Hitting The 'Undo' Button At FTX
Gary Wang wrote the code that enabled an $8 billion fraud. Prosecutors and a federal judge sang his praises
“When the guilty escape justice, it is denied the innocent, as well.” – Kerrigan Bryne
Here’s something you don’t see every day: Prosecutors and a federal judge fawning over a white-collar criminal for ratting out his boss.
Gary Wang wrote the code at that enabled his pal Sam Bankman-Fried to steal $8 billion in customer funds at the infamous klepto-currency exchange FTX.
The 31-year-old computer whiz helped Bankman-Fried start the company. He was also among the bros who lived with the furry-headed fraudster in a $35 million penthouse in the Bahamas, where the crypto exchange was based before it tanked.
Bankman-Fried got 25 years. Wang, who pleaded guilty to four felony fraud and conspiracy charges, got a load of adulation.
U.S. District Judge Lewis Kaplan openly praised Wang as he handed out a sentence with zero prison time. "You're entitled to a world of credit for facing up to your responsibility," Kaplan said.
Prosecutors couldn’t say enough nice things about Wang in a 16-page pre-sentencing memo on Nov. 13, noting his timely cooperation, “extraordinary computer programing skills,” and even his dapper attire.
“Wang took a multi-hour bus ride every time he met with the Government, each time dressed in a suit. He was focused on every interview, was willing to go over portions of the computer code again and again until investigators understood it, and made preparations in between interviews so that the time would be productive.”
Prosecutors are so impressed, it sounds like they want to give Wang a full-time job. They say they are now using an interface that Wang created to detect illegal activity in cryptocurrency markets and fraud at publicly traded companies.
“Wang’s willingness to use his skills proactively, to help detect other criminal activity in financial markets, distinguishes his cooperation from the vast majority of cooperating witnesses to appear before this Court.”
Rewarding the safecracker
This is like lauding the safecracker in a bank heist. Stephen Hall of the non-partisan public interest group, Better Markets, calls it a miscarriage of justice:
“There are so many non-white-collar criminals convicted of much less significant crimes who are spending years if not decades in prisons across America. Equal justice under law means that rich, white-collar criminals should be properly punished for their crimes, too.”
Hall notes that Wang knew about the massive fraud before FTX filed bankruptcy in November 2022 and could have come forward sooner. He was merely the first to eject from an imploding rocket ship.
“He could have been a whistleblower. He could have acted in a way that provided him with a strong basis for arguing no jail time, but he chose not to do that. All of the principals in the FTX debacle deserve significant sentences, notwithstanding their contrition and cooperation.”
FTX left a trail tears, wiping out the savings of thousands of investors, and Wang was a key part of disaster, even if his participation began unwittingly, as prosecutors said in the memo.
Never forget that FTX ruined lives. As one victim wrote the court:
“The money I had in the FTX.com platform was money I received as compensation for a car crash that left me disfigured when I was 19 years old. I kept this money ‘untouched’ for 30 years because I thought they could be the only way to give me an old age with dignity.”
Maniac brainiacs
Wang was born in China and came to the U.S. from when he was seven years old. He met Bankman-Fried at a summer math camp during their high school years. They reconnected when they both ended up at the Massachusetts Institute of Technology.
After MIT, Wang began what might have been a more promising career at Google in Boston. Bankman-Fried moved to New York and became a trader at Jane Street. In 2017, they reconnected again and founded trading firm Alameda Research and then FTX.
At FTX, Wang made $200,000 a year and did not participate in the ill-gotten gains that were achieved by siphoning off FTX customer funds into Alameda, prosecutors said.
Still, Wang wrote the code that made this grift possible and he learned about the misappropriated billions in time. As FTX’s chief technology officer, Wang owned 17% of FTX. He also owned 10% of Alameda and stood to benefit if the venture firm’s speculative investments had panned out.
Too bad Bankman-Fried was a lousy investor and an impulsive spender. He spent the stolen billions buying Super Bowl ads, plying politicians with cash, courting venture capitalists, wooing celebrity endorsements, and snapping up real estate in the Bahamas. His spending was so outlandish and so public it would have been nearly impossible for anyone within his orbit to ignore that he was on the take.
“Wang considered leaving at various points, but was concerned about what would happen to FTX since the technical coding team at FTX was small,” the pre-trial memo said.
Ctrl+Z
Like many of America’s so-called best and brightest, Bankman-Fried, Wang and other defendants decided not to tackle the world’s most daunting problems with their big brains and world-class educations.
Instead they focused on building a company that would part lower-IQ people from their money.
Now, Wang is hitting the “undo” command, which usually doesn’t work in real life, but seems to be working for him.
"I took the easy path, the cowardly path, instead of doing the right thing," Wang told the court. "I plan to spend the rest of my life doing everything I can to make amends."
He received three years of supervised release and like all the other defendants was ordered to forfeit $11 billion – like that’s going to happen.
He is the fifth and final executive to be sentenced. FTX Digital Markets Co-CEO Ryan Salame received 7.5 years. Bankman-Fried’s girlfriend, Caroline Ellison, who served as Alameda’s CEO, received two years. Nishad Singh, a computer programer, also got off with no prison time.
Wang is moving on. He married a former FTX employee in January 2023 and they’re having a baby. He’s also working at a company that develops 3-D imaging technology.
Isn’t redemption grand?
Lame justice
One minute Wang is participating in one of the largest financial frauds in history, and the next he’s a lauded hero to prosecutors.
“This was an incredibly serious crime, for which Wang has accepted responsibility and expressed remorse,” prosecutors conceded in their memo. But they also wrote that they may not have been able to nail Bankman-Fried and outline FTX’s massive fraud without Wang’s assistance.
Days after FTX filed bankruptcy, Wang turned over his laptop and walked investigators through FTX’ complex data trail. He recalled key conversations and testified in court against his long-time pal.
Prosecutors also say they need some sort of platform Wang has created to detect financial fraud. (Details of this tool were redacted from their memo, so who knows how it works, or even if they know how it works.)
Wang deserves leniency, but isn’t zero prison time a bit light for participating in a fraud this massive?
What this says is that law enforcement lacks the technology to investigate increasingly sophisticated frauds in the digital age – and that they they have to rely on a 31-year old felon for help.
What this says for high-tech scammers is that it’s, Game On!
“A sentence of no jail time for Wang once again reveals deep-seated flaws in our justice system,” said Hall.
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Couldn't agree more. Though, using the example of Frank Abagnale, the "Catch Me if You Can" thief protrayed by Leonardo DiCaprio, who wound up working with/consulting for the FBI, it might have been better to SENTENCE him to continue cooperating with investigators, even as a paid consultant, than to just say "we'll keep an eye on you for 3 years but make all the money you know how you want in the meantime." Still, it's a slight bit better than Inslaw, the developers of 'PROMIS' software, a case-management system, who sued the Department of Justice for pirating its code in the 1980s, only to have its case dismissed finally in 1998. But bottom line is here's the thing: they may need his software to 'detect' fraud; but block-chain's MAIN PURPOSE is to tag and track transactions from origin to current possession. It is the BEST 'chain-of-custody' digital algorithm ever devised. Which is why the Federal Government and investigators never really mind that cybercriminals and others want to keep believing crypto currency is somehow 'untraceable.' It's block-chain. And better than a blue dye bag.