Day four of Sam Bankman-Fried’s trial on federal fraud and money-laundering charges showcased testimony from FTX co-founder Gary Wang. Wang revealed how he and Bankman-Fried committed financial crimes and deceived the public.
In a striking demonstration of the government’s case, Wang, 30, the first star witness for the prosecution, told a New York jury on Thursday that he and Bankman-Fried diverted billions unlawfully from FTX customers and investors. They also “lied to the public” in the buildup to the collapse of the cryptocurrency trading platform in November last year.
As the former chief technology officer of FTX and part-owner of hedge fund Alameda Research, Wang admitted taking part in wire, securities, and commodities fraud. He revealed that in 2017, he and Bankman-Fried initiated the unauthorized transfer of FTX funds to Alameda, eventually withdrawing $8 billion.
Wang stated that Bankman-Fried instructed him to grant “special privileges on their FTX website” to Alameda, altering the computer code controlling its operations to provide a credit line of up to $65 billion. This figure startled Judge Lewis A. Kaplan, prompting confirmation from Wang that he did indeed mean “billion” and not “million.”
Wang testified that Bankman-Fried’s instructions allowed Alameda to have negative balances and withdraw unlimited amounts of funds, referring to the funds of FTX customers.
Wang’s damning testimony, as the former friend and roommate of Bankman-Fried, continued on Friday as the prosecution presented their case against the former cryptocurrency prodigy. Prosecutors allege that he orchestrated a “massive fraud” involving billions of dollars.
Wang is the first of three former top FTX executives set to testify against Bankman-Fried after pleading guilty to fraud in cooperation deals with the government. They hope to receive leniency in sentencing. The other former executives include Carolyn Ellison, Alameda’s former CEO and Bankman-Fried’s ex-girlfriend, and Nishad Singh, FTX’s former engineering director.
Bankman-Fried, who has been in a Brooklyn jail since August, has maintained his innocence since his arrest in the Bahamas last December. If convicted of the seven charges against him, the 31-year-old faces a potential prison sentence of over a century.
Damaging testimony from former friends
When Wang entered the Manhattan courtroom to testify for the prosecution, he avoided making eye contact with Bankman-Fried, as noted by Bloomberg News. Assistant U.S. Attorney Nathan Rehn, in his opening statement on Wednesday, declared that Bankman-Fried embezzled at least $10 billion from thousands of customers and investors to fund external ventures such as political donations and luxury real estate acquisitions.
Wang’s testimony aligned with that of Adam Yedidia, another former friend and classmate of Bankman-Fried. Yedidia testified that five months before both FTX and Alameda collapsed, Bankman-Fried privately expressed concern about a potential $8 billion deficit at FTX resulting from loans to Alameda.
During questioning by Assistant U.S. Attorney Danielle Sassoon, Yedidia disclosed that he raised the issue with Bankman-Fried, inquiring about the situation. In response, Bankman-Fried, who appeared unusually nervous, reportedly said something like, “We were bulletproof last year. We’re not bulletproof this year,” according to Yedidia’s testimony.
Yedidia’s testimony potentially undermines Bankman-Fried’s claim that he had limited involvement in managing Alameda and relied on Ellison. Yedidia, testifying with immunity from prosecution, described himself as a “longtime friend” of Bankman-Fried. They were both students at the Massachusetts Institute of Technology and later lived and worked together at Bankman-Fried’s $30 million apartment in the Bahamas.
Yedidia stated that he quit his position as an FTX developer and severed ties with Bankman-Fried after discovering in early November that Bankman-Fried allegedly redirected FTX customer deposits to cover Alameda’s expenses.
Defense has “very different story” to tell
The defense argues that their client had no criminal intentions while building his crypto empire. In his opening statement, Bankman-Fried’s attorney, Mark Cohen, asserted that Bankman-Fried has “a very different story” to present compared to the prosecution’s allegations.
Cohen portrayed Bankman-Fried as a techie who abstained from alcohol and parties, stating that “Sam didn’t defraud anyone, didn’t intend to defraud anyone.”
The trial is expected to last for six weeks.
Prior to FTX’s collapse and subsequent bankruptcy filing, Bankman-Fried had an estimated net worth of $32 billion. Famously known for socializing with politicians, he publicly declared his intention to assist the market when smaller crypto firms began to fail in early 2022.
According to a former federal prosecutor, the prosecutors focused on Bankman-Fried’s unauthorized use of customer funds rather than delving into the complexities of cryptocurrencies. “This case is less about complicated investments and all about garden-variety fraud,” said Michael Zweiback, co-founder of the law firm Zweiback, Fiset & Zalduendo.
Bankman-Fried, the son of Stanford University law school professors, attended the Massachusetts Institute of Technology in the 2010s before working at a Wall Street investment firm in 2014. He left in 2017 to relocate to San Francisco, where he co-founded FTX in 2019.
—This report includes contributions from CBS News’ Cassandra Gauthier and the Associated Press.
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