Author: Meta Era guest author "Giovanni Chen"
On October 3, the bankruptcy case of FTX Exchange, once the second largest exchange in the world, was officially opened in New York. The judge, SBF and a group of witnesses on the scene confronted each other fiercely, and various testimonies and statements reviewed the details of how SBF operated FTX, revealing the mysterious internal operations of this cryptocurrency exchange, which was once ranked second in trading volume and had a market value of up to US$32 billion.
On the day of the trial, Gary Wang, Caroline Ellison, and Trabucco, the heavyweights closest to SBF in the company, appeared in the witness stand at the same time. One of the Chinese faces attracted the attention of all media and the public. This witness, who wore glasses, was slightly introverted and well-mannered, was none other than Gary Wang, the co-founder and CTO of FTX.
Gary Wang made a bombshell statement, personally revealing that there is indeed a backdoor in the relationship between FTX and Alameda:
SBF allows Alameda to withdraw funds from FTX indefinitely. In 2019, Gary, as CTO, personally wrote into the FTX system the function for Alameda to steal customer funds. Moreover, Alameda can trade with more funds than he actually has in his account. This invisibly gives Alameda the privilege to embezzle user assets and trade indefinitely.
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 was exactly the funding gap in the FTX company account, which came from FTX customers.
In addition, the actual insurance fund balance announced by FTX (a trading protection fund that ensures the risk of traders' counterparties being liquidated) is falsified. It is generated by a random number generator, and the amount does not match the database. The real number is lower than the generated number, which reveals the deception in FTX's external financial statements and audit responses.
Seeing his once most important "comrade-in-arms" testify in court and reveal shocking data and information, SBF's body kept shaking. He rubbed his eyes with both hands to try to calm down, his eyes full of despair.
Who is Gary Wang?
According to Gary’s personal statement, as the co-founder of FTX, he has 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 person after SBF. In the operation of FTX, SBF is responsible for corporate strategy, public relations and communications, while Gary focuses on coding.
Based on the equity value of FTX and Alameda, in April 2022, on the new Forbes rich list, Gary, who was only 28 years old, became the richest person under 30 with a net worth of 5.9 billion US dollars.
As the most mysterious billionaire executive, Gary is usually mysterious and rarely appears in public. There are only a handful of photos of him online. Even his colleagues in the company often don’t see him for a long time. Even the photo on LinkedIn only shows his back.
How Gary and SBF met
According to online information, Gary was born in China and immigrated to New Jersey, USA with his parents at the age of 8. He has been an excellent student since childhood, especially in mathematics and programming, showing great talent and interest.
In 2010, he participated in a high school math competition and happened to meet SBF and Trabucco (another senior executive of FTX). The three of them attended a math summer camp training held by the Massachusetts Institute of Technology (MIT) together. All three of them were successfully admitted to the mathematics major at MIT. Trabucco and Gary pursued bachelor's degrees in mathematics and computer science, and SBF pursued a bachelor's degree in physics.
SBF and Gary gradually built trust in college. They were roommates for three years. Besides studying, they often played games and did puzzles together. In their free time, they also participated in the Epsilon Theta fraternity together. Gary was silent and introverted. Many people thought that Gary was difficult to communicate with and get along with. However, SBF had a deep understanding of Gary's personality and abilities after years of observation, especially Gary's talent in programming and mathematics (Gary once won the MIT programming competition).
"A lot of people think Gary is difficult to get along with, so they keep their distance from him, but I won't. I think Gary doesn't want to deliberately stay away from the world. He is very smart, and he can make time to think about some very difficult problems." SBF recalled.
Their years of study forged a deep friendship. After graduation, SBF went to work at Jane Street, a trading fund on Wall Street, and Gary went to Google to develop Google flights, an integration engine for airfare prices.
In November 2017, SBF founded Alameda research, a quantitative trading company in San Francisco, focusing on quantitative trading in the cryptocurrency market. SBF immediately thought of Gary, who was working at Google. He immediately flew to Boston and persuaded Gary to join Alameda: "Your talent for 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 working at Google was not challenging enough, so he accepted SBF's invitation and came to San Francisco.
They often fought side by side, Gary wrote code day and night, SBF often slept in the company, and the two only slept 4-5 hours a day.
Gary Wang's Quantization Program
At the beginning, SBF used its own funds to operate Alameda, buying and selling mainstream coins and altcoins, but the performance was poor, and the daily losses were as high as US$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 price difference of Bitcoin between Japan, the United States and South Korea for arbitrage. In the most critical link, Gary wrote the 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 risk-free arbitrage operation. With this method, SBF obtained $170 million in financing from investors. Alameda's daily trading volume once exceeded billions of dollars, and its daily income could reach an astonishing $25 million.
Gary Wang's Liquidation Engine
However, this was not the beginning of everything. As early as 2018, SBF asked Gary to write a Bitcoin exchange program, and Gary completed an exchange CryptonBTC in one month. Although it was not made into a product later, SBF knew that if Gary was asked to write a contract exchange program, he could also complete it within a month, and the quality would be better than any other exchange in the market. Gary is an absolute programming genius.
But a common problem with contract exchanges at the time was that when a customer's position experienced a loss and required additional margin, the exchange would first ask the customer to add margin. If the market changed too quickly, the exchange would bear this part of the loss first.
In the code of the later contract exchange, Gary invented a new liquidation engine mechanism that can monitor customer positions in seconds and immediately execute liquidation when the customer's margin is insufficient, thereby protecting the exchange's funds. Although this function annoys traders, it solves a key problem that has long plagued many exchanges. After Gary added a liquidation mechanism to FTX, Binance, Kraken and other exchanges also followed suit to develop this function.
Gary's Cross Margin
In addition, in general contract transactions, users need to have collateral for corresponding assets to borrow and lend, which lacks the flexibility of funds. In response to this, Gary developed the "cross margin" function for FTX, allowing users to use multiple digital assets as collateral for a transaction. This function was later launched by other contract exchanges.
SBF's Bloodthirsty Sword
In fact, as the "second in command" of SBF's 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 competitors based on market demand alone. Nishad Singh is the engineering director of FTX, but he is more of a coordinator for engineers, and 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 the authority to use and view them. The FTX engineering team does not even know all the programs written by Gary. This includes the "allow negative balance" function that allows Alameda to transfer assets from FTX. This program 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 value of $32 billion. However, in November 2022, FTX collapsed in a week, owing more than $10 billion in debt to more than 1 million creditors, which can be called the Lehman moment of 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 members of FTX, including Gary.
The once arrogant SBF once said, “There is a 5% chance that I will be elected as the president of the United States in the future.” But now he has become a “liar” that everyone wants to beat.
At the same time, the genius programmer Gary is also suffering. In December 2022, he admitted all crimes including wire fraud, commodity fraud and securities fraud, and is about to face 50 years in prison. Currently, Gary is seeking to cooperate in testifying in court to reduce the sentence.
Gary Wang, a genius programmer of his time, was also famous at one time, but such a sharp and bloodthirsty sword was used in the wrong place and ended up with a messy ending.
Meanwhile, the FTX trial is still ongoing. What will be the final outcome of the trial between SBF and Gary? Let us wait and see.
