As we gear up for week two of the Sam Bankman-Fried fraud trial, we pulled together some of the juiciest bits from witnesses who took the stand last week. Among them was Gary Wang, the co-founder and CTO of FTX, who took a plea deal in December 2022. He’s expected to finish his cross-examination on Tuesday.
Here are some other major points from Wang’s testimony so far:
In July 2019, Bankman-Fried allegedly asked Wang and FTX’s director of engineering, Nishad Singh — who’s also expected to testify — to give FTX’s crypto trading firm sister company, Alameda Research, the ability to withdraw beyond a balance of zero to help pay for company expenses. The money it was withdrawing came from the customer deposits and trading fees FTX charged its users.
On the same day that the enable negative feature was added, prosecutors shared that Bankman-Fried tweeted, “Alameda is a liquidity provider on FTX but their account is just like everyone else’s”:
Wang testified that SBF asked him “more than once” to make sure Alameda never liquidates on FTX, so he deployed code to prevent Alameda from liquidating regardless of its balances, positions in trades or negative balance.
Wang testified that in late 2019, Bankman-Fried told him that as long as the withdrawals were less than total trading revenue, then it was fine for Alameda to keep withdrawing. At the time, Alameda’s revenue was between $50 million and $100 million. But at the end of 2019, Wang learned that Alameda was dipping into FTX’s customers’ money. He said he flagged it to Bankman-Fried but didn’t pursue the issue further and “trusted [SBF’s] judgment.”
Later during his testimony, Wang said that before a Bloomberg article describing FTX and Alameda’s relationship came out sometime in September 2022, Bankman-Fried weighed shutting Alameda down altogether, saying its connection could be a bad look for the exchange.
Bankman-Fried shared a Google document with Wang and Singh, where they could list the pros and cons of shutting down Alameda. He intentionally excluded Alameda’s then CEO, Caroline Ellison, from the doc, Wang said. Ellison also happened to be in and out of a relationship with Bankman-Fried at the time.
In a separate group chat that also didn’t include Ellison, Bankman-Fried floated the possibility of replacing her with Xiaoyun “Lily” Zhang, another one of Bankman-Fried’s exes, who had founded Modulo Capital.
But Alameda couldn’t shut down because it had a negative balance of $14 billion, and there was no way to pay that back, Wang testified.
One juror shook her head and began writing on a notepad after hearing that anecdote.
Wang also recalled that on November 12, a day after FTX filed for bankruptcy, Bankman-Fried accompanied him to the Bahamas Securities Commission. Wang said that Bankman-Fried wanted to transfer customer assets to the Bahamian agency, rather than to U.S. officials or their bankruptcy lawyers, because the Bahamas seemed more “friendly” and would possibly let him stay in control of the company’s assets, even though he had already stepped down as FTX’s CEO by that time. Bankman-Fried has said in the past he regrets declaring bankruptcy.
In the end, that didn’t happen, and within six days of filing for bankruptcy, Wang flew to the U.S. to confess.
Adam Yedidia
Although Adam Yedidia is not part of Bankman-Fried’s inner circle of executives who took plea deals, he did get an immunity order that inhibits prosecutors from using anything he says in his testimony against him because he was “worried” he helped write the code for a “crime,” which allowed Alameda to withdraw customers’ funds from FTX.
Yedidia testified that Alameda bought “The Orchid,” a $35 million penthouse apartment in the Albany resort community in New Providence, Bahamas, at “Sam’s direction.” In cross-examination, the defense tried to paint the luxury gated resort community as a “housing development” and “dorm” because 10 people from FTX were living there. While some evidence photos depicted a messy penthouse, the 600-acre oceanside resort was far from just a “dorm.”
Separately, when asked whether Bankman-Fried shared with him how much he paid to have former U.K. prime minister Tony Blair and President Bill Clinton at his FTX Bahamas conference in April 2022, Yedidia replied no.
In June 2022, Yedidia learned Alameda owed $8 billion of FTX customers’ money to users. None of those funds were repaid during his time at the company (he left shortly after its downfall in November 2022).
He first heard that $500 million of customers’ money was taken six months prior through internal code — referred to as a “bug” throughout the testimonies and questions — which caused FTX customers’ funds to be funneled into Alameda’s account. Rather than fixing the “bug,” Yedidia said that FTX waited six months before addressing it, at which point the amount of funds transferred increased 1,500%.
He said the bug was fixed mid-June 2022 and was documented and shared with Bankman-Fried via private messaging app Signal.
Bankman-Fried instructed all employees to use Signal with automatic deletion timers. It’s “all downside for messages [to be] kept around,” Yedidia testified that Bankman-Fried said to him. He added that Bankman-Fried was worried if regulators found something in their messages, it could be bad for the company.
Upon learning that Alameda owed $8 billion, Yedidia said he had a conversation with Bankman-Fried because it “seemed like a lot of money” and it “concerned” him. “I wanted to be sure they could repay that,” he testified.
The two talked about it under a hut-like structure on a paddle tennis court in the Albany resort, surrounded by black fenced walls and green turf. Yedidia testified that Bankman-Fried told him, “We were bulletproof last year. We’re not bulletproof this year.”
At the time, crypto markets and prices were entering a bearish period and other firms, including Three Arrows Capital, Celsius and Voyager, also had to declare bankruptcy. Yedidia said that Bankman-Fried appeared worried and nervous, which was abnormal for him. Bankman-Fried projected it would take six months to three years for FTX to get back to a “bulletproof” place, Yedidia said.
During cross-examination, the defense referred to that time period as being “crypto winter.” He tried to make the point that no company was doing well, so it made sense FTX wasn’t bulletproof, either.
Yedidia said he didn’t press Bankman-Fried for more details, however. “I was a developer, not an accountant . . . I trusted Sam or Caroline would handle it.” But a few months later, FTX went bankrupt.
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