The most damaging evidence against FTX founder Sam Bankman-Fried at his criminal trial is coming from the people who know him best.
Bankman-Fried, 30, met Gary Wang at summer camp when he was 7 years old. The two later became college classmates at Massachusetts Institute of Technology and co-founded FTX along with a crypto hedge fund called Alameda Research.
On Thursday, Wang sat across from Bankman-Fried and admitted in court the two had also committed fraud together. With a computer code that gave Alameda unlimited access to withdraw customer funds and lenient margin trading collateral requirements, FTX customers were able to access an unlimited amount of cash.
Bankman-Fried testified that FTX did not write, review, or implement FTX's code, but directed him to create its features. These features gave Alameda unlimited access to customer funds deposited into FTX, exceptional lines of credit to place margin trades on the exchange, and the ability to incur negative balances.
Assistant U.S. Attorney Danielle Sassoon asked Wang to be extradited, a spokeswoman for the U.S. District Attorney's office. By the time FTX declared bankruptcy in November 2022, Alameda had withdrawn 8 billion dollars.
The testimony of a member of Bankman-Fried's inner circle went to the heart of the allegations against the 31-year-old cryptocurrency entrepreneur, who embezzled billions in FTX customer funds while misleading investors and lenders.
Caroline Ellison, the former chief executive of Bankman-Fried's hedge fund Alameda Research and a one-time romantic partner, as well as former FTX chief engineer Nishad Singh, are also expected to testify. The four others, Wang, Ellison, and Singh, have pleaded guilty to criminal charges.
On Friday, Wang went further into how things work at FTX and Alameda, which also acted as a customer of the cryptocurrency exchange.
In 2019 Bankman-Fried said the code he wrote in 2019 exempted Alameda from the rules that applied to other FTX customers and allowed it to essentially take what it wanted from the exchange.
For example, Alameda employed an 'allow negative' feature to take on negative balances through withdrawals or trades with FTX, overriding a program that would automatically liquidate positions in such accounts.
FTX also received a $65 billion line of credit from Alameda, a substantial increase over any other client. These arrangements, he said, were never disclosed to customers or investors.
In early 2020, Wang said he told Bankman-Fried there was a negative balance for Alameda. Bankman-Fried told Wang to include holdings of FTT, FTX's own digital currency, in the calculation, and Wang said that still didn't close the gap.
Alameda eventually borrowed as much as $14 billion from FTX. Wang said the policy is based on fairness, transparency and transparency.
This week, Wang was not the only former roommate of MIT who offered evidence against Bankman-Fried. Other hires included Adam Yedidia, whom Bankman-Fried hired to work at Alameda. Like Wang, Yedidia wrote computer code for the exchange. He said he had agreed to testify under a grant of immunity from prosecution.
In June 2022, Yedidia said he came across an $8.5 billion shortfall at FTX from loans made to Alameda.
Bankman-Fried raised the issue with the board yesterday during an exchange outside the luxury complex in the Bahamas with other FTX executives, asking if things were okay.
We were not bulletproof last year. We're not bulletproof this year,' Yedidia said, adding that Bankman-Fried appeared worried.
Prosecutors asked him what he did that changed his mind.