- Bankruptcy attorneys said Sam Bankman-Frieds Alameda has access to a $65 billion line of credit from FTX.
- The customer loans were made accessible through a backdoor created by FTX co-founder Gary Wang, they said.
- The money was used for luxury purchases like planes, parties and political donations, the court heard.
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Sam Bankman-Fried instructed his FTX co-founder, Gary Wang, to create a “secret” backdoor that would allow his trading firm, Alameda, to borrow $65 billion worth of customer funds from the exchange without their permission, the bankruptcy court was told by Delaware announced on Wednesday.
Wang was ordered to create a “backdoor,” a secret way for Alameda to borrow money from the exchange without permission from customers, FTX attorney Andrew Dietderich said.
“Mr. Wang created this backdoor by inserting a single number in millions of lines of code for the exchange and created a line of credit from FTX to Alameda that customers didn’t agree to,” he added. “And we know the amount of that credit line. It was $65 billion.”
The Commodity Futures Trading Commission (CFTC) made similar allegations when it filed charges against Wang in December. But the value of this credit line has not yet been discussed. The CFTC then described it as “virtually unlimited”.
And in November, Portal, citing unnamed sources, said Bankman-Fried had shifted $10 billion between the two companies, with another $2 billion unaccounted for.
Dietderich told the court Alameda “bought planes, threw houses, threw parties, made political donations” with the $65 billion backdoor.
Bankman-Fried is the second-highest contributor to Democratic causes, but says he’s given just as much to Republicans with “dark” money.
Also registered in FTX’s name was $256.3 million worth of Bahamian real estate – including 15 condos in the same building. Other court filings say FTX spent $6.9 million on “meals and entertainment” in just nine months.
Dietderich said the rest of the money went to personal loans, sponsorships and investments.
“We know all of this has left a drop in value to repay customers and creditors,” he added. This amount “depends on the size of the pool of receivables and our collection efforts.”
The court heard FTX had so far recovered $5 billion in cash, crypto and securities, with “plans to monetize over 300 other non-strategic investments” worth $4.6 billion.
Bankman-Fried’s attorney did not immediately respond to Insider’s request for comment, which was aired outside of normal business hours.
Correction: January 13, 2023 — A headline in an earlier version of this story mislabeled a number quoted in a bankruptcy court. An FTX attorney said Sam Bankman-Fried had access to a $65 billion line of credit from FTX, not that he borrowed that amount.