Gary Wang, a co-founder of FTX, testified on the fourth day of Sam Bankman-Fried‘s trial for federal fraud and money laundering allegations. He described how he and the defendant committed financial crimes and lied about it.
Wang, 30, the first of three key witnesses for the prosecution, hammered home the government’s case on Thursday when he testified before a New York jury that he and Bankman-Fried illegally transferred billions from the accounts of FTX clients and investors and “lied to the public” before the cryptocurrency trading platform collapsed last November.
As the former chief technology officer of FTX and a co-owner of the hedge fund Alameda Research, Wang acknowledged his alleged involvement in wire, securities, and commodities fraud. He also claimed that he and Bankman-Fried started illegally moving FTX funds to Alameda in 2017 and eventually withdrew $8 billion.
Wang claimed that Bankman-Fried instructed him to give Alameda “special privileges on their FTX website” by changing the computer code governing its operations to authorize a credit line of up to $65 billion. Because this amount is so large, Judge Lewis A. Kaplan verified that Wang meant “billion” and not “million.” He did.
Wang referred to Bankman-Fried’s directives as having “negative balances and unlimited withdrawals.” When asked whose monies he was alluding to, Wang replied, “FTX customers.”
Friday saw the continuation of Wang’s damaging evidence, who was Bankman-Fried’s college roommate and erstwhile buddy. Prosecutors are accusing the former cryptocurrency king of orchestrating a “massive fraud” involving billions of dollars.
Wang is the first of three former top executives who have agreed to cooperate with the government in exchange for leniency at sentencing and are scheduled to testify against Bankman-Fried.
The other former executives include Nishad Singh, the former engineering director of FTX, and Carolyn Ellison, the former CEO of Alameda and Bankman-Fried’s ex-girlfriend.
Since his arrest in the Bahamas in December of last year, Bankman-Fried, who has been in jail since August, has maintained his innocence. The 31-year-old could spend more than a century in jail if found guilty of the seven crimes leveled against him.
Sham witnesses who were once buddies
According to Bloomberg News, Bankman-Fried arrived in a Manhattan courtroom to testify for the prosecution, but Wang avoided eye contact with him. According to Assistant U.S. Attorney Nathan Rehn, Bankman-Fried stole at least $10 billion from tens of thousands of clients and investors to fund extracurricular activities including political donations and the acquisition of opulent real estate.
Adam Yedidia, another of Bankman-Fried’s old friends and classmates, corroborated Wang’s account. Yedidia stated that five months prior to the collapse of both companies, Bankman-Fried informally expressed concern about a potential $8 billion shortfall at FTX resulting from loans to Alameda.
Yedidia claimed during interrogation by Assistant U.S. Attorney Danielle Sassoon that he discussed the matter with Bankman-Fried and asked him if everything was okay.
“Sam said, ‘We were bulletproof last year,’ or something like that. This year, we’re not impervious to harm. Yedidia testified that Bankman-Fried had an unusually tense appearance.
Yedidia’s testimony might refute Bankman-Fried’s claim that he did not actively participate in the management of Alameda and instead relied on Ellison, who was also his then-on-and-off lover.
Yedidia testified while exempt from prosecution and claimed to have been “longtime friends” with Bankman-Fried when they were both MIT students. Later, they cohabited in Bankman-Fried’s $30 million Bahamas apartment where they both worked.
Yedidia claimed that after learning early in November 2017 that Bankman-Fried had allegedly used FTX client deposits to pay for Alameda’s expenses, he resigned from his position as an FTX developer and stopped communicating with him.
Defense is going to present a “very different story”
Defense lawyers claim that when their client created his crypto enterprise, he had no intention of committing any crimes. Bankman-Fried’s attorney, Mark Cohen, stated in his opening statement that his client had “a very different story” to share than the one that the prosecution has presented.
Cohen told the judge that Bankman-Fried was a “math nerd that didn’t drink or party,” adding that “Sam didn’t defraud anybody, didn’t intend to deceive anyone.”
Six weeks are anticipated for the trial.
Prior to FTX failing and declaring bankruptcy, Bankman-Fried had a $32 billion paper net worth. Known for mingling with politicians, Bankman-Friedman publicly declared he would assist in market rescue when smaller crypto businesses started collapsing in early 2022.
One former federal prosecutor believes that rather than going too deeply into the world of cryptocurrencies, prosecutors were right to concentrate on Bankman-Fried’s use of customer money without their knowledge.
According to Michael Zweiback, co-founder of the law firm Zweiback, Fiset & Zalduendo, “this case is less about intricate investments and more about standard fraud.”
Bankman-Fried, a son of Stanford University law school professors, attended MIT in the 2010s before beginning work at a Wall Street investment business in 2014. He left in 2017 to relocate to San Francisco, where in 2019 he assisted in founding FTX.