Sam Bankman-Fried ‘ordered FTX co-founder to create secret backdoor’ to Alameda Research

An overwhelming testimony has revealed that the co-founder of cryptocurrency exchange FTX was instructed by Sam Bankman-Fried to create a ‘secret’ back door to funnel money into Alameda Research.

Attorney for FTX Andrew Dietderich told the Delaware Bankruptcy Court on Wednesday that Gary Wang was instructed to create the secret line of credit of client funds from FTX to the hedge fund.

Dietderich told the court that Wang “created this backdoor by inserting a single number into millions of lines of code for the exchange,” creating the line of credit, which “customers didn’t agree to.”

The FTX attorney testified that the backdoor was a “secret way for Alameda to borrow from clients on the exchange without permission,” Business Insider reported.

An overwhelming testimony has revealed that the co-founder of cryptocurrency exchange FTX was instructed by Sam Bankman-Fried to create a 'secret' back door to funnel money into Alameda Research

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

“Wang created this backdoor by inserting a single number into millions of lines of code for the exchange, creating a line of credit from FTX to Alameda that customers would not agree to,” Dietderich testified.

“And we know how big that credit line is. It was $65 billion.”

Bankman-Fried had moved $10 billion between the two companies, with another $2 billion still unaccounted for, according to sources who told Reuters in November.

The attorney’s testimony corroborates the allegations of the Commodity Futures Trading Commission, the independent federal body that “regulates derivatives such as futures and swaps,” according to their website.

Last month, the CFTC filed charges against Wang and Caroline Ellison, CEO of Alameda Research, who was also Bankman-Fried’s on-again, off-again 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 fixed dollar value.

Wang and Ellison both pleaded guilty to federal charges, including fraud and conspiracy. They’ve worked with detectives.

Attorney for FTX Andrew Dietderich told Delaware Bankruptcy Court on Wednesday that Gary Wang was instructed to create the secret line of credit of client funds from FTX to the hedge fund

Attorney for FTX Andrew Dietderich told Delaware Bankruptcy Court on Wednesday that Gary Wang was instructed to create the secret line of credit of client funds from FTX to the hedge fund

Bankman-Fried was seen on Jan. 3 for a plea hearing at the U.S. Federal Courthouse in New York.  He pleaded not guilty to fraud and other criminal charges

Bankman-Fried was seen on Jan. 3 for a plea hearing at the U.S. Federal Courthouse in New York. He pleaded not guilty to fraud and other criminal charges

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

While awaiting trial, Bankman-Fried published a Substack blog post on Thursday professing his innocence.

“I did not steal money and I certainly did not stash away 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 accused Binance boss Changpeng ‘CZ’ Zhao of waging a protracted campaign to destroy his empire.

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

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

A judge has allowed SBF's trial to begin on October 3 at his January 3 plea hearing

A judge has allowed SBF’s trial to begin on October 3 at his January 3 plea hearing

He claimed that Zhao’s “fateful tweet” on Nov. 6 concluded an “extremely effective months-long PR campaign against FTX.”

“In November 2022, an extremely fast, targeted crash caused by the CEO of Binance caused Alameda to go bankrupt,” Bankman-Fried wrote.

The disgraced FTX founder’s company collapsed shortly after Zhao tweeted that Binance was dumping its position on FTX’s internal digital token FTT.

The tweet created a domino effect that pushed Bankman-Fried’s crypto hedge fund Alameda Research into insolvency and forced FTX to file for bankruptcy on Nov. 11.

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

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

If he continues to speak out in public like this, eyebrows are likely to be raised as he ignores lawyers who advised him to “disappear into a hole.” Lawyers said such statements are likely to make life more difficult for defense attorneys in his upcoming trial.

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