An attorney for FTX, Andrew Dietderich, made allegations that SBF had asked Gary Wong to create a secret backdoor for a $65 billion line of credit.
Bankman-Fried had moved $10 billion between the two companies, with a further $2 billion still unaccounted for. However, both Wang and Ellison have pleaded guilty to federal fraud and conspiracy charges and are cooperating with investigators.
On Thursday, while awaiting trial, Bankman-Fried wrote a Substack blog post in which he declared his innocence. He asserted that he did not steal funds and did not hide away billions and that nearly all of his assets were, and still are, being used to support FTX customers.
How the backdoor was created?
“Mr. Wang created this back door 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,” he added. “And we know the size of that line of credit. It was $65 billion.” The Commodity Futures Trading Commission (CFTC) made similar allegations when it brought charges against Wang in December. But the value of that line of credit hasn’t been discussed before now. The CFTC then described it as “virtually unlimited.”
Bankman-Fried had moved $10 billion between the two companies, with a further $2 billion still unaccounted for. Dietderich told the court that with the $65 billion back door, Alameda “bought planes, houses, threw parties, made political donations.”
Bankman-Fried is the second-highest donor to Democratic causes, but says he donated just as much to Republicans using “dark” money. $256.3 million of Bahamian real estate was also registered in FTX’s name – including 15 condos in the same building. Other court filings say FTX spent $6.9 million on “meals and entertainment” in just nine months.
Where the funds were used?
FTX lawyer further revealed in court that Alameda used those $65 billion back door accessed funds to buy planes, houses, throw parties, and make political donations. Court filings disclose that SBF spent nearly $40 million on hotels, travel, food and luxury items in just nine months. FTX employees in the Bahamas had perks including free travel to anywhere in the world at the FTX office. Millions of dollars were spent on meals and entertainment just a few months before FTX filed for bankruptcy.
The initial CFTC charges against SBF claim that he, FTX Trading and Alameda Research committed fraud and material misrepresentation concerning the sale of digital commodities in interstate commerce. The three defendants also caused the loss of over $8 billion in FTC customer deposits.
‘FTX customer assets were routinely accepted and held by Alameda and commingled with Alameda’s funds. Alameda, Bankman-Fried, and others also appropriated customer funds for their own operations and activities, including luxury real estate purchases, political contributions, and high-risk, illiquid digital asset industry investments,’ said the CFTC.
In an additional statement, the CFTC sought to add Gary Wang and former Alameda CEO Caroline Ellison to the charges facing SBF, FTX trading and Alameda Research. The CFTC claimed that Mr Wang and Ms Ellision ‘played critical roles in perpetrating an international fraudulent scheme that caused the loss of over $8 billion in FTX customer deposits and must be held accountable.’
