Witness Adam Yedidia solutions questions throughout Sam Bankman-Fried fraud trial over the collapse of FTX, the bankrupt cryptocurrency alternate, at Federal Court in New York City, October 5, 2023, in this courtroom sketch.
Jane Rosenberg | Reuters
Two of Sam Bankman-Fried’s former mates from MIT, who additionally labored at crypto alternate FTX whereas dwelling with the corporate’s founder in the Bahamas, took the stand in a Manhattan courtroom this week to testify towards their former classmate, confidant, and boss — a man who allegedly ran a crypto empire that defrauded hundreds of shoppers out of billions of {dollars}.
Gary Wang, the lesser-known co-founder of FTX, was requested by Assistant U.S. Attorney Nicolas Roos on Thursday, “Did you commit monetary crimes whereas working at FTX?”
“Yes,” responded Wang. He mentioned that his crimes, together with wire and commodities fraud, had been carried out with the assistance of Bankman-Fried, FTX ex-engineering head Nishad Singh and Caroline Ellison, who ran sister hedge fund Alameda Research and had been Bankman-Fried’s girlfriend.
“Mr. Wang, do you see any of the folks you dedicated these crimes with in the courtroom immediately?” Roos continued.
Wang, dressed in an outsized and wrinkled go well with with a crimson tie and glasses, awkwardly stood up and regarded across the courtroom earlier than responding, “Yes.”
“Who do you see?” requested Roos.
“Sam Bankman-Fried,” he mentioned.
The trial, set to final six weeks, will resume on Tuesday with key testimony anticipated from Ellison, who is taken into account the prosecution’s star witness, having already pleaded responsible to a number of expenses. Bankman-Fried faces seven federal charges, together with wire fraud, securities fraud and cash laundering, that might put him in jail for the remainder of his life.
Thus far, Bankman-Fried, 31, has remained largely quiet in court intently listening to witnesses and at instances writing notes to his attorneys. But as Wang testified towards him, Bankman-Fried regarded visibility upset, shifting his gaze from his former pal to the bottom, and at one level placing his head in his palms.
Sam Bankman-Fried listens as Assistant U.S. Attorney Nicolas Roos questions Gary Wang throughout Bankman-Fried’s fraud trial over the collapse of FTX, the bankrupt cryptocurrency alternate, at Federal Court in New York City, U.S., October 6, 2023, in this courtroom sketch.
Jane Rosenberg | Reuters
Wang, 30, was know-how chief for FTX, which spiraled into bankruptcy in November. He spoke so quick that U.S. District Judge Lewis Kaplan and the prosecutor each stopped him at factors to ask that he gradual his tempo.
Much of Wang’s testimony on Friday centered on the ultimate days at FTX earlier than your complete operation imploded, together with reviews in the media detailing Alameda’s enterprise practices and its troubling ties to FTX.
Wang mentioned that in response to the reporting an emergency assembly was known as between Bankman-Fried, Wang and Singh, to debate shutting down Alameda. He mentioned they finally determined towards such a transfer, as a result of he and Bankman-Fried had been conscious that Alameda had no method to repay the roughly $14 billion gap in its books.
Prosecutors took the jury via a sequence of tweets, starting on Nov. 7. Posts got here from the corporate blaming financial institution hours for gradual withdrawals, whereas Bankman-Fried tweeted from his private account, assuring clients that all was advantageous.
“FTX was not advantageous and belongings weren’t advantageous,” Wang testified.
On Nov. 12, after FTX declared chapter, Bankman-Fried requested Wang to drive with him to the Bahamas Securities Commission for a gathering. On the drive, Bankman-Fried advised Wang to switch belongings to Bahamian liquidators as a result of he believed they might permit him to take care of management of the corporate. Wang mentioned he wasn’t in the assembly with the securities authority, although Bankman-Fried’s dad was current.
Wang mentioned he returned to the U.S. and met with prosecutors the subsequent day. He faces as much as 50 years in jail when he faces a decide for sentencing following this trial. He advised jurors he signed a six-page cooperation settlement that requires him to fulfill with prosecutors, reply their questions in truth and flip over proof.
Sam Bankman-Fried, the founding father of bankrupt cryptocurrency alternate FTX, is seen throughout a listening to as a U.S decide revoked his bail, at a courthouse in New York, U.S., August 11, 2023 in this courtroom sketch.
Jane Rosenberg | Reuters
$65 billion line of credit score
For months, Bankman-Fried has recognized that Wang and Ellison, who had been integral members of his private and skilled inside circles, had turned on him. Both pleaded responsible in December and have since been cooperating with the U.S. legal professional’s workplace in Manhattan.
Wang’s testimony, which stretched into Friday, was given beneath a cooperation settlement with the federal government. Ellison is anticipated to take the stand beneath the same association.
U.S. District Judge Lewis Kaplan presides as Gary Wang testifies throughout the fraud trial of Sam Bankman-Fried over the collapse of FTX, the bankrupt cryptocurrency alternate, at Federal Court in New York City, U.S., October 6, 2023 in this courtroom sketch.
Jane Rosenberg | Reuters
Born in China, Wang moved to the U.S. at age 7, and grew up in Minnesota earlier than going to the Massachusetts Institute of Technology to check math and pc science. He labored at Google after faculty.
Wang, who first met Bankman-Fried throughout highschool at a summer season camp, owned 10% of Alameda, whereas his boss owned the opposite 90%. Wang advised the court in regards to the benefits that Alameda acquired by having code baked into FTX’s software program that allowed particular entry to the crypto alternate. Those privileges finally resulted in Alameda owing FTX $8 billion price of buyer deposits.
“We gave particular privileges on FTX that gave limitless withdrawals on the platform to Alameda,” Wang mentioned. Alameda was allowed to withdraw and switch these funds and had a $65 billion line of credit score.
“When clients deposited USD, it went to Alameda,” he mentioned. “It existed in the pc code. Alameda might have detrimental balances and limitless withdrawals.”
That “bug” in the code was written by Nishad Singh, who was FTX’s director of engineering, and reviewed by Wang. Bankman-Fried was calling the photographs, Wang mentioned.
Wang additionally advised the court a couple of $1 million private mortgage he acquired and a $200 million to $300 million mortgage in his identify from Alameda that was by no means deposited into his account, however slightly was used to make investments into different firms on behalf of FTX. That was all executed by Bankman-Fried, he testified.
In early 2020, Wang mentioned he found for the primary time Alameda’s detrimental steadiness exceeded FTX’s income, a sign that Alameda was taking buyer funds. Wang mentioned he introduced this to Bankman-Fried’s consideration a number of instances.
In late 2021, Wang found Alameda had withdrawn $3 billion from its $65 billion line of credit score.
Wang’s compensation was a base wage of $200,000 per yr plus inventory. He owned roughly 17% of FTX.
Even although they had been co-founders, “finally it was Sam’s resolution to make” when there have been disagreements, he mentioned.
Assistant United States Attorney Nicolas Roos questions Gary Wang throughout Sam Bankman-Fried’s fraud trial over the collapse of FTX, the bankrupt cryptocurrency alternate, at Federal Court in New York City, U.S., October 6, 2023, in this courtroom sketch.
Jane Rosenberg | Reuters
An $8 billion bug
Adam Yedidia, who was the prosecution’s second witness on Wednesday, continued his testimony on Thursday. Yedidia met Bankman-Fried in faculty at MIT, and the pair remained shut mates.
Yedidia, assuming a robotic posture on the stand, labored out of FTX’s Hong Kong workplace from January to October of 2021 and then in the Bahamas till final yr’s collapse. In his testimony, he referred to a bunch Signal thread known as “People of the House,” referring to Bankman-Fried’s $35 million penthouse, the place many workers lived.
Exhibit from the prosecution reveals Signal thread known as “People of the House,” referring to Bankman-Fried’s $35 million penthouse, the place many workers lived.
Source: SDNY
In phrases of who was paying the hire, Yedidia recalled Bankman-Fried saying he “assumed it is simply Alameda paying for it in the top.”
Yedidia mentioned Bankman-Fried had advised him, earlier than he started working in the Bahamas in 2019, that he and Ellison had intercourse. Bankman-Fried requested Yedidia if it was a good suggestion for them thus far, to which Yedidia mentioned no. Bankman-Fried responded by saying he was anticipating that reply.
One of Yedidia’s duties was fixing the bug in the code that gave Alameda preferential remedy. In June 2022, he submitted a report back to Bankman-Fried on Signal that confirmed $8 billion in buyer cash held in an inner database monitoring the money wired to an Alameda account known as “fiat at ftx.com” was lacking.
Yedidia mentioned he and Bankman-Fried spoke about it on the pickleball court on the resort in Nassau, Bahamas. He requested his boss if issues had been OK. He was involved as a result of it “appeared like some huge cash” from FTX clients was in danger.
“Sam mentioned, we had been bulletproof final yr. We aren’t bulletproof this yr,” Yedidia testified.
Yedidia mentioned he requested after they can be bulletproof once more.
Bankman-Fried mentioned he wasn’t positive, however it could be six months to 3 years. Yedidia mentioned Bankman-Fried appeared “frightened or nervous,” which he mentioned was atypical. Still, Yedidia mentioned he trusted Bankman-Fried and Ellison to “deal with the state of affairs.”
On cross-examination, Christian Everdell, Bankman-Fried’s legal professional, centered on how Yedidia was the one liable for creating and reviewing the code.
He requested in regards to the lengthy hours workers labored and Yedidia’s concern for Wang being close to burnout. That resulted in Yedidia instituting a rule to not wake Wang at evening for bug fixes as a result of he wanted sleep.
Everdell additionally drilled Yedidia on his excessive degree of compensation in his lower than two years at FTX. His base wage was between $175,000 and $200,000, however he acquired a number of bonuses of greater than $12 million in money and firm fairness.
Yedidia mentioned he is now educating math — geometry and algebra — at a highschool. He invested many of the hundreds of thousands he earned as bonuses again into FTX, and his fairness stake is now nugatory.
As FTX was failing, Yedidia mentioned he was by Bankman-Fried’s aspect. He highlighted a Signal alternate in November 2022, throughout which he wrote, “I really like you Sam. I’m not going anyplace.” He mentioned he wrote the message as a result of so many individuals had left.
When requested what modified, Yedidia mentioned he realized that FTX buyer deposits had been used to pay loans to collectors. He mentioned Alameda’s actions appeared “flagrantly mistaken.”
Yedidia’s testimony ended on a fiery notice, which was later struck from the document. He was requested why he had misplaced religion in FTX and resigned.
“FTX defrauded all its clients,” he mentioned.
Matt Huang, co-founder of Paradigm Operations LP, proper, arrives at court in New York, US, on Thursday, Oct. 5, 2023. Former FTX Co-Founder Sam Bankman-Fried is charged with seven counts of fraud and cash laundering following the collapse of his cryptocurrency empire final yr. Photographer: Yuki Iwamura/Bloomberg by way of Getty Images
Yuki Iwamura | Bloomberg | Getty Images
Investment to zero
The third witness to take the stand was Matt Huang, co-founder and managing accomplice of Paradigm, a crypto enterprise capital agency that invested over $275 million in FTX. That stake was worn out.
Huang testified about his agency’s due diligence on FTX, and he advised the court that Bankman-Fried assured him that funds can be used for FTX and not Alameda. Additionally, he was promised that Alameda had no preferential remedy on the FTX platform, regardless that the hedge fund was one among its top merchants.
Huang mentioned he was involved about FTX’s lack of a board of administrators, however he ultimately invested anyway. During cross-examination, Huang mentioned Paradigm pressed Bankman-Fried on the board challenge and was advised he did not need traders as administrators however he did plan on having a board with consultants.
— CNBC’s Dawn Giel contributed to this report.