FTX: Sam Bankman-Fried’s Secret “Back Door” Discovered

Sam Bankman-Fried, ex-CEO of bankrupt crypto exchange FTX, before a New York court hearing.
Michael M. Santiago/Getty Images

FTX bankruptcy attorneys reveal that Sam Bankman-Fried’s trading firm Alameda was able to use a $65 billion line of credit from the crypto exchange.

The customer loans were therefore provided through a “backdoor” created by FTX co-founder Gary Wang, according to the lawyers.

The bankruptcy court in the US state of Delaware said the money was used for luxury purchases such as airplanes, parties and political donations.

Sam Bankman-Fried, founder and ex-CEO of insolvent crypto exchange FTX, apparently instructed fellow cryptocurrency exchange Gary Wang to build a “secret” backdoor into the business. It allegedly enabled his trading firm Alameda to borrow $65 billion in customer funds from the exchange without their consent, the Delaware bankruptcy court was told last Wednesday.

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Wang was instructed to create a “backdoor, a secret way for Alameda to borrow money from customers on the exchange without permission,” said FTX attorney Andrew Dietderich. “Mr. Wang created this backdoor by inserting a single number in millions of lines of code for the exchange, creating a line of credit from FTX to Alameda that customers didn’t agree to,” he added. “And we know the amount of that credit line. It was $65 billion.”

The US agency Commodity Futures Trading Commission (CFTC) made similar allegations when it filed charges against Wang in December. But the value of this credit line has not been discussed until now. The CFTC described them as “virtually unlimited” at the time.

And in November, Reuters quoted unnamed sources as saying that Bankman-Fried had moved $10 billion between the two companies, with another $2 billion yet to be booked.

Dietderich told the court that Alameda used the $65 billion to “buy planes and houses, threw parties and made political donations” through the back door. Bankman-Fried is the second-largest donor to Democrats, but said he’s given just as much to Republicans — with “dark” money.

Properties in the Bahamas worth $256.3 million were also registered in FTX’s name – including 15 condos in the same building. Other court filings show that FTX spent $6.9 million on “meals and entertainment” in just nine months.

This article has been translated from English. You can find the original here.

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