Sam Bankman-Fried trial provides jury inside view of FTX's ultimate days

By Luc Cohen

NEW YORK (Reuters) – Sam Bankman-Fried’s fraud trial has given an unprecedented window into how a bunch of graduates from elite U.S. universities of their late 20s and early 30s tried, and in the end failed, to avert one of many greatest and swiftest company meltdowns ever.

Now, the 31-year-old former billionaire’s destiny might hinge on how jurors view his actions within the 10 days earlier than the FTX cryptocurrency change’s collapse almost one yr in the past.

Throughout the monthlong trial in Manhattan federal court docket, jurors have seen social media posts made by Bankman-Fried throughout that week assuring panicked FTX prospects their funds have been protected. They’ve additionally seen inner textual content messages exhibiting Bankman-Fried and different executives mentioned a shortfall in funds and debated how one can spin the occasions.

Prosecutors say Bankman-Fried used buyer funds to pay lenders to his Alameda Analysis hedge fund, and that his false assurances to anxious prospects in November 2022 have been a vital a part of his fraud scheme.

The jury deliberations, set to start on Thursday, will happen behind closed doorways. However the 10-day window earlier than FTX’s Nov. 11, 2022, chapter declaration may very well be a big a part of their discussions.

FTX’s loss of life spiral started on Nov. 2 when crypto information outlet CoinDesk printed an Alameda stability sheet exhibiting it held massive portions of FTT, FTX’s in-house token – suggesting shut ties between the change and a buying and selling agency that Bankman-Fried stated on Twitter was handled like some other buyer.

Nothing occurred at first, testified Caroline Ellison, Alameda’s former CEO and Bankman-Fried’s on-and-off girlfriend. However on Nov. 6, FTX’s chief engineering officer Nishad Singh wrote her and Bankman-Fried on encrypted messaging utility Sign to say FTX prospects had withdrawn $1.25 billion over the previous day.

“Oof,” Bankman-Fried replied, in a message jurors noticed.

The Massachusetts Institute of Know-how graduate testified internet withdrawals not often exceeded $50 million earlier than then.

‘THIS MIGHT SPELL DOOM’

Later that day, Changpeng Zhao, chief of rival crypto change Binance, wrote on Twitter that his change had determined to promote its stockpile of FTT “as a consequence of latest revelations which have got here to gentle.”

With withdrawals piling up, former FTX chief expertise officer Gary Wang testified that Singh – a 2017 graduate of the College of California at Berkley – knocked on the door to his bed room within the $35 million penthouse condominium they shared with seven different FTX and Alameda staff within the Bahamas, the place the change was primarily based.

FTX couldn’t course of the withdrawals quick sufficient, and Wang testified that Singh wanted his assist to hurry its programs up.

“I used to be very involved that this would possibly spell doom,” Singh – who, alongside Wang and Ellison, pleaded responsible to fraud prices and agreed to cooperate with prosecutors – testified.

Wang, a 30-year-old MIT graduate, stated Bankman-Fried requested him that day to determine how a lot further cash FTX wanted to fulfill buyer withdrawals.

Wang ran some calculations, after which advised Bankman-Fried the reply: $8 billion.

“That sounds appropriate,” Bankman-Fried responded, with a impartial demeanor, in keeping with Wang.

Bankman-Fried then created a Sign group of executives to debate “potential fundraising,” Ellison testified. Early on Nov. 7, Bankman-Fried despatched tables estimating buyer funds at $12 billion, about $8 billion greater than the $3.9 billion in money FTX might pull collectively inside every week.

In a message seen by jurors, Bankman-Fried steered 4 choices: name enterprise capitalists, ship a “assured tweet thread,” halt withdrawals, or cut back the values of deposits.

“What we want is a couple of billion of USD,” Bankman-Fried wrote in a doc shared with the group. “We are going to take no matter we are able to get.”

‘FTX IS FINE’

Later that morning, Bankman-Fried posted on Twitter, “FTX is okay. Property are high quality … FTX has sufficient to cowl all shopper holdings. We do not make investments shopper property (even in treasuries).”

Ellison, Wang and Singh every testified that the put up on the platform now often known as X was deceptive.

Testifying in his personal protection, Bankman-Fried stated he thought the put up was correct on the time and deleted it a day later after a plunge within the worth of cryptocurrencies held by Alameda.

After posting the tweet, Bankman-Fried turned to elevating capital. Can Solar, FTX’s former normal counsel, testified that round 1 p.m. he was requested to affix a name with personal fairness agency Apollo, which requested to see FTX’s monetary statements earlier than probably offering emergency capital.

Solar stated he was “shocked” when the spreadsheet he acquired confirmed FTX was brief $7 billion. He despatched it to Apollo anyway. He stated Bankman-Fried later advised him Apollo had requested for a “authorized justification” for the lacking funds.

That night, he advised Bankman-Fried there was no justification.

“Sam principally stated one thing like, received it. He was not shocked in any respect,” Solar testified.

There can be no bailout from Apollo. Late on Nov. 7, Bankman-Fried reached out to Zhao – whose tweet lower than two days earlier accelerated the run on FTX – and struck an preliminary deal for Binance to amass FTX.

“I used to be extraordinarily relieved,” stated Ellison, a 28-year-old Stanford graduate. “If the deal went via, it could imply that every one of FTX prospects would get their a refund.”

However the deal fell via on Nov. 9. Singh, who testified that he was suicidal on the time, returned to the U.S. that day. Ellison moved again to her mother and father’ home on Nov. 11, when FTX declared chapter. Wang left the Bahamas on Nov. 16.

All three would have their first conferences with federal prosecutors by the tip of the month.