Sam Bankman-Fried Ordered ‘Special Privileges’ for Alameda, FTX Co-Founder Gary Wang Testifies

NEW YORK -- Alameda Research had “special privileges” at FTX that allowed the crypto hedge fund to spend $8 billion of exchange customers’ money, Gary Wang, a former top lieutenant in Sam Bankman-Fried’s empire, testified at trial Friday.

Taking the stand in an ill-fitting black suit, Wang, who co-founded both companies with Bankman-Fried, said that in July 2019, just shortly after the exchange opened for business, Bankman-Fried directed him to write code for FTX that would let Alameda’s account balance fall below zero. It was a secret feature that no other customer of the crypto exchange had, the insider-turned-government witness said.

“Sam told me to make sure Alameda’s accounts would never get liquidated on FTX,” Wang said.

Wang is the first of at least three witnesses from Bankman-Fried’s inner circle who pled guilty to financial crimes and are now testifying against the alleged fraudster in his criminal trial.

Once known as FTX’s quiet chief technology officer, Wang in his testimony introduced the jurors to the byzantine financial arrangements that the government alleges enabled the two companies to steal billions of dollars from FTX customers.

Months after the crypto exchange FTX was founded in 2019, Wang said Friday, he wrote “allow negative equals zero” code specified to Alameda accounts. He said Bankman-Fried ordered the code so the hedge fund could spend money on the exchange’s FTT token, the token created by FTX.

“Sam said that he wanted to pay for FTT-related expenses from Alameda accounts," Wang said. But Alameda’s spending grew broader – and never stopped, he said.

Initially, Alameda’s “special privileges” were only supposed to be able to take as much money as FTX’s revenue allowed for, Wang said. When Wang saw that it exceeded that amount, he was “surprised” and went to speak with Bankman-Fried about it multiple times, Wang testified.

“I trusted his judgment,” Wang recalled.

When asked by the prosecutor if he thought that the remaining funds came from FTX customers, Wang said no.

“Why?” the prosecutor asked.

“The money belonged to the customers and [they] didn’t give us permission to use their funds for other things,” he said.

Prior to a late-morning break, the prosecutor walked Wang through a series of questions about FTX’s “backstop fund,” the emergency fund the exchange supposedly had.

FTX displayed a dollar amount for the backstop fund on its site, but this figure was not based on anything real, Wang testified.

The actual amount in the insurance fund was lower than what was displayed, Wang said. The display figure was calculated through a formula that had no basis in reality, he said.

Inside the Courtroom

Bankman-Fried’s parents were present in court again Friday. The mother wore a black suit and listened to Wang’s testimony, occasionally moving her eyes to her son, who was sitting on the defense’s bench in the same suit he’s been wearing all week. The father showed up in a gray suit holding a notepad.

Some of the 12 jurors and six alternates took notes while Wang spoke while others just listened, bouncing their eyes back and forth between the witness and the questioning counsel. Still others occasionally nodded.

Defense counsel Mark Cohen told the judge at the beginning of Friday’s proceedings that one juror shared an elevator ride with one of Bankman-Fried's lawyers. The judge reassured jurors that if they said “good morning” to any witnesses or lawyers in this case, they shouldn’t feel offended if they didn't receive a response.

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