FTX and Alameda had a $65B Credit Line which was Kept Secret: Report
- Alameda Research, a trading firm, had a “secret backdoor line of credit” with the now-bankrupt crypto exchange FTX.
- Former CEO of the exchange, Sam Bankman-Fried, asked co-founder Gary Wang, to open this line of credit.
- This backdoor provided “a secret way for Alameda to borrow from customers on the exchange without permission.”
- The credit line was worth $65 billion as per a testimoney given by FTX attorney Andrew Dietderich.
The former employees of the bankrupt crypto exchange FTX are gradually coming forward to reveal unknown facts about the firm and its founder and CEO, Sam Bankman-Fried, popularly known as SBF in the crypto space. Moreover, recent testimonies from the CEO of Alameda Research, a trading firm also founded by SBF, Caroline Ellison, confirm that both firms were closely involved in each other’s operations.
According to a report from the New York Post, Alameda Research, under the leadership of Ellison, a former girlfriend of SBF, had a line of credit with FTX that was kept secret and hidden from the public. During a bankruptcy court hearing in Delaware, FTX attorney Andrew Dietderich confirmed the same and testified that the value of this secret credit line was a whopping $65 billion.
Moreover, this “secret backdoor line of credit” was financed using the money from the customers of FTX and provided “a secret way for Alameda to borrow from customers on the exchange without permission.” It is crucial to note that it was Bankman-Fried who asked FTX co-founder Gary Wang to open this line of credit.
“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.”
It can now be confirmed that the trading firm is at the heart of the collapse of the multi-billion dollar crypto exchange which owes billions of dollars to its creditors. On the other hand, in a January 12 statement, SBF stated that he is not guilty of any charges and added that he had not mismanaged the customers’ funds.
SBF stated 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.”
As earlier reported by Bitnation, Caroline Ellison and Gary Wang, both pleaded guilty to criminal charges. Ellison pleaded guilty to seven counts, which carry a maximum sentence of 110 years, while Wang pleaded guilty to four counts, which carry a maximum sentence of 50 years.
Furthermore, the former President of FTX US, Brett Harrison, stated in a 49-part Twitter post that SBF was emotionally volatile, avoided conflict, pushed back against criticism, and even isolated him from communication on key decision-making. He stated that Bankman-Fried was rarely interested in the business of FTX US, and decisions would come directly from The Bahamas without warning.
Billionaire investor and CEO of Galaxy Digital, Mike Novogratz, recently stated in an interview that his “toxic masculine side” wants to punch Sam Bankman-Fried in the jaw and confirmed that the FTX collapse caused his firm a loss of $77 million.