- Former FTX executives are testifying against Sam Bankman-Fried (SBF)
- SBF allegedly asked his lawyer to come up with legal justifications for the missing $7 billion in customer funds.
- FTX’s sister company, Alameda Research, owed billions of dollars to FTX, creating a debt triangle.
- SBF is accused of looting billions of dollars in FTX customer funds to make investments, donate to U.S. political campaigns, and prop up Alameda.
- SBF is facing multiple counts of fraud and could face decades in prison if convicted.
Almost a year after FTX, one of the top crypto exchanges at the time went bust, details of the scandal continue to surface and shock the crypto community.
So far, several top executives have come out with testimonies against the former exchange boss, and things are not looking good.
Nishad Singh, the former engineering director pleaded guilty to fraud charges just recently.
He reported that Bankman Fried had suggested investing $120 million into purchasing Telegram (the messaging app), and has also invested roughly $1.3 billion in endorsement deals with celebrities and sports figures — including Tom Brady, Gisele Bündchen and Steph Curry before the crypto market crashed in 2022.
Caroline Ellison, SBF’s ex-girlfriend and former director of Alameda research, has also testified against SBF after more than nine hours of testimony over two days last week.
Ellison reported how she was “directed ” to fabricate balance sheets to lenders, in a bid to hide billions of dollars in funds that had been stolen from FTX customer accounts.
According to recent reports, one more witness has been called to the stand.
SBF Asked Lawyer to Justify Missing $7 Billion
According to more recent testimony from Can Sun, who was FTX’s general counsel until November 2022, SBF asked the lawyer to come up with “legal justifications” for why $7 billion in customer funds had simply vanished, just four days before it filed for bankruptcy.
Can Sun, who testified at Bankman-Fried’s fraud trial in the Manhattan federal court also reported that he was deeply “shocked” to find out that FTX was not only missing millions in customer funds, but several billions of dollars.
And that only a few days before the exchange went bust, it was still billions of dollars short of being able to satisfy customer withdrawals.
According to Sun’s testimony, Bankman-Fried or another executive sent him a spreadsheet on Nov. 7, 2022, showing that FTX owed billions of dollars to its customers.
Even crazier, is how FTX’s sister company also owed billions of dollars to FTX in a debt triangle of sorts.
Sun testified that this spreadsheet was sent to him after FTX went to Apollo, an investment fund, to ask for emergency capital to cover its tracks, and satisfy the growing customer withdrawal requests.
Apollo, not knowing what was going on at FTX, requested FTX’s financial statements as a prerequisite before providing the capital.
Sun’s testimony gets even more interesting.
The former FTX lawyer told the judge panel on Tuesday, that Bankman-Fried pulled him aside at his luxury apartment complex in the Bahamas and explained the whole thing to him, including how Apollo had asked for a legal justification for the missing funds.
“He asked me to come up with legal justifications. It basically confirmed my suspicion that had been rising all day that FTX did not have the funds to satisfy customer withdrawals and that they had been misappropriated by Alameda.”
Sun testified that he went back to Bankman-Fried later in the day, after failing to find any legal justifications for the missing funds.
As fate would have it, FTX declared bankruptcy on Nov. 11, 2022, leaving customers to deal with about $10 billion worth of losses.
Bankman-Fried Accused of Looting FTX Customer Funds
This is not the first wave of testimonies against the FTX founder.
Nishad Singh, the former engineering director at FTX, after being told that he faced about 75 years in jail for fraud-related charges, has also come forward with the damning testimonies against Bankman Fried as outlined above.
Singh has also testified that SBF occasionally would “unilaterally spend Alameda’s money” in an “excessive” way, including making investments in the artificial intelligence company Anthropic and in the business, K5 Global.
Bankman-Fried, aged 31, is now facing seven counts related to fraud in his first criminal trial and an additional five counts in a second scheduled to begin in March 2024.
SBF is accused of looting billions of dollars in FTX customer funds to make investments, donate to U.S. political campaigns and prop up Alameda.
So far, the FTX founder has pleaded not guilty to two counts of fraud and five counts of conspiracy, and could decades in prison if convicted.
According to a document shown at the trial last week on Thursday, after siphoning money from FTX into Alameda, Alameda then lent $2.2 billion to Bankman-Fried and other executives, who used those loans to make venture investments, buy real estate and donate to U.S. political campaigns.
Sun, in his testimony, also said that Bankman-Fried told him that the company had kept its customer funds safe and separate from its own assets and that FXT never approved the lending of FTX customer funds to Alameda.
However, while Sun was involved in “documenting” loans from Alameda to Bankman-Fried and the other executives, he did not know they came from customer funds.
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