|

Samuel Bankman-Fried’s secret backdoor line of credit sent billions in FTX client funds to Alameda Research

  • Samuel-Bankman Fried ordered the co-founder of his bankrupt crypto exchange FTX to create a secret backdoor to borrow $65 billion in client funds without their permission. 
  • Gary Wang created the secret line of credit from FTX to Alameda Research without clients' consent and testified over the firm’s implosion. 
  • FTX's native token, FTT, is recovering from the exchange's collapse and yielded 16.8% gains in the 24 hours between January 13 and 14, 2023. 

Samuel Bankman-Fried and his co-founder Gary Wang created a backdoor to allow FTX exchange’s customer funds to be borrowed by the trading firm Alameda Research without client permission. Sources close to the matter revealed that Bankman-Fried moved $10 billion from FTX exchange to Alameda Research, an additional $2 billion is unaccounted for, as reported by Reuters. 

Also read: Solana blockchain activity remains high despite FTX exchange’s Chapter 11 proceedings

Sam Bankman-Fried’s backdoor from FTX exchange to Alameda Research

Samuel Bankman-Fried (SBF), former CEO and co-founder of bankrupt crypto exchange FTX asked his co-founder Gary Wang to create a secret line of credit for his trading firm Alameda Research. Investigations in the FTX exchange collapse in November 2022 raised questions on the commingling of customer funds. 

Wang’s recent testimony made it clear that SBF borrowed nearly $12 billion from client funds, without their permission and through an illicit channel, “the backdoor.” Sources close to the matter believe the former billionaire moved $10 billion in funds between the two entities and an additional $2 billion that remains unaccounted for, as of January 13. 

In December 2022, the regulator filed charges against Wang and Alameda Research CEO Caroline Ellison. The Commodity Futures Trading Commission’s (CFTC), the regulatory agency incharge of cryptocurrencies and virtual assets, alleged that the FTX co-founder created a “virtually unlimited” secret line of credit from the defunct exchange to Alameda Research. Wang's testimony corroborates allegations made by the CFTC

Wang and Ellison have both pleaded guilty to federal charges and are cooperating with investigators.

FTT price continued its recovery unaffected by the developments in the legal actions taken against the co-founders of FTX exchange. The native token yielded 16.8% gains in the 24-hour period between January 13 and 14, 2022. 

Author

Ekta Mourya

Ekta Mourya

FXStreet

Ekta Mourya has extensive experience in fundamental and on-chain analysis, particularly focused on impact of macroeconomics and central bank policies on cryptocurrencies.

More from Ekta Mourya
Share:

Editor's Picks

Dogecoin tests a key make-or-break point amid waning retail support

Dogecoin trades below $0.08000 maintaining a steady decline for the seventh straight week, with a 4% drop the previous day. The meme coin is losing its retail strength as DOGE futures Open Interest drops 10% in 24 hours, while institutional demand remains muted with zero inflows so far this week.

Meta CEO Zuckerberg directs development of standalone prediction markets app 'Arena'​
Mark Zuckerberg has directed a small team at Meta to develop a new smartphone app focused on prediction markets, according to a Tuesday report by the New York Times. The experimental project, internally known as Arena, would allow users to forecast outcomes across sports, politics, entertainment and current events.
Top 3 Price Prediction: BTC under pressure, ETH loses key support, XRP momentum weakens

Bitcoin, Ethereum, and Ripple remain under pressure on Wednesday after falling slightly the previous day. BTC trades below $63,000, ETH slips below $1,700, while XRP momentum continues to weaken. The deteriorating price action in these top three cryptocurrencies suggests a potential continuation of the near-term correction.

Crypto Market Overview: Bitcoin loses $63,000 amid tech sell-off – WLD, VVV tokens lead losses
Bitcoin (BTC) edges below $63,000 at press time on Wednesday, amid a global sell-off of tech stocks, including AI and chip stocks. The broader crypto market recorded $550 million in total liquidations, primarily driven by long liquidations, suggesting sell-side dominance, with Worldcoin (WLD) and Venice Token (VVV) leading losses.
Bitcoin: Recovery hopes fade after the Fed spoils the party
Bitcoin (BTC) is set to end the week in the red, trading near the 200-Week Simple Moving Average (SMA) at around $62,300 on Friday. Institutional selling persists, capping BTC’s recovery as spot Exchange Traded Funds (ETFs) point to a sixth consecutive week of outflows.