
FTX trial: Sam Bankman-Fried used crypto exchange clients' money without permission to invest through his personal hedge fund.
The disgraced titan knowingly used knowingly used clients' funds without permission to invest through his personal hedge fund, the former business partner testified Friday in court. Gary Wang Zixiao, co-founder of FTX, has pleaded guilty to multiple charges related to the cryptocurrency trading platform's stunning collapse, and has agreed to cooperate with federal prosecutors. He is the first major witness to appear in his former partner's trial, which began on Tuesday in New York and could last up to six weeks. Bankman-Fried, 31, is charged with seven counts of fraud, embezzlement and criminal conspiracy and could face more than 100 years in prison if convicted. This courtroom sketch shows FTX founder Sam Bankman-Fried, far left, listening during his fraud trial in New York, as assistant U.S. Attorney Nicholas Roos, centre, questions FTX co-founder Gary Wang Zixiao, far right, in court on October 6th, 2023. In November 2022, Bankman-Fried's cryptocurrency exchange platform collapsed, unable to cope with massive withdrawal requests from customers panicked to learn that some of FTX's funds had been committed to risky operations by his personal hedge fund.
Bankman-Fried, FTX's chief technology chief at the time of the collapse, said on Friday that FTX and Alameda were willing to break the law and lie to enable FTX and Alameda to post strong growth and profits. Bankman-Fried's software has been changed to allow Alameda to withdraw unlimited funds from the platform in 2019, a few months after FTX was created. That code, according to Wang, was not disclosed to the public or investors, whose own sentence has not yet been handed down, though it is expected to be reduced owing to his cooperation. Gary Wang Zixiao, co-founder and former chief technology officer of FTX, exited court in New York on October 6, 2023. Photo: Bloomberg Bankman-Fried falsely told journalists and investors that the crypto platform 'didn't use customers' money, Wang testified. The money, which prosecutors allege were used by Bankman-Fried to purchase real estate in the Bahamas, Wang said. The line of credit given to Alameda was gradually raised, eventually reached the astronomical sum of US$65 billion, Wang said. The financial collapse of FTX resulted in some US$8 billion in clients' cash, borrowed by Alameda, which was unable to reimburse them. On several occasions, Wang said, Bankman-Fried had requested customer losses be put on Alameda's books, to hide the transactions from the general public and not damage FTX's image. The trial is set to resume on Tuesday, with testimony expected from former chief executive of Alameda Research, who has also pleaded guilty and pledged to cooperate with prosecutors.