Sam Bankman-Fried’s ‘secret back door’ is worth $65 billion, court finds

Sam Bankman-Fried's 'secret back door' is worth $65 billion, court finds
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  • Bankruptcy attorneys said Sam Bankman-Fried’s Alameda had access to a $65 billion credit line from FTX.
  • The client loans were made available through a back door set up by FTX co-founder Gary Wang, they said.
  • The money was used for luxury purchases such as planes, parties and political donations, the court heard.

Sam Bankman-Fried instructed his FTX co-founder Gary Wang to create a “secret” backdoor to allow his Alameda trading company to borrow $65 billion of exchange client money without their permission, it was reported. on Wednesday to the Delaware bankruptcy court.

Wang was told to create a “back door, a secret way for Alameda to borrow from clients on the exchange without permission,” said FTX attorney Andrew Dietderich.

“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,” it added. “And we know the size of that line of credit. It was $65 billion.”

The Commodity Futures Trading Commission (CFTC) made similar accusations when filed charges against Wang in December. But the value of that line of credit has not been discussed until now. The CFTC later described it as “virtually unlimited.”

and in november Reuters He cited unnamed sources who said Bankman-Fried had moved $10 billion between the two companies, with another $2 billion still unaccounted for.

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

Bankman-Fried is the second largest donor to Democratic causes, but says that donated so much to republicans using “dark” money.

$256.3 million of real estate in the Bahamas it was also registered in the name of FTX, including 15 condominiums in the same building. Other court filings say FTX spent $6.9 million on “dining and entertainment” in just nine months.

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

“We know that all this has left a deficit, in value to pay customers and creditors,” he added. That amount “will depend on the size of the claims class and our recovery efforts.”

The court heard that FTX had so far recovered $5 billion of cash, cryptocurrencies and securities, with “plans to monetize more than 300 other non-strategic investments” valued at $4.6 billion.

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

Correction: January 13, 2023 — A headline in an earlier version of this story mischaracterized a figure cited in bankruptcy court. An FTX attorney said that Sam Bankman-Fried had access to a $65 billion credit line from FTX, not that he borrowed that amount.

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