Sam Bankman Fried (SBF) ordered Gary Wang, the co-founder of FTX, to open a credit line funded by the exchange’s clients. A line of credit is a type of loan that allows an individual or business to borrow money based on their needs and repayment capacity. However, such a connection between the Alameda investment fund and FTX appears to be contra legem. This is why SBF has obviously covered up the existence of this credit line.
The secret line of credit ordered by Sam Bankman-Fried
Former FTX CEO Sam BankmanFried (SBF) reportedly ordered cryptocurrency exchange co-founder Gary Wang to open a $65 billion “secret backdoor credit facility” for Alameda Research, according to report by FTX’s lawyer FTX, Andrew Dietderich. A line of credit is a type of loan that allows an individual or business to borrow money based on their needs and repayment capacity. The credit line is established in advance by a financial institution. The borrower can use the credit line as he pleases, regularly repaying the borrowed funds with interest. It is often used for short-term needs or unexpected expenses.
The attorney disclosed the information during a hearing in Delaware bankruptcy court on Jan. 11, the New York Post reported. The alleged line of credit was funded with funds from FTX clients. According to Dietderich’s testimony, the backdoor was a covert way for Alameda to borrow from exchange customers without permission.
According to Dietderich, Mr. Wang created this backdoor by inserting a single digit into millions of lines of code for the exchange, creating a credit line from FTX to Alameda, to which customers did not agree. He adds that he knows the size of this credit line, ie 65 billion dollars. Alameda Research is the sister company of FTX and was at the center of the exchange’s dramatic collapse. In November 2022, FTX Group and over 130 subsidiaries filed for bankruptcy in the United States due to lack of liquidity.
Strong connection between FTX and Alameda
In a pre-mortem preview released on Jan. 12, SBF denied allegations of theft of FTX funds. He admitted that when his Alameda company went illiquid, so did FTX International. He was explaining that Alameda had an open margin position on FTX. Then the bank run turned this illiquidity into insolvency. However, in December 2022, the US Commodities Futures Trading Commission (CFTC) filed a complaint. The complaint concerned a series of improper business practices between the two companies.
The commission said FTX executives built features into the code. This would have allowed Alameda to maintain a substantially unlimited line of credit on FTX. Former Alameda Research CEO Caroline Ellison and FTX co-founder Gary Wang have already pleaded guilty. Conversely, Bankman-Fried pleaded not guilty to eight felony charges. These include alleged violations of campaign finance laws and wire fraud. His trial is due to start in October.
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To the angelism of the intercessors of the current monetary system, I oppose DeFi, digital assets and the metaverse. Lawyer in Luxembourg, I am interested in cryptocurrency investment funds.