SBF trial recap: ‘FTX was not fine, assets were not fine’
Here’s everything that happened during week one of the Sam Bankman-Fried trial
Artwork by Crystal Le
Sam Bankman-Fried is being tried for seven counts of federal offenses in a Manhattan courthouse. While the trial is expected to last roughly six weeks, there’s a chance it runs longer.
The prosecution told the judge on Thursday, “We’re a little behind where we were hoping to be at the end of the week.” Anthony Scaramucci, whose name was mentioned in a long list of possible witnesses or people who may be mentioned throughout the trial, said that he thinks the trial will be done by Christmas.
The prosecution and the defense set the tone of the trial in their opening remarks.
Lawyers representing the government claimed that Bankman-Fried “lied to the world” and “stole billions of dollars from thousands of people.”
Alameda received “special access” from FTX, they continued.
Bankman-Fried’s legal team attempted to set up his character: “a math nerd who didn’t drink or party.” He didn’t “defraud anyone…Sam didn’t intend to defraud anyone.”
“Working on a startup, or at a startup, is like building a plane while you’re flying it,” attorney Mark Cohen said of FTX’s work environment.
Following jury selection and opening statements, the first week really boiled down to what the witnesses had to say. The prosecution presented its initial four witnesses, clearly building out the government’s intended approach for the duration of the trial.
Here’s a look at everyone we’ve heard from during week one as we get ready for a slew of new witnesses this week, including ex-Alameda CEO (and Bankman-Fried’s ex-girlfriend) Caroline Ellison.
In December 2022, Ellison pleaded guilty to two counts of conspiracy to commit wire fraud, two counts of wire fraud, a count of conspiracy to commit commodities fraud, conspiracy to commit securities fraud, and conspiracy to commit money laundering.
FTX co-founder and co-owner of Alameda took the stand on Thursday. He didn’t mince words, with his testimony and cross-examination going late into the afternoon on Friday. Wang pleaded guilty alongside Ellison last year, with slightly fewer charges.
The prosecution began his testimony by asking if he had committed crimes while working at FTX, and Wang simply said, “Yes.”
He added that he, alongside Bankman-Fried, Engineering chief Nishad Singh and Alameda CEO Caroline Ellison committed wire fraud, securities fraud and commodities fraud.
When asked specifically how Wang committed wire fraud with SBF, he said, “We gave special privileges to Alameda Research on FTX, which allowed it to withdraw unlimited amounts of funds from the platform, and we lied about this to the public.”
Basically, FTX allowed Alameda to withdraw “unlimited amounts of money,” it didn’t matter what was in the account and didn’t even matter if it was negative. This was done through coding, which both Singh and Wang were in control of. Bankman-Fried, Wang said on Friday, asked for Alameda to be granted “special privileges.”
The funds, which obviously have to come from somewhere, came from customer deposits.
Wang disputed on Friday the infamous Nov. 7 tweet from Bankman-Fried, in which SBF assured customers that “FTX is fine. Assets are fine.”
“FTX was not fine. Assets were not fine” and FTX did not have enough assets for customer withdrawals, Wang said.
By the time FTX declared bankruptcy, Alameda had withdrawn $8 billion, a number we heard in a previous testimony.
Yedidia was a former friend, college roommate, and employee of Bankman-Fried. He first took the stand on Wednesday, with his testimony and cross-examination lasting till Thursday afternoon. Suffice it to say, Yedidia — who quit FTX before the bankruptcy — had a lot to say.
Yedidia was one of the handful who lived in the $35 million Bahamian condo alongside Bankman-Fried. He worked as a developer for FTX, reporting to Nishad Singh, the former director of engineering at FTX.
Through Yedidia’s testimony, the court and spectators learned a few things: there was a bug that Yedidia fixed, leading to him learning about the $8 billion figure that Alameda owed to FTX. He also had a meeting with SBF where Bankman-Fried admitted that FTX was not ‘bulletproof.’
Let’s start with the bug.
The error caused FTX’s liability to FTX customers to be higher than it was. Yedidia fixed it and found that Alameda owed roughly $8 billion to FTX customers back in June 2022.
Yedidia conducted a post-mortem on the bug, sharing his findings in a document via Signal. He explained that Bankman-Fried had directed employees to set messages to auto-delete on the encrypted messaging app.
“He said that it was all downside for messages to be kept around,” Yedidia explained. “If regulators found something they didn’t like in those messages, that could be bad for the company.”
Yedidia said that the $8 billion figure concerned him, prompting him to meet with Bankman-Fried at a paddle tennis court.
“We were bulletproof last year but we’re not bulletproof this year,” Bankman-Fried told Yedidia in 2022.
When asked about a timeline for re-achieving “bulletproof” status, Bankman-Fried said, “I’m not sure…maybe something like six months to three years.”
Bankman-Fried seemed “worried, or nervous” after the conversation, according to Yedidia.
Matt Huang, Marc-Antoine Julliard
Two other witnesses took the stand this week, Paradigm co-founder Matt Huang and former FTX customer Marc-Antoine Julliard.
Let’s start with Huang. He explained that Paradigm invested around $278 million into FTX and FTX.US, an investment that is now worth $0.
He also said he pushed Bankman-Fried to establish a more traditional governance structure, including a board of directors. Bankman-Fried allegedly seemed reluctant to appoint investors — such as Paradigm — to the board.
Huang noted his concerns about potential “special privileges” being granted to Alameda at the time, though he was reportedly assured that it wasn’t the case.
Don’t miss a moment of SBF’s time in court. Stay up to date with all trial coverage from Blockworks.
Julliard, the first witness in the fraud trial, talked about the trust he had in Bankman-Fried and FTX. He believed that SBF wanted to “do good” for the industry,” and believed SBF was a “leader of the [crypto] industry.”
Julliard kept both crypto and fiat in his FTX collapse up to the “FTX is fine. Assets are fine,” tweet from Bankman-Fried. When he made a withdrawal attempt the next day, “it was never processed.”
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