Gary Wang, FTX co-founder, testified in court that Sam Bankman-Fried and his inner circle committed wire fraud.
On Thursday afternoon, he said, referring to trading desk Alameda Research having access to customer deposits of the crypto exchange FTX.
Gary Wang, FTX co-founder, pleaded guilty and agreed to cooperate with authorities in the investigation. Bankman-Fried has been friends with Bankman-Fried since high school and helped set up the cryptocurrency behemoth FTX, but had a much smaller profile during the crypto company's golden years.
Alameda had a substantial line of credit, allowing it to place orders faster on FTX's platform, withdraw unlimited funds, and carry a negative balance. By the time FTX collapsed, Alameda had withdrawn $8 billion from the platform and drawn $65 billion on its line of credit, Wang said.
Alameda's indebtedness set it apart from other market makers that traded on FTX, who typically had lines of credit in the single or double-digit millions-not billions, he said.
He also disclosed that he had been on a $200,000 salary with 17% equity in FTX. Sam, 58, owned like 65% of the company, according to his testimony. Bankman-Fried owned 90% of Alameda Research, while retaining 10% of the company.
In his time in the company, Wang said he was allowed to withdraw $200,000 from the company to build a house and received access to up to $300 million to invest in other startup companies.
Wang said that Bankman-Fried handled public-facing duties such as lobbying and talking to the media, while his role was limited to coding.
The court then adjourned before Wang could complete his testimony. Judge Lewis Kaplan said the prosecutors could continue tomorrow.
Matt Huang, a managing partner at venture capital firm Paradigm, also provided testimony on Thursday, saying that his firm would not have invested $278 million, which has now marked zero, in Bankman-Fried's companies if it had known that the funds would be siphoned off to Alameda Research.
He also added that Paradigm was initially skeptical of what he called FTX's unique governance structure. Mark Cohen, one of the attorneys representing Bankman-Fried, said that Paradigm had asked that they be granted a seat on FTX's board and that they were not the only investor to have asked about it.
After raising concerns about frontrunning, Huang said Paradigm was told by Bankman-Fried that Alameda Research received no preferential treatment on FTX's crypto exchange.