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In the ongoing FTX trial, shocking insider testimony has shed light on alleged financial misconduct within the cryptocurrency exchange. Gary Wang, the co-founder of both FTX and Alameda Research, took the stand and revealed that Alameda had a significant advantage over FTX, despite their supposed independence.
FTX was designed to provide equal privileges to all customers, including Alameda, as testified by an investor in the exchange. However, Wang’s testimony painted a different picture. Alameda, owned 90% by Sam Bankman-Fried (SBF), the founder of FTX, had distinct advantages on the platform. These advantages included the ability to withdraw unlimited sums of money, a virtually limitless line of credit, faster trading capabilities, and the routing of FTX customer deposits to an Alameda bank account.
One astonishing revelation was that Alameda could withdraw funds even if its account balance went negative, a privilege not afforded to regular customers. By the time of FTX’s bankruptcy in November 2022, Alameda had allegedly withdrawn a staggering $8 billion into the negative.
Wang’s testimony is critical in the trial, as he has pleaded guilty to four counts of fraud and is cooperating with the prosecution in exchange for a potentially lighter sentence. Adam Yedidia, an FTX developer and a close friend of SBF since their college days, also testified. He recounted an instance where he confronted SBF about Alameda owing FTX customers $8 billion, a significant cause for concern.
Yedidia’s testimony indicated that Alameda and FTX, despite being portrayed as separate entities, had a close relationship. They shared an office, and for most of their history, SBF served as the CEO for both. Yedidia also revealed details about the luxurious $35 million penthouse named the Orchid, where he, SBF, and others lived. The penthouse was a stark contrast to the initial FTX office in Hong Kong, which was depicted as a crowded, dimly lit space.
The trial’s proceedings have been intense, with moments of confusion and repetitive questioning from the defense attorney, Christian Everdell. However, Yedidia’s testimony highlighted significant financial discrepancies and raised questions about the relationship between Alameda and FTX.
As the trial continues, the cryptocurrency community awaits further revelations and insights into the alleged misconduct within FTX and Alameda Research. The case underscores the importance of transparency and regulatory oversight in the crypto industry as it grapples with growing scrutiny from authorities and investors alike.