The ongoing trial of Sam Bankman-Fried, the crypto entrepreneur and founder of FTX, has taken an explosive turn. Zixiao “Gary” Wang, Bankman-Fried’s former business partner and co-founder of FTX, testified in court on Friday, accusing Bankman-Fried of knowingly using FTX clients’ funds without permission to invest through his personal hedge fund. This revelation has sent shockwaves through the cryptocurrency industry and raises questions about the integrity of FTX and its management.
In November 2022, FTX, the cryptocurrency trading platform founded by Bankman-Fried, experienced a significant collapse. The platform was unable to handle the massive withdrawal requests from panicking customers who discovered that some of FTX’s funds had been diverted to risky operations by Bankman-Fried’s personal hedge fund, Alameda Research. The collapse of FTX led to the loss of approximately $8 billion in customers’ funds.
Zixiao “Gary” Wang, who has already pleaded guilty to multiple counts related to FTX’s collapse, took the stand as the first major witness in Bankman-Fried’s trial. Wang described Bankman-Fried as being willing to break the law and lie to ensure the growth and profitability of FTX and Alameda Research. Wang revealed that Bankman-Fried had modified FTX’s software in 2019 to allow Alameda to withdraw unlimited funds from the platform without disclosing this information to the public or investors.
According to Wang’s testimony, Bankman-Fried falsely claimed that Alameda was treated like any other trader on FTX and that customers’ money was not used. However, Wang stated that customers had not given permission for the funds to be used for other purposes. It is alleged that Bankman-Fried used these funds, amounting to billions of dollars, to purchase real estate in the Bahamas. Furthermore, a line of credit granted to Alameda was gradually increased to an astonishing $65 billion.
Wang also revealed that Bankman-Fried had made requests on multiple occasions for customer losses to be recorded as losses for Alameda. This was done to hide the transactions from the public and to protect the reputation of FTX. This alleged attempt to manipulate financial records raises serious concerns about Bankman-Fried’s ethical conduct and the transparency of FTX’s operations.
The trial, which began on Tuesday in New York, could last up to six weeks. Bankman-Fried has been charged with seven counts of fraud, embezzlement, and criminal conspiracy. If convicted, he could face a sentence of more than 100 years in prison. The testimony of Zixiao “Gary” Wang, as well as the expected testimony of former Alameda Research CEO Caroline Ellison, who has also pleaded guilty and agreed to cooperate with prosecutors, will play a crucial role in determining the outcome of the trial.
The allegations against Sam Bankman-Fried are highly damaging to his reputation and the perception of FTX as a reputable cryptocurrency exchange platform. The accusations of misusing clients’ funds, unauthorized withdrawals, and attempted cover-ups cast a dark shadow over Bankman-Fried’s business practices. As the trial progresses, the crypto community and investors alike will be closely watching the proceedings and their potential impact on the future of FTX and the broader cryptocurrency industry.
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