Former FTX CEO Sam Bankman-Fried (SBF) reportedly ordered Gary Wang, co-founder of the crypto exchange, to open a $65 billion “secret backdoor channel” to Alameda Research, according to FTX attorney Andrew Dietderich.
The attorney revealed the information during a Delaware bankruptcy court hearing on January 11, the New York Post reported. The line of credit is allegedly funded with FTX customer funds. According to Dietderich’s testimony, “the back door was a secret way for Alameda to borrow from customers in the exchange without permission.”
“Mr. Wang created this backdoor by inserting the number one into millions of lines of code for the exchange, creating a line of credit from FTX to Alameda, which the customer did not agree to,” said Dietderich in court, adding:
“And we know the size of that line of credit. It’s $65 billion.
Alameda Research is a sister company of FTX, and is at the heart of the crypto exchange’s dramatic collapse. In November 2022, FTX Group and more than 130 subsidiaries filed for bankruptcy in the United States due to a “liquidity crunch”.
Related: FTX customer names will remain sealed for now, judge rules
In the “pre-mortem summary” published on January 12, SBF denied the allegations of theft of FTX funds. He said that “when Alameda became illiquid, so did FTX International, because Alameda had an open margin position in FTX; and the bank turned that illiquidity into insolvency.”
In December, the United States Commodity Futures Trading Commission (CFTC) filed a complaint alleging several irregular business practices among the companies. The commission stated that FTX executives created a feature in the code, allowing “Alameda to maintain an unlimited line of credit at FTX.”
Former Alameda Research CEO Caroline Ellison and FTX co-founder Gary Wang have pleaded guilty to charges related to the case. Bankman-Fried has pleaded not guilty to eight criminal charges, including alleged violations of campaign finance laws and wire fraud. The trial is expected to begin in October.