<\/p>\n
FTX co-founder and former CTO Gary Wang told a court Thursday that he built \u201cspecial privileges to Alameda Research\u201d into the exchange code he wrote.<\/p>\n
The jury heard testimony from three witnesses in Manhattan today as part of the trial of Sam Bankman-Fried: Wang, former FTX developer Adam Yedidia and Paradigm co-founder Matt Huang.<\/p>\n
Wang, whose account closed out the day, said that Bankman-Fried directed him to provide advantages for Alameda not available to FTX customers, such as the ability to place orders slightly faster than other market makers.<\/p>\n
This disclosure came as part of a broader admission of financial crimes by Wang. In the statement, Wang admitted that he committed securities fraud, wire fraud and commodities fraud. He alleged that other FTX insiders, including Bankman-Fried, Caroline Ellison<\/a> and Nishad Singh, also committed such crimes.\u00a0<\/p>\n Wang pleaded guilty last December<\/a> and agreed to cooperate with prosecutors, as Blockworks previously reported.\u00a0<\/p>\n Wang explained that these privileges meant that Alameda could make unlimited withdrawals from its accounts, even if the balance went negative or below zero. A normal trader would need sufficient funds or enough collateral in order to withdraw, Wang said.<\/p>\n None of these advantages were known to the public, Wang said.\u00a0<\/p>\n Alameda\u2019s special privileges, according to Wang, culminated in a $8 billion hole \u2014 liabilities owed to FTX customers by the time the exchange entered bankruptcy last year.\u00a0<\/p>\n Prosecutors pressed Wang on Alameda\u2019s $65 billion line of credit, since Alameda served as a market maker and liquidity provider on the exchange. Wang said that typically, market makers have a line of credit in the millions, not the billions.\u00a0<\/p>\n \u201cWith a B,\u201d Wang emphasized.\u00a0<\/p>\n The prosecution sought to demonstrate that Bankman-Fried and Wang were unequal within the FTX\/Alameda power structure \u2014\u00a0specifically, that Bankman-Fried was at the helm as he allegedly stole funds from FTX customers.\u00a0<\/p>\n To support this argument, prosecutors showed a signed document that said Bankman-Fried owned 90% of Alameda, while Wang owned 10%. Similarly, they demonstrated that Bankman-Fried was the majority owner of FTX.\u00a0<\/p>\n In the event of a disagreement, \u201cin the end, it was Sam\u2019s decision to make,\u201d Wang testified.<\/p>\n By contrast, the testimony from Paradigm\u2019s Huang represented a zoomed-out view \u2014\u00a0specifically, how FTX\u2019s collapse impacted venture capital firms like his.\u00a0<\/p>\n Huang testified that he held concerns about the \u201centanglement\u201d between FTX and Alameda when he was considering making an investment into FTX. But Paradigm moved forward with its investment, as the perceived strengths and opportunities were too compelling to pass, according to Huang.<\/p>\n In total, Paradigm invested<\/a> around $278 million into FTX and FTX.US, the exchange\u2019s American affiliate. Asked about the current valuation of the prosecution, Huang told the court: \u201cWe have marked it down to zero.\u201d<\/p>\n Today\u2019s court proceedings also featured some momentary drama.\u00a0<\/p>\n Yedidia, also a college friend of Bankman-Fried, bluntly told the court that \u201cFTX defrauded all its customers.\u201d\u00a0<\/p>\n Yet this statement was later ultimately stricken from the court record, a move both parties agreed upon.\u00a0<\/p>\n Don\u2019t miss the next big story \u2013 join our\u00a0free daily newsletter<\/a>.<\/strong><\/p>\nOther perspectives\u00a0<\/h2>\n
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