Third Level managing director doubles down on SBF investor fraud in trial testimony

Robert Boroujerdi, managing director at Third Level, testified on Thursday at Sam Bankman-Fried’s trial in help with the federal government’s case to try to discover the defendant responsible on seven counts associated to fraud and cash laundering.

Boroujerdi previously served as the top of world securities analysis at Goldman Sachs. He testified that whereas he bought entry to FTX’s “information room,” which is digital paperwork that consisted of strategic decks, organizational charts and monetary statements, they weren’t made conscious of the interrelationships between FTX and its sister firm Alameda.

Third Level is an institutional different asset supervisor that serves pension funds, endowments and high-net-worth people. The hedge fund was based in 1995 by billionaire Daniel Loeb. Boroujerdi’s job is to search for funding alternatives for the agency and consequently, he realized about FTX.

Within the late-first quarter to early second quarter of 2021, Boroujerdi first emailed with Bankman-Fried and different associated events as a primary step to probably put money into the crypto trade. By mid-March of that 12 months, the witness had a Zoom name with Bankman-Fried and Third Level funding staff members. He testified that on the decision, Bankman-Fried primarily led the dialog and talked about FTX’s development, strategic plans, monetary elements and so forth.

Third Level relied on the monetary information offered by FTX to take a position and was not instructed of different bills not proven within the information room, Boroujerdi testified. Every part ought to be proven, whether or not it’s “good or unhealthy,” he added.

That they had a second Zoom name assembly a number of weeks later.

Boroujerdi stated Alameda got here up on the decision and Bankman-Fried spoke of it as one thing he co-founded, however known as its relationship with FTX an “arm’s size enterprise” and that it “operated independently and had its personal self-interests.” He added that Bankman-Fried shared that he had fairness in Alameda, however it wasn’t impacting the connection.

Third Level was underneath the impression Alameda was handled like each different buying and selling agency that used the trade. “There needs to be no preferential therapy on an trade,” Boroujerdi stated. If the agency knew Alameda had particular privileges and that it might withdraw buyer funds from FTX, Third Level wouldn’t have invested, he added.

However, Boroujerdi and Third Level had been at nighttime on the time and the agency went forward with initially investing $35 million in FTX’s $900 million Collection B capital elevate in July 2021. That spherical had over 60 traders, together with VC agency Sequoia Capital, SoftBank Group Corp and British billionaire hedge fund supervisor Alan Howard. On the time, FTX’s valuation rose to $18 billion (it hit a $32 billion valuation at its peak.)

Boroujerdi recalled being instructed by FTX that the capital can be used to broaden the staff, improve market share and for technique, amongst different issues. He testified he was not conscious that the cash was being transferred to Alameda and had he recognized that, once more, Third Level wouldn’t have invested.

However the agency didn’t know — and Third Level offered extra capital for extra funding rounds, marking its complete funding in FTX to $60 million, Boroujerdi testified.

When requested by prosecutors what was the worth of the agency’s funding in FTX, Boroujerdi responded stiffly, “Zero.” However the agency appears to be doing all proper — Loeb wrote in Third Level’s Q2 2023 investor letter that it nonetheless sees a “wholesome upside within the valuations of [its] portfolio.”

In an analogous tune, Matt Huang, co-founder and managing associate of crypto funding agency Paradigm, testified throughout Bankman-Fried’s trial earlier this month that the crimson flags in FTX would have affected his agency’s choice on investing within the trade — particularly in the event that they knew FTX used buyer funds to prop up Alameda.

Over two funding rounds between 2021 and 2022, Paradigm invested $278 million into FTX. When prosecutors requested what Paradigm estimates the present worth of that funding to be, Huang replied, “We’ve got marked it to zero.”

Each testimonies level to the injury that FTX’s and Alameda’s collapse have triggered to traders. These witnesses may strengthen the federal government’s case towards Bankman-Fried with reference as to if he dedicated the alleged fraud.

Whereas the trial shall be on recess till October 26, the federal government shared that its ultimate three potential witnesses will include an FBI agent, an investor and a buyer.

After that, Bankman-Fried’s principal lawyer, Mark Cohen, shared that “if there’s a protection case, it’ll be one week or much less.” It was not clarified whether or not Bankman-Fried will testify throughout that point.