Author of the article: Meta Era guest author Giovanni Chen」
On October 3, the bankruptcy case of the FTX exchange, once the second largest in the world, officially opened in New York. The judge and SBF at the scene were in tit-for-tat with a number of witnesses, making explosive revelations frequently. Various testimonies and statements reviewed how SBF operates FTX. Various details have revealed the mysterious internal operations of this cryptocurrency exchange, which once ranked second in trading volume and has a market capitalization of US$32 billion.
On the day of the trial, Gary Wang, Caroline Ellison, and Trabucco, the heavyweights closest to SBF within the company, appeared in the witness box at the same time. One of the Chinese faces attracted the attention of all the media and the public. This bespectacled, slightly introverted, and gentle witness was the co-founder of FTX, CTO Gary Wang.
Gary Wang’s exit is a blast. He personally revealed that there is indeed a backdoor in the relationship between FTX and Alameda:
SBF allows Alameda to withdraw funds from FTX unlimitedly. In 2019, as CTO, Gary personally wrote the function of Alameda to steal customer funds into the FTX system. And Alameda was able to trade with more funds than he actually had in his account. This invisibly gave Alameda the privilege to misappropriate user assets and conduct unlimited transactions.
When FTX collapsed, Alameda increased its credit line to an exaggerated $65 billion, and Alameda even withdrew $8 billion directly from the FTX platform. This $8 billion is exactly the funding gap in the FTX companys account, coming from FTX customers.
In addition, the actual insurance fund balance (the transaction protection fund that ensures the risk of liquidation of trader counterparties) published by FTX is fraudulent. It is generated by a random number generator, and the amount does not match the database. The real number is higher than the generated number. It is low, which reveals the deception inherent in FTX’s external financial statements and response to audits.
Seeing his most important comrade-in-arms testify in court and reveal pieces of horrifying data and information, SBFs body kept shaking. He wiped his eyes fiercely with both hands to try to calm down, his eyes full of despair.
Who is Gary Wang?
According to Garys personal statement, as the co-founder of FTX, he has an annual salary of US$200,000 and owns 17% of FTXs equity and 10% of Alamedas equity. He is the second-largest person after SBF. In FTX operations, SBF is responsible for corporate strategy, PR and communications, while Gary focuses on coding.
According to the equity value of FTX and alameda, in April 2022, Gary, 28, became the richest person under the age of 30 with a net worth of US$5.9 billion in the new Forbes rich list.
As the most mysterious billionaire executive, Gary is usually mysterious and rarely appears in public. There are only a handful of photos online. Even colleagues in the company often cannot see him for a long time. Even the photos on LinkedIn only show his back.
The acquaintance of Gary and SBF
According to online information, Gary was born in China and immigrated to New Jersey with his parents when he was 8 years old. He had excellent academic performance since childhood, especially showing high talent and interest in mathematics and programming.
In 2010, he participated in a high school mathematics competition and happened to meet SBF and Trabucco (another FTX executive). The three of them participated in a mathematics summer camp training organized by the Massachusetts Institute of Technology (MIT). All three of them successfully entered MIT. Mathematics majors, Trabucco and Gary are pursuing bachelors degrees in mathematics and computer science, and SBF is pursuing a bachelors degree in physics.
SBF and Gary gradually built up trust in college. They were roommates for three years. After studying, they often played games and did puzzles together. In his free time, he also participates in the Epsilon Theta fraternity. Gary has a quiet and reserved personality. Many people think that Gary is difficult to communicate and get along with. However, through years of observation, SBF is well aware of Garys personality and abilities, especially Garys talent in programming and mathematics (Gary once received the MIT programming competition champion).
Many people think that Gary cant get along, so they keep a distance from Gary, but I dont. I think Gary doesnt want to deliberately stay away from the world. He is very smart, and he can spare time to think about some very difficult issues. SBF recalled this way road.
Their years of schooling experience formed a deep friendship as classmates. After graduation, SBF went to work at Jane Street, a trading fund on Wall Street, while Gary went to Google to develop Google flights, an integration engine for air ticket prices.
In November 2017, SBF founded Alameda Research, a quantitative trading company in San Francisco, focusing on quantitative trading in the cryptocurrency market. At the first moment, SBF thought of Gary who worked at Google. He immediately flew to Boston and persuaded Gary to join Alameda: Your talent will definitely make it possible to trade. The cryptocurrency market is full of countless new opportunities. Lets create them together! ” SBF vividly describes Gary’s ambitions and ambitions.
Gary felt that working at Google did not feel challenging, so he accepted SBFs invitation to come to San Francisco.
They often fight side by side. Gary writes code day and night, and SBF often sleeps in the company. The two of them only sleep 4-5 hours a day.
Gary Wangs quantification program
In the beginning, SBF used its own funds to operate Alameda, buying and selling mainstream currencies and altcoins, but the performance was poor, with daily losses as high as $500,000.
But after Gary joined Alameda, the team, after a long period of exploration, determined that the trading strategy was to take advantage of the Bitcoin price difference arbitrage between Japan, the United States and South Korea. In the most critical part, Gary wrote an entire quantitative program for Alameda to quickly arbitrage in different trading markets. As long as this program captures the price difference between exchanges and executes it quickly, it can complete a seamless transaction. Risk arbitrage operations. With this method, SBF received US$170 million in financing from investors. Alamedas daily trading volume once exceeded billions of US dollars, and its daily income could reach an astonishing US$25 million.
Gary Wangs Liquidation Engine
However, this is not the beginning of everything. As early as 2018, SBF asked Gary to write a program for a Bitcoin exchange. Gary completed an exchange, CryptonBTC, in one month. Although it did not become a product later, SBF knew that if Gary was asked to write the contract exchange program, he could complete it within a month, and the quality of the writing would be better than any exchange on the market. Gary is an out-and-out programming genius.
But a common problem in contract exchanges at that time was that when a customers position experienced losses and a margin call was required, the exchange would first ask the customer to add a margin call. If the market changed too fast, the exchange would first bear the loss of funds.
In the subsequent code of the contract exchange, Gary invented a new liquidation engine mechanism that can monitor customer positions on a second-by-second basis and perform liquidation immediately when the customers margin is insufficient, thereby protecting the exchanges funds. Although this feature is annoying to traders, it solves a key problem that has long plagued many exchanges. After Gary added a clearing mechanism to FTX, Binance, Kraken and other exchanges followed suit and developed this feature.
Garys Cross Margin
In addition, in general contract transactions, users need to have mortgages of corresponding assets for borrowing, which lacks flexibility in funds. In response to this, Gary developed the cross-margin function for FTX, which allows users to use multiple digital assets to jointly collateralize a transaction. This feature was later launched by other contract exchanges.
SBF’s bloodthirsty sword
In fact, as the second in command of SBFs great achievements, Gary is not only an excellent programmer, he is also a top product manager!Gary can even develop products that are ahead of his competitors through market demand alone. Nishad Singh is the engineering director of FTX, but he is more responsible for the coordination of engineers. The core products are often developed by Gary alone.
At the same time, Gary will be responsible for the core requests of some special programs of SBF, and only Gary and SBF have permission to use and view them. The FTX engineering team does not even know all the programs written by Gary. These include the Allow Negative Balance feature that allows Alameda to transfer assets from FTX. This procedure allows Alameda to use FTX customers funds without restrictions.
The fall of the FTX core team
Under the leadership of SBF and Gary, FTX ranked second in global trading volume, with a market capitalization of US$32 billion. But in November 2022, FTX collapsed in a week, owing more than 1 million creditors and a debt of over ten billion dollars. It can be called the Lehman moment in the virtual currency world.
The core team of FTX all lived in a penthouse in the Bahamas. At the time of the incident, the police came and detained all the core personnel of FTX, including Gary.
The once arrogant SBF said: I have a 5% chance of being elected President of the United States in the future. Now he has become a liar that everyone calls out.
At the same time, the genius programmer Gary was also suffering. In December 2022, he pleaded guilty to all crimes including wire fraud, commodities fraud, and securities fraud, and was about to face 50 years in prison. Currently, Gary is seeking to cooperate in testifying in court to reduce his sentence.
Gary Wang, a generation of genius programmer, also became famous for a while, but such a sharp and bloodthirsty sword was used in the wrong place, resulting in a sloppy ending.
At the same time, the trial of FTX is still ongoing. What is the final outcome of the trial of SBF and Gary? let us wait and see.
References:
[ 1 ] Michael lewis（2023）, 《Going Infinite: The Rise and Fall of a New Tycoon 》
[ 2 ] https://www.dlnews.com/articles/people-culture/meet-ftx-founder-gary-wang-who-testified-against-sbf/
[ 3 ] https://www.theblockbeats.info/news/46105?search=1
[ 4 ] https://www.odaily.news/post/5183190
