Shocking information has been revealed by the bankruptcy lawyers stating Sam Bankman-Fried (SBF) and his cohorts in FTX and Alameda Research had access to a US$65 billion credit line, where customer loans were made available via a backdoor created by FTX cofounder Gary Wang. According to the revelation, the money was used for luxury purchases like planes, parties, and political donations.
It further said, Sam Bankman-Fried instructed his FTX cofounder Gary Wang to create a “secret” backdoor to enable his trading firm Alameda to borrow US$65 billion of clients’ money from the exchange without their permission, the Delaware bankruptcy court was told.
FTX cofounder Gary Wang was told to create a “backdoor, a secret way for Alameda to borrow from customers on the exchange without permission”, according to FTX’s lawyer, Andrew Dietderich.
“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. And we know the size of that line of credit. It was $65 billion”, he added.
The CFTC made similar allegations when it brought charges against Wang in December 2022. But the value of that line of credit hasn’t been revealed before now. The CFTC then described it as “virtually unlimited”.
And in November, Reuters reported that SBF had moved US$10 billion between the two companies, with a further US$2 billion still unaccounted for.
Andrew Dietderich told the court that with the US$65 billion back door, Alameda “bought planes, houses, threw parties, made political donations”.
Sam Bankman-Fried is the second-highest donor to Democratic causes, but says he donated just as much to Republicans using “dark” money.
US$256.3 million of Bahamian real estate was also registered in FTX’s name – including 15 condos in the same building. Other court filings say FTX spent US$6.9 million on “meals and entertainment” in just nine months.
The rest of the money went towards personal loans, sponsorships, and investments, according to Andrew Dietderich.
“We know that all this has left a shortfall, in value to repay customers and creditors,” he added. That amount “will depend on the size of the claims pool and our recovery efforts”.
Meanwhile, according to experts, investors who have put hundreds of millions of dollars in FTX may not finally get any refund.
After knowing this news about Sam Bankman-Fried’s fraudulent ventures named FTX and Alameda Research had stolen billions of dollars, people are expressing anger on social media and news sites. Here are some of the reactions:
Bill: Something does not add up. 65 billion in loans. And only 10 or 12 billion to show for it. where did the other 50 billion go? I mean it’s not rocket science here a large amount of money is missing. and 300 mil in real estate and 10 million in food does not equal 50 billion.
Marcus: How is this guy out on bail? Oh yeah, the judge who gave him bail had a connection with FTX thru her husband law firm. After letting him out on bail, she wants off the case due to a potential conflict of interest.
So. That’s how the 2-tiered legal system works here in the US.
Tim: The claim he gave to Republicans needs evidence. Without evidence it seems made up to save the Democrats. Give us the evidence please. Also if possible, give us names of those Republican recipients of donation from FTX.
Jack: The good news for investors involved in this scheme is that a significant amount of money was given to the Democratic Party. Once they pay it back the investors will be reimbursed (sarcasm).
Gino: How many politicians and friends were using the bitcoin to funnel the Ukraine funding to their accounts which cannot be traced?
Bob: Sam Bankman-Fried and the co-founders should be locked up for life without possibility of parole.
Matthew: It sounds like the “$65 Billion Line of Credit” from FTX to Alameda was just a made-up number, since he controlled both companies. We don’t know how much is still actually missing from customer accounts, and Reuters has a estimate in this story that states $2 billion is still unaccounted for.
As of right now, though, we don’t really know how much was totally moved out of customer accounts; how much was totally spent in wrong ways; and how much is owed to creditors, vendors, and customers. Nor do we know how much was given as loans or as investments from FTX and from Alameda, and any other subsidiary/spinoff FTX company. Nor do we know the transactional history of Alameda. Nor do we know much about the “hacks” that took place and that allegedly moved monies.
A few things we can be sure of: there is still quite a bit of missing money from customer accounts that was moved without their knowledge or permission. And vendors/investors might be owed monies, too. And FTX altered a lot of code and documents, and might have falsified and destroyed some records along the way. And there is a lot of internal data and transactional data to sift through to try and piece together the accurate financial pictures of all FTX companies.
When all of those questions are answered, it will surely be stunning. And it looks like some customers, vendors and investors are going to be losing some portions of what they are owed.
