By
Mayowa Adebajo
April 11th, 2024
The CFTC claimed that the FTX co-founder created a “virtually unlimited” secret line of credit” for Alameda.
FTX attorney Andrew Dietderich has dropped a bombshell testimony that Sam Bankman-Fried ordered co-founder Gary Wang to open a credit line for Alameda Research. Alameda Research is the crypto exchange’s crypto company, which was at the center of the unfortunate crash last year. The incident resulted in FTX, Alameda Research, and about 130 subsidiaries filing bankruptcy in the US due to a “liquidity crunch.”
Report: FTX Opened Credit Line for Alameda Research
According to the New York Post, the attorney revealed this information during a hearing at a Delaware bankruptcy court on the 11th of January. Dietderich explained that the FTX former boss asked Wang to open a $65 billion “secret backdoor line of credit” for Alameda Research. He added that the purpose of the backdoor was to create a method that allows Alameda Research to borrow money from FTX without seeking permission from the exchange’s customers.
“Mr. Wang created this backdoor by inserting a single number into millions of lines of code for the exchange, creating a line of credit from FTX to Alameda, to which customers did not consent. And we know the size of that line of credit. It was $65 billion.”
In November, Reuters noted that SBF had transferred $10 billion between Alameda and FTX. The report, citing sources, added that the ex-CEO moved another $2 billion, which is currently unaccounted for. In a “pre-mortem overview” published on the 12th of January, Bankman-Fried denied the allegation against him about stealing FTX funds. In his response, he said that FTX International became illiquid, as Alameda did. SBF explained that” Alameda had a margin position open on FTX, and the run on the bank turned illiquidity into insolvency.”
The FTX lawyer’s testimony authenticates allegations from the Commodity Futures Trading Commission (CFTC). In December, the authorities filed charges against SBF, Wang, and Alameda CRO Caroline Ellison. The CFTC claimed that the FTX co-founder created a “virtually unlimited” secret line of credit” for Alameda.
Meanwhile, Alameda Research’s ex-CEO and Wang have pleaded guilty to the charges against them concerning the FTX dramatic collapse. On the other hand, SBF pleaded not guilty to eight criminal charges, and his trial is scheduled to begin in October. In the interim, he is under house arrest at his parents’ house after a $250 million bond release. Sam’s parents Joseph and Barbara Fried, are under investigation, as confirmed by the current FTX CEO John Ray. Ray revealed that Bankman received cash from the company as payment for giving “legal advice” to his son.