![Latest update — Former FTX CEO Sam Bankman-Fried trial [Day 4]](https://urecomm.com/wp-content/uploads/2023/10/Latest-update-—-Former-FTX-CEO-Sam-Bankman-Fried-trial-Day.jpg)
The trial of former FTX CEO Sam “SBF” Bankman-Fried is currently underway in New York, and Cointelegraph reporters are providing live updates on the proceedings. On October 5th, Gary Wang, co-founder of Alameda Research and FTX, testified about the relationship between the companies and how it led to an $8 billion hole in customer assets.
According to Wang’s testimony, Alameda received special privileges from FTX a few months after the exchange was launched in 2019. These privileges included an unlimited negative balance, a $65 billion line of credit in 2022, and an exemption from FTX’s liquidation engine. Wang stated that these privileges were part of Alameda’s role as a primary market maker for FTX.
However, Wang also mentioned that Bankman-Fried instructed him to ensure that Alameda’s negative balance did not exceed FTX’s revenue. Wang testified that the rule changed over time, and by late 2021, Alameda’s liability to FTX stood at $3 billion. Despite this, Wang said he trusted Bankman-Fried’s judgment and agreed to the privileges.
Prosecutors also highlighted an alleged incident in which Bankman-Fried told Wang and Caroline Ellison to add a multimillion-dollar deficit from MobileCoin to Alameda’s balance sheet instead of keeping it on FTX. This was purportedly done to hide the loss from FTX investors.
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Months before FTX’s collapse in November 2022, Bankman-Fried, Wang, and Nishad Singh, former director of engineering, discussed shutting down Alameda and replacing its role with other market makers. However, the company’s liabilities were too high at the time, amounting to $14 billion. Alameda continued its operations until November 2022.
Wang’s testimony will continue on October 10th, the same day Ellison is expected to testify.
On the same day, Adam Yedidia, a close friend of Bankman-Fried and a former developer at FTX, underwent cross-examination. Yedidia testified about the $8 billion liability from Alameda to FTX. He stated that FTX used an Alameda account called North Dimension to deposit users’ funds while facing difficulties in opening its own bank account. Yedidia was aware of the funds sent to Alameda’s account but did not voice concerns until he learned about the liability amount in 2022. Bankman-Fried allegedly said the debt should be settled between the companies within six months to three years.
During the cross-examination, Bankman-Fried’s defense counsel presented a broader picture of FTX and Alameda’s relationship. They emphasized that FTX was growing rapidly during the 2021 bull market and highlighted Yedidia’s immunity order, which protected him from facing charges regarding his role at FTX. The defense also noted that FTX’s reliance on Alameda’s North Dimension account was well known.
Two witnesses, Matthew Huang of Paradigm and Gary Wang, testified on October 5th. Huang revealed that Paradigm had invested $278 million in FTX but was not aware of the commingling of funds between FTX and Alameda or the privileges granted to Alameda.
Wang acknowledged committing wire fraud, securities fraud, and commodities fraud during his testimony. He also confirmed Alameda’s special privileges, such as the ability to withdraw unlimited funds and a line of credit of $65 billion. The defense argued that these privileges were common for market makers and that Alameda’s role as a primary market maker justified the privileges.
On October 4th, the Department of Justice (DOJ) and Bankman-Fried’s defense presented their arguments. The DOJ portrayed Bankman-Fried as someone who deliberately lied to investors and used Alameda to steal customers’ funds. The defense characterized Bankman-Fried as a young entrepreneur who made business decisions that didn’t work out and denied the existence of secret transactions or a backdoor to steal funds.
The defense also mentioned Binance’s role in the bank run that led to FTX’s collapse and raised doubts about the credibility of the prosecution’s witnesses who had entered into cooperation agreements with the government.
The trial is ongoing, and further testimonies and arguments will be presented in the coming weeks.
