FTX’s Gary Wang Faces Risk of Getting 50-Year in Prison
Gary Wang, co-founder, and former CTO of FTX, appeared as a witness for the prosecution in the criminal trial of his fellow co-founder Sam Bankman-Fried on Oct. 6.
During his testimony, Wang revealed that he had pleaded guilty in a December 2022 plea deal, potentially facing up to 50 years in prison. He expressed hope for leniency due to his cooperation with prosecutors, with plans for a 5K letter to support his case.
Wang’s testimony also delved into FTX’s downfall, starting with events leading up to its November 2022 bankruptcy. FTX faced withdrawal issues because it had sent billions of dollars to its sister firm, Alameda Research, which owed FTX up to $14 billion. Bankman-Fried resisted shutting down Alameda due to repayment impossibility.
Other issues highlighted included a misrepresented backstop insurance fund on FTX’s website and a 2021 exploit in FTX’s margin system. Alameda Research absorbed significant losses directed by Bankman-Fried.
Wang crucially disclosed that FTX allowed Alameda to maintain an unlimited, negative balance, borrowing customer funds without permission. This arrangement facilitated stablecoin conversions and maintained a $65 billion line of credit for trading stability.
These details may aid Bankman-Fried’s defense, arguing the necessity of Alameda’s privileges to keep FTX operational. Wang’s testimony lasted under an hour, with expectations of his recall by the defense next week.
Other witnesses, including former Alameda CEO Caroline Ellison and BlockFi co-founder Zac Prince, are also set to testify.