More revelations have come to light since the trial of the former CEO of the defunct crypto exchange FTX, Sam Bankman-Fried (SBF), commenced last week. Part of these secrets include the alleged illegalities that went on in FTX and its sister company, Alameda Research. 

According to a report by the Wall Street Journal (WSJ), FTX had offered to pay $5 million to LedgerX Chief Risk Officer Julie Schoening, whose team is reported to have discovered the backdoor that allowed Sam Bankman-Fried to siphon funds from the crypto exchange to Alameda Research.

However, that deal for the $5 million settlement never materialized, as WSJ reported that the paperwork wasn’t completed before FTX collapsed in November. Schoening is believed to have been offered this sum in exchange for her silence, especially considering that she had been fired not long after she brought up the discovery of the backdoor to her boss’ notice. 

Regarding her complicity, the DOJ isn’t expected to charge her, especially since there is no paperwork to suggest that Schoening or anyone else was offered hush money, as such evidence could bring about a conspiracy charge. However, she could be called to the witness stand to testify despite being subject to a non-disclosure agreement (NDA).

Last week, the prosecution used the witness testimony that FTX’s co-founder and Chief Technology Officer Gary Wang gave on October 5 to support its opening statement that Sam Bankman-Fried had stolen up to $10 million (in customers’ funds) through a backdoor that allowed Alameda to withdraw funds from FTX.

The next day, Wang took the stand again, revealing that FTX’s “insurance fund” was fake, and the company came about the figures it portrayed “by multiplying daily trading volume by a random number around 7500.”

Wang confirmed that the actual figure in the fund was insufficient to cover the losses which the company experienced. He gave an instance of when a trader exploited a bug in FTX’s margin system in 2021, which led to hundreds of millions of dollars in losses for the crypto exchange. 

Instead of coming clean about this event, Sam Bankman-Fried allegedly told Wang to have Alameda Research “take on” the loss rather than recording it on FTX’s balance sheet. Wang mentioned that SBF made this statement because FTX’s books were more public than Alameda’s. As such, a figure of such magnitude could easily be noticed by investors, which could lead to further investigation.

Sam Bankman-Fried’s trial will continue on October 10 with the cross-examination of Gary Wang. Once that is done, the prosecution is expected to call more witnesses. There is the possibility that Alameda’s ex-CEO, Caroline Ellison, could testify on that day.

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