Gary Wang, the former Chief Technology Officer (CTO) and co-founder of FTX, returned to a New York court on October 6 to provide testimony during the ongoing criminal trial of former FTX CEO Sam "SBF" Bankman-Fried. Wang's testimony centered on the relationship between FTX and Alameda Research and a controversial feature known as "allowing negatives."
Wang revealed that Alameda Research's account on the FTX platform was the sole account authorized to trade beyond its available volume, effectively allowing it to accumulate a negative balance. He claimed that Bankman-Fried instructed him and former FTX engineering director Nishad Singh to implement this feature in 2019.
The addition of "allowed negatives" to the FTX code permitted Alameda to amass a negative balance larger than FTX's total 2020 revenue, amounting to $200 million compared to FTX's $150 million. Wang further stated that Bankman-Fried had extended a staggering $65 billion credit line to Alameda, despite public statements that contradicted the true nature of the relationship between the two entities.
Wang emphasized that FTX had initially pledged not to utilize funds in this manner, and he recounted how he informed Bankman-Fried that Alameda's balance was in the billions. According to Wang, a meeting in the Bahamas followed, during which Bankman-Fried inquired about the situation and subsequently informed Carolyn Ellison, the former CEO of Alameda, that the company could continue repaying the loan.
Bankman-Fried has claimed that Alameda's special privileges on FTX primarily revolve around the exchange's native token, FTX Token (FTT), which is used for trading when account balances are negative. Wang confirmed that Alameda had the ability to directly withdraw funds from FTX accounts.
The central focus of the prosecution's case against Bankman-Fried revolves around allegations that he utilized FTX user funds at Alameda without obtaining customer consent. Wang had already confessed to this crime during his testimony on October 5, and he had previously pleaded guilty to fraud charges in December 2022. The trial is expected to continue into November, with other witnesses such as former Alameda CEO Carolyn Ellison and former Alameda employee Andrew Singer likely to testify. Bankman-Fried's bail was revoked by Judge Lewis Kaplan in August, and it remains uncertain whether he intends to testify in person.
