Sam Bankman-Fried’s assurance that the cryptocurrency exchange was “fine” in a tweet was untrue, according to a co-founder of FTX, who testified in court.
Former executive Gary Wang claimed that Mr. Bankman-Fried knew the company was facing a $8 billion shortfall when he took the job. Days later, it announced bankruptcy.
Mr. Wang was giving testimony in New York’s federal court during Mr. Bankman-Fried’s fraud trial.
Wang has already entered a guilty plea.
The 30-year-old, who was FTX’s chief technology officer and was a friend from high school math camp, testified for a second day on Friday. Prosecutors were looking into the disconnect between the company’s public image and its internal operations and asked questions regarding spreadsheets, tweets, and private chats.
Mr. Wang asserted that Mr. Bankman-Fried had made a number of unfounded public assertions about the firm’s financial stability.
“FTX was not fine,” declared Mr. Wang. “Assets were not fine, because FTX did not have enough assets for customer withdrawals.”
In November of last year, FTX filed for bankruptcy as a large number of customers attempted to withdraw their money.
Soon after, Mr. Bankman-Fried was accused of stealing money from FTX clients, misrepresenting to investors and lenders, and engaging in money laundering. He has refuted all of the allegations.
The Department of Justice claims that he used Alameda, a cryptocurrency trading company Mr. Bankman-Fried created a few years ago, to use customer funds for marketing, real estate acquisitions, political donations, and other expenses.
According to Mr. Wang, “We publicly stated that we would not use customer funds in this manner.“
Before FTX filed for bankruptcy, Mr. Wang said that he and Mr. Bankman-Fried talked about the rapidly expanding hole on the company’s financial sheet that was brought on by Alameda’s significant withdrawals of customer monies.
Alameda was already taking out more money than FTX did from fees levied to consumer trading on its platform as of the end of 2019, he claimed.
The court was informed that by June 2022, Mr. Bankman-Fried had requested a review of Alameda’s indebtedness to FTX, allowing top officials to consult a spreadsheet to determine the actual amount owed. Mr. Wang estimated it to be around $11 billion that month.
Despite assertions to the contrary made in the public, he claimed that Alameda’s account had elements that made it distinct, such as a $65 billion line of credit at FTX and the capacity to have a negative balance.
Several months after launching FTX, Mr. Bankman-Fried claimed on Twitter that his trading company, Alameda, had an account on the exchange that was “just like everyone else’s” in one instance in 2019.
According to Mr. Wang, Mr. Bankman-Fried asked him to modify the platform’s programming so Alameda could make limitless withdrawals later that day.
Another time, the FTX CEO used what the prosecution described as a “fake number” to post about the amount held in a fund that was meant to provide protection in the event of losses.
Everdell, Christian Less than an hour remained for Mr. Bankman-Fried’s attorney to cross-examine Mr. Wang before the court’s daytime session came to a conclusion.
He suggested that Alameda’s position on the platform as a “market-maker” in charge of facilitating smooth trade was the reason for the special characteristics of its account.
Six weeks are predicted for the trial. Next week, Caroline Ellison, a former Alameda executive and Mr. Bankman-Fried’s ex-girlfriend who has also entered a guilty plea, will take the stand after Mr. Wang.
Here are more Detail about FTX case
According to Gary Wang’s testimony in court, the tweet claiming FTX was “fine” was fraudulent. Here are some additional information about it:
- Sam Bankman-Fried tweeted the message on November 7, 2022, in response to queries from users about FTX’s financial stability.
- Bankman-Fried stated in the tweet, “FTX is OK. The assets are good.
- Bankman-Fried knew at the time he sent this statement that it was untrue, according to Wang’s testimony.
- According to Wang, FTX had a $8 billion shortfall at the time and lacked the assets to cover consumer withdrawals.
- Wang also stated that Bankman-Fried had made a number of unfounded public assertions concerning FTX’s financial stability.
The fact that Bankman-Fried wrote the tweet after Changpeng Zhao, CEO of Binance, revealed that Binance will be selling its holdings of the F T X token (FTT), is one aspect that stands out in particular. Zhao did not explain the rationale for Binance’s decision to sell its FTT, but the revelation sparked a surge in consumer F T X withdrawals.
The tweet might have been posted by Bankman-Fried in an effort to calm clients and stop the withdrawal avalanche. Wang’s testimony, however, indicates that Bankman-Fried was aware of the falsity of his statement at the time it was sent.
This is a crucial nuance because it can imply that Bankman-Fried purposefully deceived customers and investors about FTX’s financial situation. It might help the prosecution’s case against him if this is proven to be the case.
The trial is still going on, and it’s crucial to remember that Bankman-Fried has pled not guilty to all of the allegations.