Sam Bankman-Fried’s $65 billion ‘Secret Backdoor’, court heard

  • Sam Bankman-Frieda’s Alameda had access to a $65 billion line of credit from FTX, bankruptcy attorneys revealed.
  • The customer loans were made available through a backdoor created by FTX co-founder Gary Wang, they said.
  • The money was used for luxury purchases such as jets, parties and political donations, the court heard.

Sam Bankman-Fried instructed his FTX co-founder Gary Wang to create a “secret” backdoor that allowed his Alameda trading firm to borrow clients’ money from the $65 billion exchange without their permission, a Delaware bankruptcy court said Wednesday.

Wang was told to create a “backdoor, a secret way for Alameda to borrow from exchange customers without permission,” FTX attorney Andrew Dietderich said.

“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 that the customers did not agree to,” he added. “And we know the size of that line of credit. It was $65 billion.”

The CFTC made similar allegations when it filed charges against Wang in December. But the value of this line of credit has not yet been revealed. The CFTC then described it as “virtually unlimited”.

And in November, Reuters reported that SBF had moved $10 billion between the two companies, with another $2 billion still unaccounted for.

Dietderich told the court that with the $65 billion backdoor, Alameda “bought planes, houses, threw parties, made political donations.”

Sam Bankman-Fried is the second-biggest donor to Democratic causes, but says he’s given as much to Republicans using “dark” money.

$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 $6.9 million on “food and entertainment” in just nine months.

The rest of the money went to personal loans, sponsorships and investments, according to Dietderich.

“We know that all of this has left a shortfall in value to repay customers and creditors,” he added. This amount “will depend on the size of the claim pool and our collection efforts.”

The court heard how FTX has so far recovered $5 billion in cash, crypto and securities, with “plans to monetize more than 300 additional non-strategic investments” worth $4.6 billion.

Bankman-Fried’s attorney did not immediately respond to Insider’s request for comment, sent outside regular business hours.

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