Sam Bankman-Fried’s ‘secret backdoor’ is worth $65 billion, court hears

  • Bankruptcy attorneys said Sam Bankman-Fried’s Alameda had access to a $65 billion line of credit from FTX.
  • The customer loans were made available through a backdoor created by FTX co-founder Gary Wang, they said.
  • The money was used for luxury purchases like planes, parties and political donations, the court heard.

Sam Bankman-Fried asked his FTX co-founder Gary Wang to create a ‘secret’ backdoor to allow his trading company Alameda to borrow $65 billion worth of customers’ money from the exchange without their permission, a the Delaware bankruptcy court announced on Wednesday.

Wang was asked to create a “backdoor, a secret way for Alameda to borrow from exchange customers without permission,” said FTX attorney Andrew Dietderich.

“Mr. Wang created this backdoor by inserting a unique number into millions of lines of code for the exchange, creating a line of credit from FTX to Alameda, which the customers did not consent to,” he said. -he adds. “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 filed charges against Wang in December. But the value of this line of credit has not been discussed so far. The CFTC called it “virtually unlimited” at the time.

And in November, Reuters quoted unnamed sources as saying Bankman-Fried had transferred $10 billion between the two companies, with another $2 billion still missing.

Dietderich told the court that with the $65 billion backdoor, Alameda “bought planes, houses, threw parties, made political donations.”

Bankman-Fried is the second-biggest donor to Democratic causes, but says he’s given just as much to Republicans using “dark” money.

$256.3 million in Bahamian real estate has also been registered in FTX’s name – including 15 condos in the same building. Other court documents say FTX spent $6.9 million on “meals and entertainment” in just nine months.

Dietderich said the rest of the money was for personal loans, sponsorships and investments.

“We know all of this has left a shortfall in value to repay customers and creditors,” he added. This amount “will depend on the size of the claims pool and our recovery efforts.”

Court heard FTX has so far recouped $5 billion in cash, crypto and securities, with “plans to monetize over 300 other non-strategic investments” worth $4.6 billion .

Bankman-Fried’s attorney did not immediately respond to Insider’s request for comment, which was sent outside of normal working hours.

Correction: January 13, 2023 — A title in an earlier version of this story misrepresented a character quoted in bankruptcy court. An attorney for FTX said Sam Bankman-Fried had access to a $65 billion line of credit from FTX, not that he borrowed that amount.

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