TechFlow reported, according to Bloomberg, that just days before FTX filed for bankruptcy, SBF posted on Twitter assuring customers and investors that the exchange and its assets were in good condition. On Friday, FTX co-founder Gary Wang testified in court that this was a lie, stating, "FTX was not okay, and the financial situation wasn't okay either. This money belonged to customers, and they never gave us permission to use it for other purposes." Over more than four hours on the witness stand, Gary Wang recounted the final days leading up to FTX's collapse, detailing how he and SBF executed a multibillion-dollar plan that made FTX's downfall inevitable.
On Friday, under questioning by U.S. Assistant Prosecutor Nicolas Roos, Gary Wang testified about the secret mechanism that allowed funds to flow from FTX to Alameda. He stated that SBF instructed him to add a back-end "allow negative balance" feature for Alameda. While some major clients also received credit lines on FTX, no one aside from Alameda had a credit line exceeding $1 billion—most were only in the millions. Alameda’s credit line was $65 billion.
In addition, SBF directed that Alameda be exempted from liquidation rules that applied to all other FTX accounts. Gary Wang explained that accounts with potential losses would offload their positions to market makers before any losses occurred. This mechanism was designed to protect the exchange and other customers.
