Former FTX CEO Sam Bankman-Fried (SBF) is said to have instructed his co-founder Gary Wang to install a “clandestine lending backdoor” on sister company Alameda Research’s cryptocurrency exchange, through which the hedge fund has borrowed a whopping $65 billion target.
This was revealed by FTX attorney Andrew Dietderich during the trading platform’s current bankruptcy hearing on January 11, according to the New York Post. mentioned. Particularly surprising is that the loans allegedly were fueled by funds from FTX clients. As Deetderich explains, “The backdoor was a secret way for Alameda to borrow customer funds from cryptocurrency exchanges without asking permission.”
“Mr. Wang built this backdoor by inserting a single digit in millions of lines of programming code for a cryptocurrency exchange that opened a line of credit with Alameda on FTX without customers ever agreeing to it,” the lawyer said. And also:
“We now know that this line of credit was in the order of $65 billion.”
Alameda Research hedge fund was a sister company of FTX and played a major role in the crash of the cryptocurrency exchange. As a result, the entire FTX group of more than 130 subsidiaries was shut down in November 2022 insolvency sign in.
Sam Bankman-Fried wrote a lengthy blog post on January 12 in which the former FTX boss shared his take on things and RefusalHe stole customers’ money. Thus, he argues, Alameda’s liquidity problems inevitably led to FTX International’s liquidity problems also because Alameda had an open margin position at FTX. The bank’s subsequent operation by customers would have led to bankruptcy.
The CFTC now accuses the two companies of maintaining unfair trading relationships. The authority also refers to the “unlimited” line of credit that the exchange was said to have granted to the hedge fund through changes in programming code.
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