Author: Giovanni Chen, Meta Era
On October 3rd, the bankruptcy case of FTX, once the world's second largest exchange, was officially heard in New York. The judge, SBF, and a number of witnesses at the scene confronted each other, revealing a wealth of information and details about how SBF operated FTX, exposing the internal mysterious operations of this once second-ranked exchange with a market value of up to $32 billion in the cryptocurrency market.
On the day of the trial, the heavyweight figures closest to SBF within the company, Gary Wang, Caroline Ellison, and Trabucco, all appeared as witnesses. Among them, a Chinese face attracted the attention of all media and the public. The witness, who wore glasses and appeared somewhat introverted and polite, was none other than Gary Wang, the co-founder and CTO of FTX.
Gary Wang revealed some explosive information, personally disclosing that there was indeed a backdoor relationship between FTX and Alameda:
- SBF allowed Alameda to withdraw funds from FTX without limit. In 2019, as the CTO, Gary personally wrote the function for Alameda to steal customer funds from the FTX system. Moreover, Alameda could trade with more funds than it actually owned in its account, giving Alameda the invisible privilege of misappropriating user assets and unlimited trading.
- When FTX collapsed, Alameda increased its credit limit to an exaggerated $650 billion, and Alameda even directly withdrew $8 billion from the FTX platform. This $8 billion happened to be the fund gap in FTX's company account, which came from FTX customers.
- In addition, the real balance of the insurance fund disclosed by FTX (to ensure the trading counterparty is cleared of liquidation risk) was found to be falsified. It was generated by a random number generator, and the amount did not match the database. The real number was lower than the generated number, revealing the deceptive behavior of FTX's external financial statements and audit responses.
Seeing his once most important "comrade" testify in court and reveal shocking data and information, SBF's body trembled uncontrollably. He vigorously rubbed his eyes in an attempt to calm down, his eyes filled with despair.
Who is Gary Wang?
According to Gary's own statement, he is the co-founder of FTX, with an annual salary of $200,000, and owns 17% of FTX's shares and 10% of Alameda's shares, making him the second most important figure after SBF. Based on the valuation of FTX and Alameda's shares, in April 2022, the 28-year-old Gary became the richest person under 30 with a net worth of $5.9 billion, as listed in the latest Forbes rich list.
As the most mysterious billionaire executive, Gary is usually mysterious in character, rarely appearing in public. There are only a few photos of him online, and even his colleagues often don't see him for long periods of time. Even his LinkedIn photo is just a silhouette.
The Acquaintance of Gary and SBF
According to online information, Gary was born in China and immigrated to New Jersey, USA with his parents after the age of 8. He excelled in his studies from a young age, especially demonstrating 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 executive of FTX). The three of them attended a mathematics summer camp training held by the Massachusetts Institute of Technology (MIT) and all successfully entered the mathematics program at MIT. Trabucco and Gary pursued bachelor's degrees in mathematics and computer science, while SBF pursued a bachelor's degree in physics.
SBF and Gary gradually built trust during their university years. They were roommates for three years, and in addition to studying, they often played games and solved puzzles together. In their free time, they even joined the Epsilon Theta fraternity together. Gary was quiet and introverted, and many people found it difficult to communicate and get along with him. However, after observing Gary for many years, SBF deeply understood Gary's character and abilities, especially knowing about Gary's talent in programming and mathematics (Gary had won the MIT programming competition).
"Many people think Gary is difficult to get along with and keep their distance from him, but I won't. I think Gary doesn't want to deliberately distance himself from this world. He is very smart, and he can take the time to think about some very difficult problems," SBF recalled.
Their many years of studying together formed a deep friendship, and after graduation, SBF went to work in trading at the Jane Street trading fund on Wall Street, while Gary went to Google to work on the development of the flight price integration engine, Google Flights.
In November 2017, SBF founded the quantitative trading company Alameda Research in San Francisco, focusing on quantitative trading in the cryptocurrency market. At the first opportunity, SBF thought of Gary, who was working at Google. He immediately flew to Boston and persuaded Gary to join Alameda: "Your talent in trading will definitely work. The cryptocurrency market is full of countless new opportunities. Let's create them together!" SBF vividly described his ambitions and aspirations to Gary.
Gary felt that he couldn't feel challenged in his work at Google, so he accepted SBF's invitation to come to San Francisco.
They often fought side by side, with Gary writing code day and night, and SBF often sleeping in the company. They only slept 4-5 hours a day.
Gary Wang's Quantitative Program
Initially, SBF operated Alameda with his own funds, trading mainstream and alternative coins, but the performance was poor, with losses as high as $500,000 per day.
However, after Gary joined Alameda, the team, after a long period of trial and error, determined the trading strategy to be arbitrage between Bitcoin prices in Japan, the United States, and South Korea. In the most critical part, Gary wrote the entire quantitative program for Alameda, used to quickly arbitrage between different trading markets. As long as the program captured the price difference between exchanges and executed it quickly, it could complete a risk-free arbitrage operation. With this method, SBF was able to secure $170 million in financing from investors, and Alameda's daily trading volume once exceeded several billion dollars, with daily revenue reaching an astonishing $25 million.
Gary Wang's Liquidation Engine
However, this was not the beginning of everything. Back in 2018, SBF asked Gary to write a program for a Bitcoin exchange, and Gary completed a CryptonBTC exchange in just one month. Although it didn't become a product later on, SBF knew that if he asked Gary to write a contract exchange program, he could complete it within a month and the quality would be better than any exchange on the market. Gary is a true programming genius.
However, at that time, the common problem with contract exchanges was that when a client's position experienced losses and required additional margin, the exchange would first ask the client to add margin. If the market changed too quickly, the exchange would bear the loss of funds first.
In the later contract exchange code, Gary invented a new liquidation engine mechanism that could monitor client positions in seconds and immediately execute liquidation when the client's margin was insufficient, thereby protecting the exchange's funds. Although this feature annoyed traders, it solved a key problem that had long plagued many exchanges. After Gary added the liquidation mechanism to FTX, Binance, Kraken, and other exchanges also followed suit in developing this feature.
Gary's Cross-Margin
In addition, in regular contract trading, users need to have collateral in the corresponding assets for borrowing, lacking flexibility in funds. In response to this, Gary developed the "cross-margin" feature for FTX, allowing users to use multiple digital assets as collateral for a single trade. This feature was subsequently introduced by other contract exchanges.
SBF's Bloodthirsty Sword
In fact, as the "right-hand man" of SBF in achieving great success, Gary is not just an excellent programmer, he is also a top-notch product manager! Gary can even develop products that surpass competitors based on market demand alone. Nishad Singh is the engineering manager at FTX, but the most core products are often developed solely by Gary, with Singh mainly coordinating engineers.
At the same time, Gary is responsible for the core requests of some special programs for SBF, and only Gary and SBF have permission to use and view them. FTX's engineering team doesn't even know all the programs Gary has written. This includes the "allow negative balance" feature that allows Alameda to transfer assets from FTX. This program allows Alameda to use FTX customer funds without restrictions.
The Fall of FTX's Core Team
Under the leadership of SBF and Gary, FTX became the world's second-largest exchange with a market value of $32 billion. However, in November 2022, FTX collapsed within a week, owing over $100 billion in debt to more than 1 million creditors, marking a Lehman moment in the virtual currency world.
The core team of FTX all lived in a top-floor apartment in the Bahamas. When the incident occurred, the police raided the apartment and detained all the core members of FTX, including Gary.
Once invincible, SBF said, "I have a 5% chance of being elected President of the United States in the future," but now he has become a "fraudster" who everyone is calling out.
At the same time, the inner turmoil of the genius programmer Gary is also evident. In December 2022, he admitted to all crimes, including wire fraud, commodity fraud, and securities fraud, and is facing 50 years in prison. Currently, Gary is seeking to cooperate as a witness in court to mitigate his sentence.
The once-renowned genius programmer Gary Wang has also had his time in the spotlight, but this sharp and bloodthirsty sword was used in the wrong place, leading to a hasty and unsatisfactory ending.
At the same time, the trial of FTX is still ongoing. What will be the final outcome for SBF and Gary? Let's 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/
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