Sam Bankman-Fried ordered ‘secret $65 billion credit line’, lawyer says

Sam Bankman-Fried ordered the co-founder of his cryptocurrency exchange FTX to create a “secret” backdoor that allowed his hedge fund Alameda Research to borrow $65 billion in clients’ money without their permission, according to testimony over the firm’s collapse.

Gary Wang has been ordered to create a secret line of credit using client funds from FTX to Alameda, FTX attorney Andrew Dietderich said in Delaware bankruptcy court on Wednesday.

“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, which the clients did not agree to,” Dietderich testified.

“And we know the size of this credit line. It was $65 billion.”

Dietderich said that “the back door was a secret way for Alameda to borrow from customers on the exchange without permission.”

According to sources cited by Reuters in November, Bankman-Fried moved $10 billion between the two companies, with another $2 billion still unaccounted for.

The Post has requested comment from Bankman-Fried.

Attorney’s testimony supports claims made by the Commodity Futures Trading Commission, an independent federal agency that regulates derivatives such as futures and swaps.

Last month, the CFTC indicted Wang and Alameda Research CEO Caroline Ellison, who was also a Bankman-Freed girlfriend back and forth.

The CFTC accused Wang of creating a “virtually unlimited” secret line of credit. Dietderich’s testimony is credited as the first time an FTX official gave a line of credit a hard dollar value.

Wang and Ellison both pleaded guilty to federal charges including fraud and conspiracy. They cooperate with investigators.

Bankman-Fried, who was arrested and extradited to the US from his base in the Bahamas last month, is under house arrest at his parents’ $4 million Palo Alto home under the terms of his $250 million bail release.

While awaiting trial, Bankman-Freed posted on the Substack blog Thursday pleading not guilty.

“I didn’t steal money, and I certainly didn’t hide billions,” wrote Bankman-Fried.

“Nearly all of my assets have been and still are being used to support FTX clients.”

The disgraced former crypto mogul, 30, has accused Binance boss Changpeng “CZ” Zhao of running a long campaign to destroy his empire.

claimed that Zhao’s “life-changing tweet” on November 6 ended “an extremely effective months-long PR campaign against FTX.”

“In November 2022, an extreme, rapid, and targeted crash instigated by the CEO of Binance rendered Alameda insolvent,” Bankman-Fried wrote.

The disgraced FTX founder’s business collapsed shortly after Zhao tweeted that Binance was relinquishing its position on its own FTX FTT digital token.

The tweet set off a domino effect that pushed cryptocurrency hedge fund Bankman-Fried Alameda Research into insolvency, and FTX filed for bankruptcy on Nov. 11.

Meanwhile, Bankman-Freed’s parents are also preparing for a possible court exposure.

Joseph Bankman, Bankman-Freed’s father, has hired Manhattan attorney Sean Hecker of Kaplan Hecker and Fink LLP to represent him, Reuters reported.

Bankman was not charged with a crime and was not told he was under federal investigation, a source familiar with the situation told The Post.

However, his work at FTX came under scrutiny after the platform filed for bankruptcy.

Testifying on Capitol Hill last month, current FTX CEO John Wray confirmed that his team is “investigating” the role Bankman and his wife, fellow Stanford law professor and Democratic operative Barbara Fried, played in the platform’s collapse.

Ray told lawmakers that Bankman gave “legal advice” to his son at FTX and received cash payments from the company.

Additional reporting by Thomas Barrabee