Indicted FTX founder Sam Bankman-Fried leaves the United States Courthouse in New York City, U.S., July 26, 2023. REUTERS/Amr Alfiky/File Photo Acquire Licensing Rights
NEW YORK, Oct 5 (Reuters) – Sam Bankman-Fried’s college roommate and ex-colleague, Gary Wang, testified on Thursday at the FTX cryptocurrency exchange founder’s fraud trial that Bankman-Fried told him to give a hedge fund they co-owned special trading privileges on FTX.
The special privileges granted to the hedge fund, Alameda Research, included a $65 billion line of credit, several times bigger than the amount other users were able to borrow, he said. Alameda withdrew $8 billion from FTX at the time of the exchange’s bankruptcy in November 2022, Wang testified.
“It withdrew so much that FTX was not able to repay customers who were trying to withdraw,” Wang, FTX’s former chief technology officer, said on the stand. He added that Bankman-Fried had directed him to implement the changes giving Alameda special privileges.
Wang is the first of three former close associates of Bankman-Fried to testify at the trial, which began on Tuesday. All three have pleaded guilty to fraud charges and agreed to cooperate with prosecutors.
Bankman-Fried’s trial kicked off nearly a year after FTX froze customer withdrawals and declared bankruptcy in a dramatic collapse that shocked financial markets and left its founder’s reputation in tatters.
Federal prosecutors in Manhattan say the 31-year-old former billionaire stole billions of dollars in FTX customer deposits to plug losses at Alameda, buy real estate and donate to U.S. political candidates.
“All that was left in FTX was what amounted to an IOU from Alameda,” prosecutor Thane Rehn said in his opening statement on Wednesday.
Bankman-Fried has pleaded not guilty. His lawyer, Mark Cohen, said in his opening statement that cooperating witnesses like Wang may be “spinning things that Sam said and did at the time that were good-faith business decisions that they themselves were fine with” as “sinister” in hindsight.
Wang and Bankman-Fried met at a math camp in high school and later became roommates at the Massachusetts Institute of Technology. They were also among 10 FTX and Alameda employees who lived together in a $35 million penthouse apartment in the Bahamas, where FTX was based.
Earlier on Thursday, jurors heard from Adam Yedidia, a former FTX computer programmer who reported to Wang and was also friends with Bankman-Fried at MIT.
Yedidia said that in fixing an error in FTX’s code in June 2022, he saw that Alameda owed FTX $8 billion. The debt had arisen because the exchange could not open its own bank accounts and had instructed FTX’s users to wire money to Alameda, he said.
But Yedidia grew concerned that the debt was too large, and asked Bankman-Fried about it while playing padel tennis at their Bahamas apartment complex. He said Bankman-Fried appeared worried as well.
“Sam said something like, ‘we were bulletproof last year, but we’re not bulletproof this year,'” Yedidia testified on Thursday.
At the trial on Thursday, Bankman-Fried took a break from typing on a laptop on the defense table in front of him to look up at Yedidia as he walked by before testifying. Yedidia did not turn to look at him.
The defendant’s parents, the Stanford Law School professors Joseph Bankman and Barbara Fried, took notes on a yellow legal pad that they passed back and forth to each other as Yedidia testified.
Other cooperating witnesses set to testify include Nishad Singh, FTX’s former engineering chief, and Caroline Ellison, Alameda’s former chief executive officer and Bankman-Fried’s on-and-off girlfriend.
Reporting by Luc Cohen and Jody Godoy in New York
Editing by Amy Stevens and Matthew Lewis
Our Standards: The Thomson Reuters Trust Principles.
