Revelations in Sam Bankman-Fried Trial: FTX Staff Noted $20 Billion Loss with an ‘Oops’
During the trial of Sam Bankman-Fried, the boss of the now-failed crypto exchange FTX, startling revelations emerged.
In July 2022, as investors sought the return of their money amidst a crypto industry downturn, Bankman-Fried ordered his staff to prepare a spreadsheet to assess FTX’s debts.
This spreadsheet exposed a staggering $20 billion loss, and next to an entry for ‘expenses’ totaling -$172 million, a senior staff member wrote, ‘Oops, this sounds like not a thing we should be counting.’
FTX Co-Founder Gary Wang’s Testimony
Gary Wang, co-founder of FTX, played a pivotal role in the trial’s testimony. Wang, a star witness for the prosecution, claimed that FTX had been misappropriating customers’ funds for three years leading up to its collapse.
He disclosed that the debts owed by Alameda to FTX had skyrocketed from less than $100 million in 2019 to a staggering $8 billion by November 2022, coinciding with the exchange’s collapse.
Alleged Misappropriation of Customer Funds
Wang detailed how Alameda Research, FTX’s sister company, was granted special privileges by Bankman-Fried.
These privileges included having a negative balance of up to $65 billion and making unlimited withdrawals from FTX, even when Alameda had no money in its account.
This meant that Alameda was essentially borrowing customer funds without authorization.
Bankman-Fried justified this arrangement by instructing Wang to include the value of FTT, a cryptocurrency created by FTX, in his calculations.
However, Wang raised concerns that selling off all FTT would lead to a drop in its price, potentially leaving insufficient funds to cover Alameda’s debts.
Collapse and Customer Impact
When news of this secretive arrangement became public in November 2022, it triggered a rush by customers to withdraw their funds, ultimately leading to FTX’s collapse.
Wang acknowledged that customer money had been used without their consent, and despite this, Bankman-Fried reassured customers publicly that everything was fine.
In reality, Alameda’s debt had surpassed the combined value of FTX’s trading revenue and the FTT cryptocurrency.
Bankman-Fried’s Response and Legal Consequences
Bankman-Fried’s response to the escalating situation included transferring a $700 million loss onto the accounts of Alameda, citing FTX’s more public balance sheets as a reason for this move. Wang testified that this decision effectively transferred the loss to customers.
The trial involves numerous charges against Bankman-Fried, including wire fraud, money laundering, and violations of campaign finance laws, with the potential for a 115-year prison sentence if convicted.
Wang’s testimony shed light on a complex web of financial misconduct and mismanagement within FTX and Alameda Research.
Closing Thoughts on the Trial
The trial has provided a glimpse into the inner workings of FTX and the alleged misappropriation of customer funds, leaving many questions about transparency and accountability in the crypto industry.
The courtroom revelations underscore the challenges of regulating digital asset exchanges and the need for greater oversight to protect investors and customers.Read More On The Topic On TDPel Media