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- Bankruptcy lawyers revealed Sam Bankman-Fried’s Alameda had access to $65 billion from FTX.
- The customer loans were made available via a backdoor created by FTX cofounder Gary Wang, they said.
- The money was used for luxury purchases like planes, parties, and political donations.
Sam Bankman-Fried instructed his FTX cofounder Gary Wang to create a “secret” backdoor to enable his trading firm Alameda to borrow $65 billion of clients’ money from the exchange without their permission, the Delaware bankruptcy court was told Wednesday.
Wang was told to create a “backdoor, a secret way for Alameda to borrow from customers on the exchange without permission,” according to FTX’s lawyer, Andrew Dietderich.
“Mr Wang created this back door 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,” he added. “And we know the size of that line of credit. It was $65 billion.”
The CFTC made similar allegations when it brought charges against Wang in December. But the value of that line of credit hasn’t been revealed before now. The CFTC then described it as “virtually unlimited.”
And in November, Reuters reported that SBF had moved $10 billion between the two companies, with a further $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.”
Sam Bankman-Fried is the second-highest donor to Democratic causes, but says he donated just 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 “meals and entertainment” in just nine months.
The rest of the money went towards personal loans, sponsorships, and investments, according to Dietderich.
“We know that all this has left a shortfall, in value to repay customers and creditors,” he added. That amount “will depend on the size of the claims pool and our recovery efforts.”
The court heard how FTX had so far recovered $5 billion of 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, sent outside normal working hours.
This post was originally published on Business Insider
