Inside FTX Crypto Courtroom Drama: The First 2 Weeks of the Wild SBF Trial

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Chayanika Deka
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In a wild twist of fate, the crypto world’s foundation trembled as the FTX empire crumbled last year, leaving its founder, Sam Bankman-Fried, standing trial for a fraud of epic proportions. The US government asserts that this disgraced crypto mogul orchestrated one of the grandest financial deceptions in history, while his defense paints him as a naive young enthusiast who swam too deep in the digital tides.

Two weeks deep into the riveting high-stakes drama of the courtroom, jurors have feasted on opening salvos and the star witness testimony of Caroline Ellison, a former high-ranking member of Bankman-Fried’s crypto giant and his former flame.

Buckle up for a rollercoaster of revelations from the crypto underbelly.

SBF Trial: First Week

During the first week of the highly anticipated trial, SBF’s legal defense that – despite his nominal leadership role, the FTX founder remained oblivious to the nefarious undercurrents festering within both his exchange and the hedge fund Alameda Research – was significantly challenged by the US DOJ.

• Matt Huang, Paradigm’s co-founder, testified that they invested around $278 million in various FTX funding rounds, but the equity is now valued at zero dollars.
• Gary Wang, FTX’s co-founder, testified that SBF directed all the crimes, including his admission to wire fraud, securities fraud, and commodities fraud.
• Adam Yedidia, a former FTX developer, resigned in November 2022 after uncovering the customer “defraud” scheme, though this crucial detail was later removed from the record.
• In 2022, a software bug at the exchange, arising from its unique handling of customer deposits, inflated Alameda’s holdings by $8 billion. As per Yedidia’s testimony, FTX customers deposited funds into Alameda through wire transfers, causing complexities in tracking customer debts.
• The DOJ issued a forfeiture bill that identified two aircraft, a Bombardier Global and an Embraer Legacy, as assets owned by Bankman-Fried and targeted for seizure.

SBF Trial: Second Week

While the first week also reportedly witnessed one juror nodding off, things started getting more interesting in the second one when Ellison spilled the beans on her tumultuous relationship with Bankman-Fried. Her jaw-dropping testimony unveiled a web of deceit, from fraudulent balance sheets to Thai prostitutes opening crypto accounts. And just when you thought it couldn’t get weirder, we delve into “Things Sam is freaking out about.”

• Ellison, Alameda’s former CEO, took the stand this week and testified about her relationship with Bankman-Fried, her concerns regarding Alameda’s large credit line at FTX, and the latter’s guidance in making her the face of the crypto trading firm.
• In an explosive testimony, she alleged that FTX couldn’t meet obligations because customer funds were used to cover Alameda’s financial obligations and balance sheet gaps. SBF allegedly directed the creation of false balance sheets to hide misappropriated funds.
• The customer assets, on the other hand, were used for luxury real estate, venture capital, and political funding led by SBF’s mother.
• Alameda had withdrawn over three-quarters of FTX customers’ total holdings. In the process, the now-defunct hedge fund lost at least $200 million, including $100 million to a phishing scheme.
• Ellison also disclosed that Bankman-Fried had been in discussions with Saudi Prince Mohammed Bin Salman regarding potential financial support to cover FTX losses before its bankruptcy declaration.
• Alameda allegedly attempted to recover $1 billion in frozen funds on Huobi and OKX by trying to bribe Chinese officials, but the claim was removed from the record.
• Alameda employed Thai prostitutes to open accounts on those exchanges to execute strategies to release locked funds, a significant portion of the hedge fund’s assets at the time.
• Ellison’s “Things Sam is freaking out about” list was presented as evidence, a frequently updated Google Doc that outlined her SBF’s concerns, including “bad press” and a plan to involve regulators in rival Binance to gain more customers and fill an $8 billion gap.
• According to Ellison’s Thursday testimony, Alameda faced difficulties securing an audit. Attempts to engage accountants in 2021 and 2022 failed as the professionals declined due to concerns after examining the fund’s financial records.
• It was reported that former FTX Digital Markets CEO Ryan Salame initially handled Alameda’s balance sheets, but Ellison eventually assumed this responsibility.
• The founder and former CEO of crypto lender BlockFi, Zac Prince, also took the witness stand and blamed his company’s bankruptcy on FTX’s own failures.

The prosecution aims to conclude its case within the next two weeks, by October 26 or 27. Subsequently, Bankman-Fried’s defense will have the chance to present their side comprehensively.