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FTX co-founder Gary Wang disclosed additional information regarding Alameda Research’s unethical association with his exchange during Sam Bankman-Fried’s fraud trial on Friday.
In his testimony, Wang asserted that the capability enabling Alameda to misappropriate client funds had been integrated into FTX’s computer systems as early as 2019.
Alameda’s Unique Advantages
As reported by Inner City Press on Twitter, Gary Wang indicated that Alameda was afforded three unique advantages at FTX in comparison to other clients.
One of these was the “allow negative” feature, which permitted Alameda to trade with more capital than it actually possessed in its account. As Wang had previously testified, Alameda was able to withdraw unlimited amounts from FTX.
This feature was subsequently misused to withdraw $8 billion in fiat and crypto beyond what the trading firm had in its account—approximately the same deficit FTX encountered when it failed to meet client withdrawal demands last November.
Wang clarified that the additional funds originated from FTX customers who had not explicitly consented to lend their assets. Although it took years for the scheme to come to light, Wang stated he was aware of Alameda having a negative balance as early as 2019.
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Initially, the withdrawal limit was set at around $50 million to $100 million—the amount that FTX had been generating in annual revenue. However, just a year later, Wang found that this limit had already been breached.
“In early 2020 I conducted a database query—Alameda’s balance was negative more than FTX revenue,” he remarked. While the exchange’s revenue was approximately $150 million, Alameda was already at least $200 million in the negative.
Alameda’s Enormous Credit Line
Alameda also had access to an extraordinary $65 billion line of credit from FTX. According to Wang, no other client was able to obtain credit exceeding $1 billion.
Wang stated that the reality contradicted Bankman-Fried’s repeated assertions that FTX customer funds remained untouched. “He mentioned it on Twitter and during phone calls; I heard him as he walked around the office,” Wang added.
The co-founder also claimed that Bankman-Fried had seen Alameda’s balance firsthand. This contradicts SBF’s numerous statements in interviews claiming he was unaware of the status of Alameda’s finances prior to its downfall.
During cross-examination, Sam Bankman-Fried’s attorneys emphasized that Alameda’s balance was permitted to go negative so that it could function as a market maker for FTT—FTX’s native exchange token. Wang clarified, however, that the trading desk’s exemption from auto liquidation was partly due to the fact that Alameda’s position was so substantial that it could “cause damage.”
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