Sam Bankman-Fried’s historic fraud trial has taken a new turn as his own words in tweets and group chats are being used as evidence against him. Prosecutors have presented screenshots of messages, social media posts, and internal documents to showcase how Bankman-Fried allegedly orchestrated a multibillion-dollar scheme at his FTX cryptocurrency exchange and trading firm Alameda Research.
The documents highlight the alleged fraud and discrepancies between Bankman-Fried’s public statements and private instructions to his inner circle. Former colleagues, including Caroline Ellison and Gary Wang, have provided insight on deciphering the documents during their testimony at the federal courthouse in New York.
Prosecutors also played audio clips from a secretly recorded meeting between Ellison and Alameda employees in Hong Kong, where Ellison confirmed that it was Bankman-Fried who made the decision to repay Alameda lenders with FTX customer funds.
Audio clips from an Alameda all-hands meeting held on November 9, 2022, were also presented. Ellison spoke about the firm’s troubles and admitted that it was likely to shut down. The meeting revealed that Alameda had been borrowing money through open-term loans to make illiquid investments.
During the trial, Ellison testified that Bankman-Fried directed her to prepare “alternative” balance sheets to hide unfavorable financial information from lenders. She came up with seven potential versions, with Bankman-Fried choosing “Alt 7” to conceal Alameda’s borrowing from FTX customers. The “Alt 7” balance sheet was eventually sent to Genesis, one of Alameda’s lenders.
Gary Wang, a co-founder of FTX and a long-time friend of Bankman-Fried, revealed that Alameda Research had a line of credit of $65 billion on FTX, allowing the trading firm to misappropriate FTX customer funds. Wang testified that Bankman-Fried requested an “allow negative” balance feature to be added for Alameda, allowing the firm to withdraw more funds than it actually had.
Adam Yedidia, an MIT alumnus who worked at FTX, testified that Bankman-Fried admitted that the company was not as financially stable as the previous year. Yedidia mentioned a conversation on the financial health of FTX that occurred at a padel tennis court in The Albany, where Bankman-Fried and others resided.
Yedidia also revealed a Signal chat group called “People of the House,” where Bankman-Fried and others discussed concerns about rent payments. The prosecution argued that Bankman-Fried was using Alameda’s money, misappropriated from FTX customer funds, to fund his lavish lifestyle.
The government’s case included allegations that Bankman-Fried deceived not only customers but also venture capital investors like Paradigm. Matt Huang, managing partner at Paradigm, testified that his firm had raised concerns about FTX’s corporate governance and its relationship with Alameda before investing in the crypto exchange.
In September 2022, Bankman-Fried considered closing down Alameda Research due to concerns about conflicts of interest between the two entities. However, he ultimately decided against it because Alameda had spent a significant amount of FTX customer funds and would not be able to repay them.
During the trial, evidence showed that Bankman-Fried had worries about Alameda’s financial position and wanted regulators to crack down on Binance, one of FTX’s competitors. An internal discussion led to a Twitter post by Ellison offering to buy all of Binance’s FTT for $22 per token.
As Alameda and FTX were collapsing, Ellison confessed to Bankman-Fried that she had been dreading the day when everything would come to light. The emotional burden became too much for her, and she felt relieved that it was finally over. Ellison and Bankman-Fried never met again after that.
