NEW YORK – FTX co-founder Gary Wang said he and Sam Bankman-Fried committed a multi-billion-dollar fraud with customer funds that led to the cryptocurrency exchange’s collapse, shortly after taking the stand against his one-time maths camp buddy and Massachusetts Institute of Technology (MIT) roommate.

Dressed in a gray suit and red tie, Wang, 30, did not make eye contact with Bankman-Fried as he entered the Manhattan courtroom on Thursday afternoon to testify as a government witness.

Prosecutors claim Bankman-Fried orchestrated a scheme in which billions of dollars in FTX customer funds were secretly transferred to affiliated hedge fund Alameda Research.

The testimony by Wang, who pleaded guilty to fraud and agreed to cooperate against his one-time friend in December, promises to be among the most powerful the government puts on against Bankman-Fried.

Wang, also FTX’s chief technology officer, said Bankman-Fried directed him to alter the cryptocurrency exchange’s code so that Alameda was able to draw a US$65 billion (S$89 billion) line of credit.

“It withdrew so much that FTX was not able to pay customers who tried to withdraw,” Wang said.

Wang initially appeared nervous and spoke quickly on the stand, though he seemed to become more at ease as questioning continued.

His testimony on Thursday was relatively brief, but he is expected to return to the stand on Friday.

‘We are not equal’

As an FTX co-founder, Wang was once a billionaire, though he said his wealth never matched that of Bankman-Fried, who was estimated to be worth US$26 billion before the exchange’s collapse.

The unequal relationship extended to Alameda, Wang said, where he owned 10 per cent of the firm and Bankman-Fried had 90 per cent.

And Bankman-Fried had the final say on most business decisions.

“We are not equal,” Wang testified.

He said Bankman-Fried carefully oversaw the process by which FTX’s top brass were able to borrow hundreds of millions of dollars from Alameda.

“He told us what things to be implemented”, such as how much collateral was needed for certain positions and limits on how much people can deposit or withdraw, Wang testified.

Wang’s testimony potentially undercuts Bankman-Fried’s contention that he was not closely involved with the running of Alameda and relied instead on its chief executive Caroline Ellison, who is also his former girlfriend.

Bankman-Fried’s lawyers are arguing that he made mistakes but had no ill intent.

Ellison has also pleaded guilty to fraud and her testimony was touted by prosecutors in opening statements on Wednesday.

Earlier on Thursday, Mr Adam Yedidia, another MIT classmate who went to work at FTX, testified that Bankman-Fried was aware and concerned about a potential US$8 billion shortfall at FTX from loans to Alameda five months before both companies collapsed.

Mr Yedidia told jurors he was testifying under a grant of immunity from prosecution.

“It concerned me,” Mr Yedidia testified. “It seemed like a lot of money for Alameda to be owing FTX. And I wanted to be certain that Alameda could repay that debt.”

Mr Yedidia said he raised the issue with Bankman-Fried in a conversation outside the US$35 million luxury Bahamas penthouse that they shared with eight other people.

“Are things okay?” he said he asked.

Not ‘bulletproof’

“In response, Sam said something like, ‘We were bulletproof last year. We’re not bulletproof this year’,” Mr Yedidia testified, adding that Bankman-Fried appeared nervous and worried.

Mr Yedidia said that was atypical of the friend he had known for many years.

Mr Yedidia testified that he received a US$6 million cash bonus at the end of 2021, which he immediately invested it in FTX stock.

Though his base salary was between US$175,000 and US$200,000, Mr Yedidia said he received several millions of dollars in cash bonuses and stock options.

In its cross-examination of Mr Yedidia, the defence tried to downplay Bankman-Fried’s own wealth, comparing the Bahamas penthouse to a dorm and asking Mr Yedidia if he ever witnessed his friend buying watches, sports cars, yachts or fancy clothes.

Mr Yedidia said he did not.

“I didn’t see him wearing any fancy clothes,” he testified. BLOOMBERG