Sam Bankman-Fried “Ordered FTX Co-Founder to Create a Secret Backdoor” to Alameda Research

Explosive testimony has revealed that the co-founder of cryptocurrency exchange FTX was instructed by Sam Bankman-Fried to create a “secret” backdoor to funnel money into Alameda Research.

FTX attorney Andrew Dietderich told Delaware bankruptcy court on Wednesday that Gary Wang was ordered to create the secret line of credit from FTX’s client funds to the hedge fund.

Dietderich told the court that Wang “created this backdoor by inserting a unique number into millions of lines of code for the exchange” creating the line of credit, which “customers did not consent to.”

FTX’s attorney said the backdoor was a “secret way for Alameda to borrow from exchange customers without permission,” Business Insider reported.

Explosive testimony has revealed that the co-founder of cryptocurrency exchange FTX was instructed by Sam Bankman-Fried to create a ‘secret’ backdoor to funnel money to Alameda Research

“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 customers did not consent to,” Dietderich said.

“And we know the size of that line of credit. It was $65 billion.

Bankman-Fried had transferred $10 billion between the two companies, with another $2 billion still missing, sources told Reuters in November.

The attorney’s testimony supports claims made by the Commodity Futures Trading Commission, the independent federal agency that “regulates derivatives such as futures and swaps,” according to their website.

Last month, the CFTC filed charges against Wang and Alameda Research CEO Caroline Ellison, who was also Bankman-Fried’s recurring girlfriend.

The CFTC accused Wang of creating a “virtually unlimited” secret line of credit. Dietderich’s testimony is believed to be the first time an FTX official has given the line of credit a firm dollar value.

Wang and Ellison both pleaded guilty to federal charges, including fraud and conspiracy. They cooperated with investigators.

FTX attorney Andrew Dietderich told Delaware bankruptcy court on Wednesday that Gary Wang was ordered to create the secret line of credit from FTX's client funds to the hedge fund.

FTX attorney Andrew Dietderich told Delaware bankruptcy court on Wednesday that Gary Wang was ordered to create the secret line of credit from FTX’s client funds to the hedge fund.

Bankman-Fried was seen arriving for a plea hearing at the US federal courthouse in New York on January 3.  He pleaded not guilty to fraud and other criminal charges.

Bankman-Fried was seen arriving for a plea hearing at the US federal courthouse in New York on January 3. He pleaded not guilty to fraud and other criminal charges.

Bankman-Fried, who was arrested and extradited to the United States from his home base in the Bahamas last month, is under house arrest at his parents’ $4 million Palo Alto home, under the terms of his $250 million bond release.

While awaiting trial, Bankman-Fried published a Substack blog post on Thursday in which he claimed his innocence.

“I didn’t steal funds and I certainly didn’t hide billions,” Bankman-Fried wrote.

“Almost all of my assets were and still are usable to support FTX clients.”

The 30-year-old disgraced former crypto king has accused Binance boss Changpeng ‘CZ’ Zhao of waging a long campaign to destroy his empire.

DailyMail.com has discovered a photo from March 2021, which shows SBF, 30, with his arm around ex-girlfriend Caroline Ellison, 28, on her 29th birthday.  They are pictured with FTX co-founder Gary Wang (left)

DailyMail.com has discovered a photo from March 2021, which shows SBF, 30, with his arm around ex-girlfriend Caroline Ellison, 28, on her 29th birthday. They are pictured with FTX co-founder Gary Wang (left)

A judge set the start of SBF's trial for October 3 during his plea hearing on January 3

A judge set the start of SBF’s trial for October 3 during his plea hearing on January 3

He alleged that Zhao’s “fateful tweet” on Nov. 6 capped an “extremely effective month-long PR campaign against FTX.”

“In November 2022, an extreme, rapid, and targeted crash precipitated by Binance’s CEO rendered Alameda insolvent,” Bankman-Fried wrote.

The disgraced FTX founder’s business collapsed shortly after Zhao tweeted that Binance was dumping its position on FTX’s in-house digital token FTT.

The tweet set off a domino effect that pushed Bankman-Fried’s crypto hedge fund, Alameda Research, into insolvency and FTX had to file for bankruptcy on November 11.

Bankman-Fried now faces eight counts, accusing him of defrauding FTX investors whose money he held. He made his first appearance in Manhattan court last month, when a judge released him on bail on a $250 million bond.

On January 3, he pleaded not guilty to fraud and other criminal charges. A judge has set his trial to begin on October 3.

To continue to speak out publicly like this is likely to raise eyebrows, as he ignores lawyers who have advised him to ‘retreat into a hole’. Lawyers said such statements would likely make life more difficult for defense attorneys at his next trial.

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