Luxury real estate, political donations, investments and magazine covers. A year ago, that was life for Sam Bankman-Fried, Assistant U.S. Attorney Thane Rehn said during opening statements in the world's most famous cryptocurrency trial.
โThis was all based on lies,โ Rehn continued, claiming that the co-founder of Alameda Research and FTX โlied to the worldโ to enrich himself and increase his influence through lobbying in Washington, DC. Rehn's statement apparently affected even Bankman-Fried. The defense attorney, who responded with a lukewarm comment. His attorney, Mark Cohen, described his client as a businessman who made mistakes during times of rapid growth. "There was no robbery," he told the jury.
In the gallery, among journalists and lawyers, were Joseph Bankman and Barbara Fried, parents of the accused. While Joseph smiled occasionally over the past few days, Barbara stared at her son in the courtroom for hours.
This week, four witnesses testified at the trial held in the United States District Court in Manhattan. The list includes a French trader, an investor in FTX, along with Adam Yedidia and Gary Wang, former close friends of Bankman-Fried.
Highlights from the Sam Bankman-Fried trial were covered by Cointelegraph on the floor.
Marc Julliard
The first witness before the prosecutor's jury was a cocoa merchant from Paris, now living in London. Marc Julliard was one of the victims of the FTX debacle in November 2022. Juilliard told the jury that he had four Bitcoins on FTX, worth almost $100,000 at the time. He recalled feeling anxious after trying to withdraw funds without receiving a refund.
At FTX, he never traded futures. Bitcoin participation was a substantial part of Julliard's savings. Prosecutors used his testimony to illustrate how clients who entrusted funds to FTX had been harmed since the events of last year.
Bankman-Fried's defense attempted to downplay prosecutors' arguments, saying the trader was a licensed professional in London who did not make decisions based on celebrity endorsements. Cohen noted that there was nothing wrong with hiring Tom Brady to run an FTX ad.
Adam Yedidia
Adam Yedidia and Bankman-Fried became friends at the Massachusetts Institute of Technology (MIT). Before joining FTX as a developer in January 2021, Yedidia briefly worked at Alameda in 2017 as an intern. He was also one of the residents of FTX's $35 million luxury property in the Bahamas.
According to his testimony, FTX received trust funds from clients through an Alameda subsidiary called North Dimension. Each deposit made by an FTX customer was considered a debt owed by Alameda to FTX. At the time of the stock market crash, this liability amounted to $8 billion.
Yedidia learned of the multimillion-dollar debt between the companies months before filing for bankruptcy. "Are things okay?" Yedidia asked Bankman-Fried. on a paddle tennis court, mentioning the responsibility of Alameda. He did not receive a positive response. "We are no longer bulletproof," Bankman-Fried told him, adding that it would take companies between six months and three years to settle their accounts. "He seemed nervous," Yedidia recalled.
Until the November crash, Yedidia saw FTX take over its competitors, Binance and Coinbase. He even spent his million-dollar bonus to acquire a 5% stake in the firm.
"I trusted Sam, Caroline and others in Alameda to handle the situation."
Yedidia resigned in November 2022, after learning that Alameda was using funds sent by FTX customers to pay its debts. He has been cooperating with the US Department of Justice since last year.
Matthew Huang
Matthew Huang, co-founder of venture capital firm Paradigm, invested a total of $278 million in FTX in two funding rounds between 2021 and 2022. For him, it was a complete loss.
According to Huang, the company was not aware of the commingling of funds between FTX and Alameda, nor of the privileges Alameda had with the crypto exchange. Alameda was exempt from the FTX liquidation engine, which closes positions at risk of liquidation, as evidenced by prosecutors' evidence from the FTX code and database.
Under the exemption, Alameda was able to leverage its position and maintain a negative balance with FTX.
Huang admitted to not conducting deeper due diligence on FTX, instead relying on information provided by Bankman-Fried.
day 3 of #SBF judgment, we arrived early and brilliantly! โ๏ธ pic.twitter.com/PQ1rQV38Px
โ Cointelegraph (@Cointelegraph) October 5, 2023
In the words of Huang, Bankman-Fried It was "very resistant" to the idea of โโhaving investors on FTX's board of directors, but committed to creating one and appointing experienced executives.
Gary Wang
Wang and Bankman-Fried, who were once co-founders of two prominent companies, found themselves on opposite sides of the courtroom this week. "I'm here because I committed wire fraud, securities fraud and commodities fraud," he told jurors, adding that he had also participated in a conspiracy alongside Bankman-Fried, Caroline Ellison, former CEO of Alameda Research, and Nishad Singh. former engineering director.
"I'm here because I committed wire fraud, securities fraud and commodities fraud."
Wang is considered a key witness in the case. Prosecutors' questioning of him began on October 5 and should conclude on October 10, when the second week of the trial begins. Wang offered a deeper look at how FTX and Alameda operated under Bankman-Fried.
In 2019, a few months after FTX was founded, Alameda was granted special privileges over the FTX code, Wang said. Based on screenshots of the FTX database and code on GitHub, prosecutors showed that Alameda had an unlimited negative balance, a special $65 billion line of credit, and a liquidation waiver.
Bankman-Fried's defense attorney argued that these privileges were similar to those received by other market makers at FTX. The defense also pointed to the fact that Alameda was the primary market maker on FTX; therefore, having the ability to carry a negative balance was critical to its role.
According to Wang, the mix of funds between the companies grew over time. In 2020, Bankman-Fried ordered Wang to maintain Alameda's negative balance in FTX's revenues. Alameda's negative balance increased and so did its line of credit with FTX. Alameda's liability for FTX peaked at $3 billion at the end of 2021, up from $300 million in 2020.
"I trusted their judgment," Wang responded when asked why he supported Alameda's privileges.
Prosecutors also highlighted the MobileCoin (MOB) exploit in 2021. In an attempt to hide the loss from FTX investors, Bankman-Fried allegedly told Wang and Ellison to add the million-dollar deficit to Alameda's balance sheet instead of keeping it. in FTX finances.
Another key revelation was that insurance fund FTX had manipulated data, Wang said.
In the months leading up to FTX's collapse, Bankman-Fried, Wang and Singh discussed the possibility of closing Alameda and replacing it with other market makers. At that time, however, the company's liabilities to FTX amounted to $14 billion. In November 2022, Alameda ceased operations.
Wang is also cooperating with prosecutors. His testimony will resume on October 10. Caroline Ellison will also be heard on the same day.
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