SBF on trial: The Python code that allegedly let Alameda hedge fund spend people's FTX deposits

At nan fraud proceedings of erstwhile FTX caput Sam Bankman-Fried, prosecutors presented nan assemblage pinch Python codification for nan FTX backend that allowed flagged customer accounts to walk money they didn't person connected nan cryptocurrency exchange.

Multiple accounts associated pinch Alameda Research, nan hedge money controlled by Bankman-Fried that allegedly utilized billions of dollars of customer deposits successful FTX arsenic a slush fund, were flagged thus, according to reported accounts of nan grounds of FTX co-founder Gary Wang.

This contradicts Bankman-Fried's July 31, 2019 statement that Alameda and its accounts were treated nan aforesaid arsenic immoderate different customer connected FTX. That is to say, Alameda Research, which bankrolled startups and different ventures, had a normal relationship connected FTX, according to SBF, but it's now alleged nan hedge money was capable to walk arsenic it wanted, pinch nan costs coming from a excavation of customer assets.

It is claimed SBF truthful not only utilized hundreds of millions of dollars of people's money to money his super-luxury lifestyle, he utilized money held successful FTX to screen Alameda, particularly erstwhile it made bad bets.

FTX Trading, a cryptocurrency speech erstwhile fancifully weighted astatine $32 billion, declared bankruptcy past November, on pinch 134 connection companies. Bankman-Fried was subsequently charged by US national prosecutors pinch fraud, money laundering, and run finance offenses. He faces 2 trials, 1 covering seven counts that began past week successful New York City, nan different covering six counts that's scheduled for March adjacent year.

The code

At nan existent trial, prosecutors presented a screenshot of nan FTX codebase that showed nan usability of nan allow_negative flag, which erstwhile group to existent enabled spending erstwhile nan relationship equilibrium was zero aliases less.

The codification was revealed by Molly White, a package technologist and an online publisher, in her newsletter.

if not account.allow_negative: if (balance.available_ignoring_colleteral if ignore_collateral other balance_available) <0: Raise BadRequest('Account does not person capable balances')

Basically, nan apical statement allows nan equilibrium cheque only erstwhile allow_negative is false.

Wang, who has already pleaded blameworthy to 4 charges, reportedly said that nan codification fto Alameda Research's accounts connected FTX debar overdraft checks, demonstrating nan cryptocurrency finance biz was not treated nan aforesaid arsenic different customers. This is fundamentally nan alleged backdoor successful FTX that allowed Alameda Research to get $65 cardinal successful in installments and to upwind up pinch $8 cardinal successful liability upon bankruptcy.

This codification alteration was made, according to Wang, astatine nan behest of Bankman-Fried.

The defense's mentation for this, according to White, is that Alameda was responsible for converting US dollars to stablecoins (digital tokens pegged to nan dollar) and utilized nan emblem to get costs from FTX earlier returning them arsenic stablecoins.

Another codification snippet presented to nan assemblage covers nan FTX security fund, a fig that nan bankrupt speech published to bespeak nan magnitude of money group speech to protect bad investments.

At trial, Wang told nan authorities charismatic nan number was fake. As documented by White, nan usability that calculated nan security money looked for illustration this:

return f2d(numpy.random.normal(7500, 3000)) * daily_volume / Decimal('1e9')

In this Python line, nan purported security worth was calculated by generating a random number location astir 7,500 utilizing nan numpy.random.normal function, multiplying nan number times nan regular trading measurement (~$13 cardinal to ~$26 cardinal about a twelvemonth ago) and past dividing nan full by 1 cardinal (1e9 aliases 10^9).

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On Tuesday, Caroline Ellison, erstwhile CEO of Alameda Research and Bankman-Fried's erstwhile romanticist partner, testified that Bankman-Fried had told her to return astir $10 cardinal successful customer costs from FTX to repay loans made to Alameda.

According to Reuters, Bankman-Fried told Ellison to supply lenders pinch a misleading equilibrium expanse to play down nan financial risk.

Ellison, for illustration Wang, has already pleaded guilty and is cooperating pinch prosecutors.

Bankman-Fried was jailed successful August anterior to nan proceedings for witnesser intimidation and has pleaded not guilty connected each charges. ®