An attorney for bankrupt cryptocurrency exchange FTX has testified in court that former CEO Sam Bankman-Fried ordered a “secret backdoor” to be created for laundering money.
FTX lawyer Andrew Dietderich told the court that Bankman-Fried instructed the company’s cofounder Gary Wang to create the backdoor.
The move enabled Bankman-Fried’s hedge fund Alameda Research to “borrow” $65 billion of clients’ money from the exchange without their permission.
Wang was told to create a “backdoor, a secret way for Alameda to borrow from customers on the exchange without permission,” Dietderich said in his testimony before the Delaware bankruptcy court this week.
“Mr. Wang created this back door 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,” he added.
“And we know the size of that line of credit: It was $65 billion.”
Dietderich told the court that Wang “created this backdoor by inserting a single number into millions of lines of code for the exchange” creating the line of credit, which “customers did not consent” to.
The FTX attorney testified that the backdoor was a “secret way for Alameda to borrow from customers on the exchange without permission,” Business Insider reported.
Alameda Research was run by Bankman-Fried’s girlfriend Caroline Ellison.
Bankman-Fried had moved $10 billion between the two companies, with a further $2 billion still unaccounted for, according to sources told Reuters in November.
The lawyer’s testimony corroborates allegations made by the Commodity Futures Trading Commission, the independent federal agency that “regulates derivatives such as futures and swaps,” according to its website.
Last month, the CFTC filed charges against Wang and Alameda CEO Ellison.
The CFTC accused Wang of creating a “virtually unlimited” secret line of credit.
Dietderich’s testimony is believed to be the first time an FTX official has given the line of credit a firm dollar value.
Wang and Ellison both pleaded guilty to federal charges including fraud and conspiracy.
They have been cooperating with investigators.