Sam Bankman-Fried trial live updates: Day 3
Former FTX engineer Adam Yedidia claims SBF encouraged employees to use Signal and set messages to auto-delete — keeping messages “was all downside”
Artwork by Crystal Le
FTX co-founder Sam Bankman-Fried faces seven counts of federal offenses in a fraud trial taking place at a Manhattan courthouse. The former crypto executive is accused of misappropriating billions of dollars of customer funds for real estate, donations, political contributions and investments.
So far in the trial, the jury was finalized, both the prosecution and the defense made their opening statements, and the court heard testimony from the first witnesses.
10:40 am ET: Two witnesses take the stand
We’ve made it to day three of the Sam Bankman-Fried trial.
First up this morning, former SBF friend (and college roommate) Adam Yedidia will take the stand to wrap up his testimony. He’ll face questioning from lawyers as well.
After Yedidia’s testimony, Paradigm co-founder and former Sequoia partner Matt Huang is expected to take the stand.
A lot happened yesterday so let’s start with an In Case You Missed It (ICYMI): Yedidia was the final witness called to the stand on Wednesday. To avoid prosecution, he’s been granted immunity so long as he tells the truth. Not only was he a college roommate of SBF, but he was one of the handful to move with the former FTX CEO at the $30 million apartment in the Bahamas.
However, Yedidia quit in November 2022 after an FTX employee (Yedidia was also an employee of FTX and Alameda) told him that customer funds from FTX were being used to pay Alameda creditors. He had not spoken to or seen Bankman-Fried since November, he said yesterday.
The other witness was someone that SBF may have never heard of, though the Frenchman was quite familiar with SBF. Marc-Antoine Julliard, a French citizen living in London, said he lost thousands of dollars to FTX after he tried to withdraw on Nov. 8, 2022 — just days before FTX officially collapsed.
11:20 am ET: Is the new Sam Bankman-Fried book by Michael Lewis book worth your time?
To kick off what will (presumably) be a busy day, our opinion editor Molly Jane Zuckerman read the new Michael Lewis book, “Going Infinite,” so you don’t have to.
Zuckerman said the downfall of Sam Bankman-Fried was also the downfall of the book, since it was meant to be a success story until, well, I think we all know how the story ends.
She was also less than impressed with the way Lewis discussed SBF being allowed to “be Sam.” The description means that he couldn’t commit to meetings, calls or events until the last minute — the night before — and leaving food littered on the floor for other people to clean up when he missed his mouth.
Zuckerman criticized the way Lewis wrote about him, falling back on the portrayal of Bankman-Fried as a quirky nerd. Even SBF’s own defense used it in their opening statement earlier Wednesday, labeling him as a “math nerd who didn’t drink or party.”
“The truth was that grown-ups bored him. All they did was slow him down,” Lewis wrote.
Separately, Lewis also wrote about a memo Bankman-Fried sent to the former Alameda CEO and love interest, Caroline Ellison, where he began the memo by saying, “In a lot of ways I don’t really have a soul.”
“The fact that Lewis is more critical in the last 20 pages of how the FTX bankruptcy is handled than he is of how FTX is run in the first 200 says all that you need to know about this book,” Zuckerman wrote.
5:40 pm ET: Paradigm’s Matt Huang takes the stand
Paradigm’s Matt Huang took the stand ahead of Wang. Perhaps the sleepy juror will find Huang’s testimony more compelling than Yedidia’s. Though I don’t think there was a tired eye in the courtroom after Wang admitted to committing crimes.
Let’s start with the low down: Paradigm was an equity investor in FTX. Back in November of last year, Huang took to X — formerly Twitter — and posted that they were “shocked by the revelations about FTX, Alameda, and SBF.”
According to his testimony on Thursday, Paradigm invested roughly $278 million in FTX and FTX.US. Paradigm, though an investor, was never a customer of FTX.
Now, back in the courtroom in New York, the prosecutors took the first stab at questioning Huang, proceeding to ask if Huang knew that FTX was able to use customer funds out of exchange wallets for its own business deposits. (Shocker: He didn’t.)
Huang was concerned, he said, about the lack of a “traditional corporate governance model.” Huang added that he pushed Bankman-Fried to create a board of directors, but he was “resistant” to name investors, such as Paradigm, to a board seat. Huang did clarify that Bankman-Fried told him that establishing a board was a vague part of a future plan.
Of course, that never materialized.
Huang was also worried about the potential “favorable treatment” of Alameda. If only he knew just what kind of treatment Alameda was getting if what Wang testified is true…
Side note: During Wang’s testimony, a snippet of an episode of the Blockworks Empire podcast was played to explain why SBF named Alameda, well, Alameda. Looks like you can keep up with Blockworks content everywhere, even in crowded courtrooms without a phone!
1:15 pm ET: Yedidia’s testimony continues
Side note: SBF’s mom is in attendance today, sitting up in the second row of the courtroom.
The court is on its lunch break, with the cross-examination of former SBF roommate Adam Yedidia continuing.
When the court reconvenes, Bankman-Fried’s legal team will continue questioning Yedidia. Here’s what’s happened so far.
The prosecution was given the first opportunity to question Yedidia about his time at FTX and his relationship with SBF.
Yedidia formally reported to Nishad Singh, FTX’s former director of engineering who pleaded guilty in a fraud investigation earlier this year. Singh’s name was also floated on a list from the government on day one of the trial which means that he could be a witness or just mentioned throughout the trial, like he was on Thursday.
Informally, however, he reported to SBF and Gary Wang, who is set to take the stand later this week. Guess it’s hard not to kind of report to your boss’s boss when you share an apartment with them…
Also, outside of the day job, Bankman-Fried apparently asked Yedidia if he “should date” Caroline Ellison after admitting that the two had engaged in prior relations. Yedidia told the court that he said no.
Yedidia also claimed that SBF was a bit of a risk taker, alleging that he was “more willing” to take risks than some others.
Bankman-Fried encouraged employees to use Signal and set an auto-delete though it’s not clear what timeframe was set. Yedidia claims SBF said “it was all downside” to keep messages.
3:30 pm ET: Adam Yedidia faces cross-examination
Following the questioning from the prosecution, Yedidia faced a cross-examination from Sam Bankman-Fried’s legal team.
The vibes, according to Blockworks reporters, were not immaculate during this section of Yedidia’s time on the stand. It reportedly felt as if the defense was losing the jury at parts. One juror even fell asleep toward the end. And, no, it wasn’t the juror working night shifts.
Yedidia was unable to tell the defense how “successful” Alameda was, and which led the defense to ask if Alameda was profitable.
“I don’t know if that’s true,” Yedidia answered.
Yedidia was also reportedly concerned for Gary Wang, who — at the time was more his roommate than his boss, though earlier testimony from Yedidia revealed that he reported to Singh, not Wang — and made a rule to ensure that Wang slept because he was burnt out, so no one bothered him with code questions.
Yedidia also took on some of Singh’s responsibilities, including “ghostwriting” reviews of employees.
A lot of the questioning led to objections, which were sustained by Judge Lewis Kaplan. Throughout the process, Christian Everdell — the lawyer leading the question — took breaks to confer with Bankman-Fried and Mark Cohen and was seen flipping through a binder.
After Judge Kaplan released the jury for lunch, he told Everdell: “You’re wearing out your welcome on repetition.”
Once questioning had resumed, Everdell continued to be repetitive, earning him a comment from Kaplan.
“I’m serious about” the comment made before lunch, he said.
Throughout Yedidia’s testimony, both sides questioned the former FTX employee on an $8 billion figure he had uncovered after fixing a bug. The $8 billion was how much Alameda owed FTX customers.
This prompted Yedidia to confer with Bankman-Fried at a paddle tennis court and ask “are we okay?”
SBF, who reportedly became “worried or nervous,” answered in June 2022 that “we were bulletproof last year” but not bulletproof at the time. He added that it could take anywhere from six months to three years to become “bulletproof” again.
Yedidia also noted that “there was a conversation that Sam and I had…in which he talked about raising money” from Saudi Arabia and the United Arab Emirates. However, despite the attempt to drum up additional cash for FTX, it was not successful.
5:00 pm ET: Former FTX CTO Gary Wang is questioned
Gary Wang, co-founder and former chief technology officer at FTX, took the stand to round out the day on Thursday.
Wang admitted to committing wire fraud and conspiring to commit commodities fraud alongside Bankman-Fried, Caroline Ellison and Nishad Singh.
“We gave special privileges to Alameda Research” to withdraw unlimited funds from FTX, Wang said, and he also admitted to lying to the public.
The aforementioned privileges allegedly meant that Wang could allow Alameda to transfer or withdraw funds regardless of how much was in the account, it didn’t even matter if the balance was negative.
Alameda could also execute trades “slightly faster than other market makers.”
Meanwhile, the regular customers of FTX would have to have sufficient funds in their accounts to execute withdrawals.
Alameda had a line of credit on FTX of roughly $65 billion, which was not known to the public, according to Wang’s testimony.
Wang added that the Alameda advantages were added because Bankman-Fried wanted them.
He and Sam both co-owned Alameda. SBF owned roughly 90% of Alameda, with Wang owning 10%. For FTX, Bankman-Fried’s stake was roughly 60% to 65%, while Wang’s equity stake was around 17%.
Wang’s salary was $200,000, but due to his stake, he was a temporary billionaire until FTX collapsed.
If there were disagreements, Wang said that “in the end, it was Sam’s decision to make.”
This is a developing story.
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