Sam Bankman-Fried’s Hedge Fund Allegedly Stole $65 Billion From Customers

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James Lynch Contributor
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Disgraced former crypto billionaire Sam Bankman-Fried’s crypto exchange FTX allegedly created a $65 billion credit line for hedge fund Alameda Research, FTX’s bankruptcy lawyer says.

FTX held a bankruptcy hearing in court Wednesday and its bankruptcy attorney, Adam Landis, disclosed the line of credit FTX created with Alameda, CoinDesk reported. FTX Chief Technology Officer Gary Wang was allegedly directed to change FTX code for Alameda to have special privileges on the platform, Wang said in a Dec. 19 hearing, according to Reuters.

The exchange allegedly diverted customer funds to Alameda for Bankman-Fried’s own “personal use,” according to a Securities and Exchange Commission (SEC) complaint. Bankman-Fried founded FTX in 2019 and Alameda in 2017 and stepped down as Alameda CEO in 2021, The Wall Street Journal reported.

“We know what Alameda did with the money. It bought planes, houses, threw parties, made political donations. It made personal loans to its founders. It sponsored the FTX Arena in Miami, a Formula One team, the League of Legends, Coachella and many other businesses, events and personalities,” Landis said, according to CoinDesk.

Additionally, FTX was able to recover over $5 billion in various types of assets, Landis disclosed. Over $8 billion in customer deposits were missing from FTX, according to the Commodities Futures Trading Commission’s Dec. 13 complaint against Bankman-Fried, FTX and Alameda. (RELATED: Crypto Platform Coinbase Will Lay Off 20% Of Its Staff)

The exchange said in Nov. 11 bankruptcy filings it owes creditors between $1 and $10 billion. FTX declared chapter 11 bankruptcy in the wake of allegations FTX and Alameda executives misused customer funds, first reported by CoinDesk.

Bankman-Fried was indicted by federal prosecutors Dec. 13 on eight counts of fraud and conspiracy, including wire fraud, money laundering and campaign finance violations. He was released from custody Dec. 22 on a $250 million bond and ordered to stay in his parents’ Palo Alto, California, house. Bankman-Fried pleaded not guilty to the charges Jan. 3 and his trial is scheduled for October 2, 2023.

Wang pleaded guilty to wire fraud and three conspiracy counts in December 2022 and will cooperate with prosecutors in their case against Bankman-Fried, the NY Times reported.