during the golden years of the crypto company, unlike Bankman-Fried.
The explanation that Wang gave revealed that a large line of credit had been granted to Alameda. It also had a way of placing orders that were executed quickly on the FTX platform.
In addition, it was allowed to withdraw an unlimited amount of funds. He also said that it had been permitted to carry a negative balance.
During his testimony, Wang said that by the time of the crypto exchange’s collapse, Alameda had used up its line of credit by $65 billion and its withdrawals from the exchange stood at $8 billion.
Wang also revealed that as compared to other market makers that were trading on FTX, Alameda stood out because of its indebtedness.
He added that other market makers were given lines of credit that had a value in the single or double-digit millions and none were given billions.
He further disclosed that his annual salary at FTX had stood at $200,000 and also had an equity of 17%. Meanwhile, 65% of the company belonged to Sam Bankman-Fried.
As far as Alameda Research is concerned, Wang said in his testimony that he retained 10% ownership, while the remaining 90% belonged to Bankman-Fried.
The co-founder further disclosed that during his time at the company, he had been given funds of $300 million for investing in other startup firms.
In addition, he could also withdraw a sum of $200,000 for building a house. He also said in his testimony that his work had been limited to coding.
As for the public-facing duties, such as communicating with the media and lobbying, those were dealt by Bankman-Fried.
Court had adjourned before Wang’s testimony ended and Judge Lewis Kaplan told prosecutors to continue the next morning.
On Thursday, a managing partner at Paradigm, a venture capital firm, Matt Huang, also appeared in court to testify.
His firm invested a total of $278 million in Bankman-Fried’s companies. He said that he would not have done so if they had been aware that the money would be siphoned off to Alameda Research.
He disclosed that they had now marked down the company’s investment to zero. He did say that they had initially been skeptical of the ‘unique governance structure’ of FTX.
He said that Bankman-Fried had asserted that the FTX crypto exchange did not give any preferential treatment to Alameda Research.