Former FTX CEO Sam Bankman-Fried (SBF) reportedly ordered Gary Wang, co-founder of the crypto exchange, to open a $65 billion “secret backdoor line of credit” for Alameda Research, according to FTX attorney Andrew Dietderich.
The attorney disclosed the information during a Delaware bankruptcy court hearing on Jan. 11, the New York Post reported. The alleged line of credit was financed with FTX customers' funds. According to Dietderich’s testimony, the “backdoor was a secret way for Alameda to borrow from customers on the exchange without permission.”
“Mr. 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, to which customers did not consent,” Dietderich told the court, adding that:
“And we know the size of that line of credit. It was $65 billion.”
Alameda Research is the sister company of FTX, and it was at the heart of the crypto exchange's dramatic collapse. In November 2022, FTX Group and over 130 subsidiaries filed for bankruptcy in the United States due to a “liquidity crunch.”
In a “pre-mortem overview” published on Jan. 12, SBF denied allegations of stealing FTX funds. He said that "as Alameda became illiquid, FTX International did as well, because Alameda had a margin position open on FTX; and the run on the bank turned that illiquidity into insolvency.”
In December, the United States Commodities Futures Trading Commission (CFTC) filed a complaint alleging a number of irregular business practices between both companies. The commission claimed that FTX executives created features in the code, allowing “Alameda to maintain an essentially unlimited line of credit on FTX.”
Former Alameda Research CEO Caroline Ellison and FTX co-founder Gary Wang already pleaded guilty to charges related to the case. Bankman-Fried has pleaded not guilty to eight criminal charges, including alleged violations of campaign finance laws and wire fraud. His trial is expected to begin in October.