FTX co-founder: FTX is not doing well and its assets are in poor condition

FTX is not doing well and its asset condition is not very good.

That’s according to former co-founder and CTO Gary Wang, who returned to the witness stand this week for the SBF trial.

FTX’s collapse last November was made public in part by former CEO Ban SBF’s own tweets. One of his most well-known messages (since deleted) was posted less than a week before FTX declared bankruptcy and read: “FTX is fine, assets are fine.”

Wang told the court today that the content of the tweet was false. FTX had an $8 billion hole at the core of its balance sheet, and sister company Alameda Research was also facing difficulties with the loan. Wang said SBF was well aware of the debt when it tweeted. Wang further testified that some customer assets were also simply "lost," while other funds were used for investment.

Prosecutors sought to use Wang’s testimony to prove that many of SBF’s public statements about FTX’s solvency and the risk exposure the exchange had had since its inception were false. In a Bloomberg podcast segment hosted by Matt Levine, SBF touted FTX’s lack of liquidation risk — specifically, that FTX had never had a single day with a blowout that was bigger than its revenue.

Wang said this was not the case. He claimed that on days when FTX might have incurred losses, the losses were transferred to Alameda at the request of SBF.

Bahamian regulator steps in

According to Wang’s testimony, Wang stayed in the Bahamas with SBF after FTX declared bankruptcy on Nov. 11. On Nov. 12 (one day after the bankruptcy filing), Wang said while traveling to and from the Bahamas Securities Commission office that SBF told him to stop transferring any assets to the U.S.

Instead, SBF told Wang that they should send the assets to Bahamian regulators because they looked more “friendly.” SBF got this impression after meeting with his father, Joseph Bankman, and their lawyers.

Wang told the court that he ignored the advice of his U.S. bankruptcy attorneys and followed the SBF’s order — transferring FTX assets to a Bahamian liquidator later that day.

Wang then left SBF for the Bahamas on November 16. He then met with U.S. officials on November 17 to cooperate with prosecutors in their case against SBF. Wang told the court that he did not expect the government to reduce his sentence for his cooperation, but said he hoped to avoid jail time. Wang faces up to 50 years in prison.