Trial of Former FTX CEO Sam Bankman-Fried: Key Testimonies from Developer and Co-Founder
Date: 2023-10-07 Author: Dima Zakharov Categories: CRYPTO PAYMENTS
Trial of Bankman-Fried: Key Witness Testimonies and FTX's Downfall
This week, the financial industry is closely following one of the most significant events - the trial of Sam Bankman-Fried, the former CEO of the FTX exchange, which filed for bankruptcy earlier this year. Over four days of court hearings, a jury was selected, and the testimonies of several key witnesses were heard. The trial, expected to last six weeks, sheds light on long-awaited answers about the events that led to the exchange's collapse.
Testimony of an FTX Developer
On Thursday, one of the first key witnesses was a former employee of both FTX and Alameda Research, Adam Edidia. Edidia worked at Alameda Research and later joined FTX as a developer in 2021. Interestingly, Edidia is also known for his luxurious mansion in the Bahamas, which was purchased by Bankman-Fried for $30 million.
He began his testimony by asserting that FTX client funds were stored in accounts belonging to Alameda Research. This raised significant questions about how client funds were managed. FTX later opened a separate account for user deposits, but a substantial amount still remained in Alameda's accounts.
Another surprising revelation by Edidia was related to an accounting error that led to Alameda's debt to FTX being significantly higher than expected. After correcting the error, it was revealed that the debt amounted to $8 billion. Edidia also shared his concerns about the situation with Bankman-Fried during a game of tennis. The company's head assured him that everything was under control, and resolving the issue would take anywhere from six months to three years.
However, what caught the attention of Bankman-Fried's defense was the fact that Edidia had been promised immunity from prosecution by the prosecutor's office in exchange for his testimony. This raises questions about the credibility and motivations of the witness.
Testimony of an FTX Co-Founder
On Friday, the court took center stage as Gary Van, one of the co-founders of FTX, provided his testimony. Van, a top manager at FTX, admitted to investor deception and financial manipulations. He claimed that Alameda Research had the ability to withdraw capital from the FTX exchange almost without limitations.
What is particularly surprising is Van's assertion that Bankman-Fried was aware of what was happening and actively participated in deceiving investors. Both top managers, along with Alameda Research's leader, Caroline Allison, repeatedly provided inaccurate information about the true financial state of the companies.
The situation became increasingly complex over time. In 2020, Bankman-Fried instructed Van that Alameda's negative balance should not exceed FTX's revenue. However, according to Van, this rule stopped being enforced over time. For example, by the end of 2021, Alameda's obligations to FTX amounted to $3 billion, whereas in 2020, the amount was much lower, around $300 million.
As Van stated, "I trusted his judgment." This raises questions about the extent to which trust among the company's top leadership was abused.
The trial of Sam Bankman-Fried is delving into a long period of ambiguity and manipulations that apparently led to the collapse of the FTX exchange. The testimonies of Adam Edidia and Gary Van are garnering increasing headlines and questions about how such events could have gone unnoticed for an extended period. The coming weeks of the trial are likely to bring further revelations and unveil new facets of this high-profile financial story.
