FTX Founder Established a $65B Secret Credit Line with Alameda

According to FTX lawyer Andrew Dietderich, the 30-year-old fraudster and founder of the exchange, Sam Bankman-Fried (SBF), allegedly gave co-founder Gary Wang, the order to open a $65 billion “secret backdoor line of credit” for Alameda Research.

As reported by the New York Post, the lawyer revealed the details on January 11 during a hearing in Delaware bankruptcy proceedings. The questionable line of credit was paid for using money from FTX consumers. Dietderich testified that Alameda used the “backdoor” as a covert method to illegally borrow money from exchange clients.

Dietderich disclosed the matter by stating: 

“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.”

He further added: “And we know the size of that line of credit. It was $65 billion.”

FTX Mismanaged Customers’ Funds

Notably, in December 2022, the US Commodities Futures Trading Commission, commonly known as CFTC, filed a lawsuit alleging a number of unethical business practices between these two businesses. 

The commission asserted that features built into the programming by FTX officials allowed Alameda to keep a virtually limitless line of credit on FTX. Now CFTC’s allegations are proven true, as this information was disclosed by the attorney.

However, in a recent blog titled “FTX Pre-Mortem Overview,” SBF attributed the exchange’s demise to general market conditions and the insufficient hedging of its sibling trading company, Alameda Research. 

Additionally, the creator of the insolvent exchange asserts that Changpeng Zhao, CEO of Binance, was responsible for Alameda’s bankruptcy through his targeted media attacks.

The former FTX CEO was detained on suspicion of money laundering, securities fraud, wire fraud, and conspiracy to avoid campaign finance laws. However, after his extradition to the US, he was subsequently bailed on a $250 million bond.