Cointelegraph reporters are on the ground in New York for the trial of former FTX CEO Sam “SBF” Bankman-Fried. As the saga unfolds, check below for the latest updates.

Oct. 5: Gary Wang details relationship between FTX and Alameda Research

In over 4 hours of testimony, Gary Wang, co-founder of Alameda Research and FTX alongside Sam Bankman-Fried, provided in-depth details about the relationship between the companies and how the crypto empire ended up with an $8 billion hole in customer assets. 

According to Wang, a few months after FTX’s inception, in 2019, Alameda received special privileges from FTX. Prosecutors used screenshots of FTX’s database and code available on GitHub to show that Alameda was allowed to have an unlimited negative balance at FTX, a special line of credit of $65 billion in 2022, and an exemption from the liquidation engine. 

The commingling of funds and problems between companies evolved over time. In 2020, Bankman-Fried instructed Wang that Alameda’s negative balance should not exceed FTX’s revenue — a rule that changed over the years, according to Wang’s testimony. In late 2021, for example, Alameda’s liability to FTX stood at $3 billion, up from $300 million in 2020. 

“I trusted his judgment,” Wang said when asked why he agreed to Alameda’s privileges. 

However, these alleged privileges were part of Alameda’s role as a primary market maker for FTX, the defense argued later during Wang’s testimony. The defense counsel also noted that other market makers had similar privileges at FTX, and being able to go negative was a key feature of any market maker. 

Another point emphasized by prosecutors was the MobileCoin (MOB) exploit in 2021. Bankman-Fried allegedly told Wang and Caroline Ellison to add the multimillion-dollar deficit to Alameda’s balance sheet instead of keeping it on FTX to hide the loss from FTX investors.

Months before FTX’s collapse, Bankman-Fried, Wang, and Nishad Singh — former director of engineering — discussed shutting down Alameda and replacing its role with other market makers. The company’s liabilities, however, were too high at the time, sitting at $14 billion. Alameda remained in operations until November 2022. 

Wang’s testimony will continue on Oct. 10 — the same day Ellison will also be heard.

Oct. 5: Yedidia cross-examination, witness testimonies in focus

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