"Our Korean Friend"

The following is edited testimony from Gary Wang implicating SBF. It is breathtaking.

Q. How did this special "Allow Negative" privilege come about?
A. Sam had asked Nishad and I to add the ability to——to pay for various FTX-related expenses from Alameda's accounts and from a few other bookkeeping accounts on FTX.
Q. And when was that?
A. This was in July 2019.
Q. How long after starting the exchange was that?
A. This was a few months after starting the exchange.
Q. Was Alameda given this special advantage around when it was introduced?
A. Yes.
Q. What, if anything, did the defendant say about why Alameda needed the ability to have a negative account balance?
A. So we wanted to——so Sam said that he wanted to pay for
some——pay for certain FTT-related expenses from Alameda's
accounts.
Q. Okay. We'll come back to that. Over time, was the use of this ability to have an account balance go negative used only by Alameda for that purpose——that is, the FTT expenses?
A. No.
Q. So was it used for other purposes?
A. Yes.
Q. What else was it used for?
A. It was also used by Alameda for trading.
Q. What do you mean by that?
A. To withdraw from FTX and send it other exchanges to use for their trading activities.
Q. And so did this special advantage——that is, the ability to
have a negative account balance——allow Alameda to make
unlimited withdrawals off of the FTX exchange?
A. Yes.
Q. As a result of that special advantage, could Alameda make unlimited withdrawals from the exchange even when its account balance was below zero?
A. Yes.
Q. And so if Alameda's account balance was zero or negative, for example, in Bitcoin, and it used its special advantage to withdraw Bitcoin, whose Bitcoin would it be withdrawing?
A. From cus——it would be withdrawing customers' Bitcoin.
Q. I'll ask you again: When Alameda withdrew money from the exchange while it had a negative balance, whose money was it withdrawing?
A. So I——either FTX's own money or money from customers——was withdrawing money from customers.
Q. When you said FTX's own money, what are you referring to?
A. The money FTX earned from trading fees from customers.
Q. And you said Alameda withdrew or had a negative balance of $8 billion; is that right?
A. Yes.
Q. Was that more than the amount of money that FTX had in
revenue?
A. Yes.
Q. So then whose money did that $8 billion come from?
A. From customers.
Q. And what about the defendant?
A. He did not look at it, but he was——we told him——he asked us to do it and then we told him we did it.
Q. Now this comment says, "And we set Allow Negative equals true for," and it lists a bunch of accounts. Let me just stop there. When it says "we set Allow Negative equals true," what does that mean?
A. So it means that prior to or as part of making the change, he went into the database and set the "Allow Negative" column to true for a particular——a particular set of accounts.
Q. So for this set of accounts, I want to ask you about a few of them. It lists I think——let's see, one, two, three, four, five——six accounts; is that right?
A. Yes.
Q. So do you see the second account, info@Alameda(9)?
A. Yes.
Q. What is that a reference to?
A. That's the main trading account.
Q. That's Alameda's main account.
A. Yes.
Q. And what is the next account there?
A. The info@Alameda off-market FTT subaccounts is the account that Alameda was using to host some of its FTTs.
Q. These numbers next to the main Alameda account and its subaccount, what are those?
A. Those are the account IDs of those accounts and subaccounts.
Q. The next one here is cottonwoodtrading@gmail off-market FTT subaccount, and has a number. What's that account?
A. That's a——that's another Alameda account.
Q. Okay. So then there are two accounts that I didn't ask you about. Are those customer accounts?
A. No.
Q. Okay. What kind of accounts are they?
A. They're bookkeeping accounts. Q. Were there any other customer accounts besides Alameda's accounts that were given this "Allow Negative" feature at the time it was created?
A. No.
Q. From July 31, 2019, which is the date here, until the end of FTX, did Alameda's main account and certain subaccounts have that "Allow Negative" feature turned on?
A. Yes.
Q. Was it ever turned off?
A. Not for those accounts.
Q. Did you speak to the defendant about not having Alameda Research's account be liquidated?
A. Yes.
Q. What did he say?
A. He told me a few items to make sure that Alameda's account is never liquidated on FTX.
Q. Based on your conversation, was the defendant aware that Alameda had this privilege?
A. Yes.
Q. Just to be clear, did the topic of Alameda not being liquidated come up once or more than once with the defendant?
A. More than once.
Q. Did there come a time in late 2019 when you heard the
defendant talk about Alameda Research having a negative
balance?
A. Yes.
Q. What do you recall about what you heard?
A. So at the time FTX and Alameda were in the same office, and someone -- a trader from Alameda came up to Sam's desk and asked him whether it's fine for Alameda to continue withdrawing from FTX, and Sam said that as long how much Alameda has withdrawn from FTX is less than what FTX total trading revenue was at the time, then it's fine for Alameda to keep withdrawing from FTX.
Q. Let me ask you a few follow-up questions on that. First, what was the defendant's role with Alameda, if any, at the time?
A. He was the CEO of Alameda.
Q. You said he said that Alameda could keep withdrawing as long as they didn't go more negative than FTX's revenue?
Q. How much was the revenue?
A. Around 50 to a hundred million dollars at the time.
Q. Putting that together, how much did the defendant say, in other words, that Alameda could withdraw?
A. That it could withdraw until its account became negative by more than 50 to a hundred million dollars.
Q. What would it have meant if Alameda Research's account had a negative balance that was more negative than 50 or a hundred million?
A. That would mean that it's taking customers' deposits.
Q. Let's go back to this conversation. How do you know this conversation happened?
A. I was sitting near Sam's desk when it happened.
Q. Did it remain the case that Alameda's negative balance did not exceed FTX's revenue?
A. No.
Q. How do you know that?
A. So at the very end of 2019 or early 2020, I did a database query to check what Alameda's balances were at the time. When I checked, it was negative by more than what FTX's trading revenue was at the time.
Q. What was the implication of Alameda having a negative
balance in excess of FTX's revenue?
A. It means that Alameda was taking customers' money.
Q. What was your reaction to this?
A. I was surprised because it didn't line up with what I heard Sam say earlier, so I went to Sam to talk to him about this.
Q. What did the defendant say?
A. He asked me, when I was doing this calculation, if I was including the value of Alameda's FTT, which was held in a separate account. He asked me if I was also including that FTT.
Q. To break this down a little bit, you said Alameda's account was negative in excess of revenue. What was FTX's revenue at the time?
A. It was around $150 million.
Q. What was Alameda's negative balance at the time?
A. It was more than that. It was more than that. I think it was around 200 million.
Q. When you told the defendant that Alameda had a negative balance, what did he tell you to include in the balance calculation?
A. He asked me to include the value of all of Alameda's accounts on FTX and include the value of the FTT that was in those accounts.
Q. Now, did there come a time when Alameda's account balance on FTX was so negative that it remained negative even with the FTT included?
A. Yes.
Q. Did you talk to the defendant about that?
A. Yes.