Gary Wang, a co-founder of FTX, testified in a New York court that a tweet sent by Sam Bankman-Fried, the CEO of FTX, falsely assuring that the cryptocurrency exchange was “fine” was inaccurate. Mr. Wang disclosed that when Bankman-Fried posted the tweet, he was aware that the firm faced an $8 billion deficit, which led to its bankruptcy declaration shortly thereafter.
Wang, who had already pleaded guilty, testified in court, where Bankman-Fried is on trial for fraud. Bankman-Fried has been charged with fraud, money laundering, stealing funds from FTX customers, and lying to investors and lenders. He has denied all charges.
Wang’s testimony highlighted the gap between FTX’s public image and its actual financial situation. He claimed that Bankman-Fried repeatedly made public statements about the company’s financial health that did not align with reality. Wang stated, “FTX was not fine. Assets were not fine because FTX did not have enough assets for customer withdrawals.”
FTX experienced a collapse into bankruptcy in November of the previous year as a surge of customers attempted to withdraw their funds. The Department of Justice has accused Bankman-Fried of funnelling customer funds into property purchases, political donations, marketing, and other expenses through Alameda, a cryptocurrency trading firm he founded.
Wang revealed that Alameda had been withdrawing more money from FTX than the platform generated from customer trading fees since the end of 2019. By June 2022, the debt owed by Alameda to FTX was estimated at around $11 billion. Bankman-Fried’s lawyer argued that Alameda’s unique features on the platform were due to its role as a “market maker” responsible for facilitating smooth trading.
The trial is expected to last six weeks, with Wang continuing to testify next week, followed by Caroline Ellison, Bankman-Fried’s former girlfriend and former CEO of Alameda, who has also pleaded guilty.