Posted October 10, 2023 at 5:25 PM EST.
welcome to fifth day of the criminal trial of Sam Bankman-Fried, the founder and former CEO of the defunct crypto exchange FTX. The 31-year-old SBF, as he is also known, faces seven charges, including fraud, to which he has pleaded not guilty. Laura Shin and Sage Young report from inside the courtroom while Rosie Perper and James Rubin transcribe from the office.
Here’s a live recap of what happened so far on Tuesday:
(October 10, 2023, 6:18 p.m. EST)
Compared to previous witnesses, Ellison spoke clearly and was easier to follow. She also shared details about her romantic relationship with Bankman-Fried and how he sometimes didn’t make her a priority — details that could help the prosecution win favor with the jury.
October 10, 2023, 5:22 p.m. EST
Photographers and reporters crowded Caroline Ellison as she left the courtroom after the first day of her highly anticipated testimony. She is expected to testify again tomorrow.
October 10, 2023, 1:52 p.m. EST
Former Alameda CEO Caroline Ellison began her testimony today, which is expected to reveal more key details about the relationship between FTX and Alameda. For starters, Ellison said she committed crimes while working in Alameda under Bankman-Fried.
She made court watchers laugh when she looked in the wrong place after being asked to identify Bankman-Fried, her former boyfriend, and could not immediately point to him.
October 10, 2023, 1:10 p.m. EST (day five)
SBF’s defense finally appears to be making progress in the case, scoring key points during its cross-examination of Wang on Tuesday. In a few cases, they seemed to suggest that Wang’s memories of the events were fuzzy or did not include the full context. For example, they brought up the fact that Wang said last week that SBF would tell investors and the media that Alameda Research, FTX’s sister company, was being treated like the others on FTX. But the defense argued that because Wang only listened to SBF’s phone conversations, he would have only heard SBF’s point of view and did not necessarily know what the other side was saying.
The defense also brought up a document in which SBF discussed the Alameda closure, in which it was stated that they did not “cover up” as much as they should have.
***
October 6, 2023 (fourth day)
Gary Wang, co-founder of Alameda Research and FTX, described the special Alameda privileges that FTX had programmed into its software code as early as July 31, 2019, a few months after the exchange launched.
Prosecutors presented previously deleted Github posts, tweets, and code documents along with other evidence, and Wang noted that FTX did not disclose these benefits to the exchange’s customers or investors. He pleaded guilty earlier this year to fraud charges in a plea deal he hopes will keep him out of prison. Wang faces a sentence of up to 50 years.
***
Wang described the ability of FTX’s trading arm, Alameda Research, to hold a negative balance in its FTX account, meaning Alameda could transfer and withdraw more funds than it had, essentially “borrowing stock Exchange “.
In July 2019, shortly after the launch of FTX, Bankman-Fried allegedly directed Wang and Nishad Singh, FTX’s head of engineering, to pay various FTX-related expenses from the accounts of Alameda and others accounting accounts on FTX – especially expenses related to FTT, the cryptocurrency. created by FTX. The “allow_negative” feature was then enabled on Alameda’s behalf.
Because Alameda’s account could have a negative balance, the company withdrew more funds than it had on the site, Wang said. Those funds belonged to FTX customers, and by the time FTX declared bankruptcy, Alameda had borrowed $8 billion from the exchange, he said.
Wang added that FTX would liquidate and close other customer accounts that move into negative territory to protect FTX and its customers from losing money. But Alameda’s account was immune from liquidation because of the “allow_negative” code, he said, noting that SBF asked him to make sure FTX never liquidated Alameda’s account.
***
In a June 2022 meeting with Wang, Singh, and then Alameda CEO Caroline Ellison, Bankman-Fried reportedly asked Ellison to return money owed to Alameda to its lenders, such as crypto lender Genesis, which demanded repayment of the loans. Wang said the money needed to repay Alameda lenders would come entirely from FTX customer deposits. Three months later, Bankman-Fried brought up the topic of closing Alameda, Wang said.
***
The day after FTX filed for bankruptcy on November 11, 2022, Bankman-Fried and Bahamian government officials asked Wang to transfer FTX’s assets to Bahamian regulators, Wang said, adding that Bankman-Fried believed that it was ideal to transfer FTX assets to them because they “seemed friendly” and willing to let Bankman-Fried stay in power.
***
In a worrying sign for the defense, Bankman-Fried’s lawyers repeatedly irritated U.S. District Court Judge Lewis Kaplan by repeatedly questioning witnesses.
Christian Everdell, Bank-Fried’s lawyer, questioned Wang about his role as CTO, which was by then a firmly established fact. After an objection from prosecutors, Judge Kaplan told the defense team, “It’s been answered, but let’s stop this please,” referring to the repetition.
Everdell then asked if Wang was focused on the business side of FTX. Shortly afterward, a visibly annoyed Judge Kaplan asked, “What part of ‘let’s stop it’ was obscure?” »
October 5, 2023 (third day)
The third day of Bankman-Fried’s trial ended with Gary Wang accusing his FTX co-founder of criminal misappropriation of client funds. Wang spent part of Thursday afternoon providing details about moving money from FTX to plug holes in the balance sheet of its struggling trading arm, Alameda Research.
“We granted special privileges to Alameda Research to allow them to withdraw unlimited funds from FTX and we lied about it,” Wang said.
Bankman-Fried, 31, who served as CEO of the crypto exchange until its implosion, faces seven criminal charges, including wire fraud, conspiracy to commit money laundering and campaign finance violations. Prosecutors say SBF, as it is also known, used client funds for luxury real estate purchases and other expenses, as well as to support Alameda Research. If convicted, the former crypto prodigy could spend decades in prison.
In June, prosecutors separated five other charges filed after Bankman-Fried’s arrest and extradition from the Bahamas, where FTX was based before its downfall. Law enforcement and creditors are currently fighting over the division of FTX’s assets.
SBF maintained his innocence, and his defense team told jurors during opening arguments that FTX’s collapse was the result of his inexperience as a manager and poor decisions by his senior management.
Wang and two other top executives, Caroline Ellison, former CEO of Alameda, and Nishad Singh, have already pleaded guilty to various fraud counts as part of a cooperation agreement with federal prosecutors.
***
Before Wang, co-founder of venture capital giant Paradigm Matt Huang, said the company had invested $278 million in FTX over several rounds, but now valued FTX at “zero dollars.”
***
The morning began with continued testimony from former FTX developer Adam Yedidia, who was granted immunity in exchange for his testimony and helped create the systems that credited clients’ accounts when they deposited fiat currency. In the early days of FTX, customers sent their money to Alameda, making overall accounting confusing. Technological flaws also compromised FTX’s ability to track its balance sheet.
***
Prodded by prosecutors, Yedidia recounted a conversation in Albany, the luxury community in the Bahamas, where Bankman-Fried, Ellis and other managers shared a penthouse apartment. Yedidia said it was a bug in FTX’s accounting software, but when expressing concerns, Bankman-Fried said the company “has been bulletproof for the year last, but… not bulletproof this year.”
Yedidia said he resigned after learning that Alameda was using client funds to pay off creditors.
***
At one point, Yedidia spoke about an exchange on the social media platform Signal in which executives expressed concern about the cost of living in Albany and Bankman-Fried suggested the company would cover their rent.
***
U.S. District Court Judge Lewis Kaplan often seemed annoyed by defense attorneys’ repetition of certain questions, occasionally sighing. Kaplan, who has tried a number of famous cases during his long career, is well known in legal circles for his pragmatic approach in court.
***
October 4, 2023 (first day)
Bankman-Fried, who cut his curly hair before the trial, continued to don a business suit, one of three he reportedly purchased at Macy’s. According to courtroom observers, he was typing on his laptop and was at times nervous during his testimony. Her mother appeared to bite her lip at one point and pinched her face during her testimony, which unsettled her.
