Cointelegraph reporters are on the ground in New York for the trial of former FTX CEO Sam “SBF” Bankman-Fried. As the saga unfolds, check below for the latest updates.
Oct. 5: Gary Wang details relationship between FTX and Alameda Research
In over 4 hours of testimony, Gary Wang, co-founder of Alameda Research and FTX alongside Sam Bankman-Fried, provided in-depth details about the relationship between the companies and how the crypto empire ended up with an $8 billion hole in customer assets.
According to Wang, a few months after FTX’s inception, in 2019, Alameda received special privileges from FTX. Prosecutors used screenshots of FTX’s database and code available on GitHub to show that Alameda was allowed to have an unlimited negative balance at FTX, a special line of credit of $65 billion in 2022, and an exemption from the liquidation engine.
The commingling of funds and problems between companies evolved over time. In 2020, Bankman-Fried instructed Wang that Alameda’s negative balance should not exceed FTX’s revenue — a rule that changed over the years, according to Wang’s testimony. In late 2021, for example, Alameda’s liability to FTX stood at $3 billion, up from $300 million in 2020.
“I trusted his judgment,” Wang said when asked why he agreed to Alameda’s privileges.
However, these alleged privileges were part of Alameda’s role as a primary market maker for FTX, the defense argued later during Wang’s testimony. The defense counsel also noted that other market makers had similar privileges at FTX, and being able to go negative was a key feature of any market maker.
Another point emphasized by prosecutors was the MobileCoin (MOB) exploit in 2021. Bankman-Fried allegedly told Wang and Caroline Ellison to add the multimillion-dollar deficit to Alameda’s balance sheet instead of keeping it on FTX to hide the loss from FTX investors.
Months before FTX’s collapse, Bankman-Fried, Wang, and Nishad Singh — former director of engineering — discussed shutting down Alameda and replacing its role with other market makers. The company’s liabilities, however, were too high at the time, sitting at $14 billion. Alameda remained in operations until November 2022.
Wang’s testimony will continue on Oct. 10 — the same day Ellison will also be heard.
Oct. 5: Yedidia cross-examination, witness testimonies in focus
A liability of $8 billion from Alameda to FTX was at the center of prosecutors’ cross-examination of Adam Yedidia on Oct. 5. Yedidia is a close friend of Sam Bankman-Fried and was a developer at FTX. He was also one of ten people to live in Bankman-Fried’s $35 million luxury resort in the Bahamas.
According to Yedidia’s testimony, since early 2021, FTX used an Alameda account labeled North Dimension to deposit users’ funds while facing difficulties opening its own bank account. Funds would be considered Alameda’s liability toward FTX, which reached $8 billion in June 2022.
While Yedidia was aware of the funds sent to Alameda’s account, he didn’t see it as a concern when he first heard about it in 2021. However, after learning about the liability amount in 2022, he voiced his concerns to Bankman-Fried during a tennis game. According to Yedidia, Bankman-Fried said the debt should be settled between the companies within six months to three years.
Scenes from outside Sam Bankman-Fried’s trial location in New York. Source: Ana Paula Pereira/Cointelegraph
“I trusted Sam, Caroline, and others in Alameda to handle the situation,” he said, answering questions from prosecutors. Upon learning that Alameda was not only holding the funds, but using them to pay its debtors, Yedidia resigned in November 2022.
While prosecutors used the case to illustrate how the companies were commingling funds, Bankman-Fried’s defense counsel sought to share a broader picture of FTX and Alameda’s relationship with the jury.
The defense highlighted that FTX was growing fast, with its leadership working over 10 hours a day during the 2021 bull market, including Bankman-Fried, who oversaw several parts of the company at the time.
The defense counsel also pointed out that Yedidia had been under several inquiries from prosecutors under an immunity order, meaning cooperation with prosecutors would protect him from facing any charges regarding his role at FTX.
Also, according to Bankman-Fried’s defense, FTX’s difficulties opening a bank account and its reliance on Alameda’s North Dimension to deposit funds were well known. Yedidia’s cross-examination will resume this afternoon in the federal courtroom in lower Manhattan.
Two witnesses testified during the second part of the Sam Bankman-Fried trial on Oct. 5: Matthew Huang, co-founder of Paradigm, and Gary Wang, co-founder of FTX and Alameda Research.
Paradigm invested a total of $278 million in FTX in two funding rounds between 2021 and 2022. According to Huang, the venture capital firm was not aware of the commingling of funds between FTX and Alameda, nor of the privileges that Alameda had with the crypto exchange.
Such privileges included Alameda’s exemption from FTX’s liquidation engine (a tool that closes positions at risk of liquidation). With the exemption, Alameda was able to leverage its position and maintain a negative balance with FTX.
The Paradigm co-founder also acknowledged that the firm did not conduct deeper due diligence on FTX, instead relying on information provided by Bankman-Fried.
Another concern for Paradigm was FTX not having a board of directors. According to Huang, Bankman-Fried was “very resistant” to the idea of having investors on FTX’s board of directors but promised to build one and appoint experienced executives to serve on it.
During his brief testimony, Wang acknowledged that he, along with Bankman-fried and Caroline Ellison, had committed wire fraud, securities fraud, and commodities fraud.
Wang also noted that Alameda had special privileges with FTX, such as the ability to withdraw unlimited funds from the exchange, as well as a line of credit of $65 billion. To illustrate these privileges, Wang pointed out that any other market maker would have a credit line in the millions, while Alameda had a credit line in the billions.
A loan of approximately $200 million to $300 million from Alameda was also mentioned by Wang, allegedly as part of the purchase of other crypto firms. However, the loans were never credited to his account. His testimony will continue on Oct. 6.
Oct. 4: DOJ and Bankman-Fried’s defense state their arguments
The first hours of SBF’s trial have offered a glimpse of the arguments the United States Department of Justice (DOJ) and the former FTX CEO’s defense will bring to court in the coming weeks.
After a jury selection in the morning, both parties gave opening statements to the 12-person jury present in the court.
The DOJ took a tough stance against Bankman-Fried in its first statement, portraying the FTX founder as someone who deliberately lied to investors to enrich himself and expand his crypto empire.
According to the DOJ, Bankman-Fried lied to FTX customers and investors, using Alameda as a key partner to “steal customers’ funds,” a phrase that was frequently used during the opening statements.
A sign outside Sam Bankman-Fried’s trial location in New York. Source: Ana Paula Pereira/Cointelegraph
As per the trial preview, the DOJ will focus its arguments on allegations that Bankman-Fried misled customers, investors and lenders regarding the safety of their funds while using Alameda to steal their money and influence politicians in Washington.
The defense, meanwhile, brought arguments about Bankman-Fried being a young entrepreneur who made business decisions that “didn’t work out.” The defense denied the existence of secret transactions between Alameda and FTX or a backdoor used to steal customer funds. According to the previous arguments presented, all transactions were legitimate or made in good faith by Bankman-Fried during the crypto market downturn and the subsequent collapse of FTX in November 2022.
The defense also highlighted the role of Binance in the bank run that led to FTX’s collapse. Testimonies will continue throughout the day.
According to the defense, Bankman-Fried assumed FTX was allowed to loan funds to Alameda as part of a business relationship with the market maker, and there was no secret door for transactions between the companies.
Prosecutors also noted that Caroline Ellison, Gary Wang and Nishad Singh will offer the jury insider details about Bankman-Fried’s role in FTX’s operations and alleged crimes. However, the defense pointed out that as part of the cooperation agreement with the government, they were supposed to give testimony against Bankman-Fried, raising doubts about their credibility.
The defense also downplayed the accusations against the nature of the relationship between FTX and Alameda, arguing that FTX margin traders were aware of the risks associated with transactions.
“There was no theft,” the defense claimed. “It’s not a crime to be the CEO of a company that files for bankruptcy.”
In the second half of the first day of the trial, the jury heard from two witnesses: Mark Julliard, a French trader and former client of FTX, and Adam Yedidia, a friend of Sam Bankman-Fried and former employee at Alameda Research and FTX.
In his testimony, Julliard said he had four Bitcoin (BTC) held at FTX at the time of the exchange’s collapse, worth nearly $100,000. He admitted that FTX and Bankman-Fried’s marketing efforts, as well as the notable venture capital companies backing FTX, gave him the confidence to use the exchange for crypto trading. He assumed that venture capital firms had done due diligence on FTX and its leadership.
During the questioning, prosecutors emphasized that the trader used FTX exclusively for spot trading and was unaware that the exchange used client funds for crypto trading with Alameda Research.
Questions for Yedidia were focused on his educational background at the Massachusetts Institute of Technology, where he first met Bankman-Fried and had two professional experiences with the FTX founder. Yedidia worked at Alameda briefly in 2017 as a trader and then returned to work for FTX in 2021 as a developer. He was among 10 people living in the Bahamas on FTX’s $30 million real estate.
In Yedidia’s testimony, prosecutors used former FTX ads as evidence that the company was always positioning itself as a safe, trusted and easy way to invest in cryptocurrency, including marketing campaigns with NFL player Tom Brady and comedian Larry David. The trial will resume Oct. 5.
Oct. 3: SBF trial begins
Bankman-Fried’s trial will take place in a Manhattan federal court. Source: Ana Paula Pereira/Cointelegraph
The trial of Sam Bankman-Fried began on Oct. 3 with jury selection. Bankman-Fried is charged with seven counts of conspiracy and fraud in connection with the collapse of FTX, the cryptocurrency exchange he co-founded. He has pleaded not guilty to all charges. The case is being heard by Judge Lewis Kaplan, who has presided over a long list of other high-profile cases, including ones involving detainees at Guantanamo Bay, the Gambino crime family, Prince Andrew and Donald Trump.
Bankman-Fried was ordered to be jailed on Aug. 11 after Kaplan found that his sharing of former Alameda Research CEO Caroline Ellison’s personal papers amounted to witness intimidation. Alameda Research was a trading house also founded by Bankman-Fried. Previously, he had been under house arrest in his parents’ home in Stanford, California, on a $250-million bond.
December: SBF arrested
Bankman-Fried was arrested in the United States on his arrival from the Bahamas on Dec. 21, 2022. He had been arrested in the Bahamas on Dec. 12 after the U.S. government formally notified the country of charges the U.S. was filing against him. He declared his intention to fight extradition from the Caribbean nation but changed his mind after a week in Bahaman jail and consented to extradition.
Meanwhile, FTX co-founder Gary Wang and Alameda Research CEO (and reportedly sometime SBF girlfriend) Ellison agreed to plead guilty in the burgeoning case.
November: FTX collapses
Bankman-Fried’s troubles began when reports emerged on Nov. 2 that Alameda Research had a large holding of FTX Token (FTT), FTX’s utility token. That revelation led to questions about the relationship between the two entities. On Nov. 6, Changpeng Zhao, CEO of rival exchange Binance, announced that his exchange would liquidate its FTT holdings, which were estimated to be worth $2.1 billion. Zhao turned down an offer tweeted by Ellison to buy Binance’s FTT.
A run began on FTX. Bankman-Fried gave reassurances on Twitter (now X) that the exchange’s “assets are fine” and accused “a competitor” of spreading rumors. By Nov. 8, the price of FTT had fallen from $22 to $15.40.
It’s only been one week since SBF’s notorious “FTX is fine. Assets are fine.” pic.twitter.com/zKoILqquHF
Also on Nov. 8, Bankman-Fried announced on Twitter that he had come to an agreement with Zhao “on a strategic transaction.” He wrote, “Our teams are working on clearing out the withdrawal backlog as is. This will clear out liquidity crunches; all assets will be covered 1:1.”
On Nov. 9, Zhao announced that Binance would not pursue the acquisition of FTX after due diligence and more reports of mishandled funds. The price of Bitcoin (BTC) plummeted to $15,600. The FTX and Alameda Research websites went dark for a few hours. When the FTX website came back, it bore a warning against making deposits and was unable to process withdrawals.
On Nov. 10, Bankman-Fried posted a 22-part Twitter thread that began with “I’m sorry.” It was the first of a long string of public statements he made about the exchange’s fall. The following day, the entire staff of Alameda Research quit, and FTX, FTX US and Alameda Research filed for bankruptcy in the United States. Bankman-Fried resigned as FTX CEO and was replaced by John J. Ray III, who was best known for his role in the Enron bankruptcy.
As the crypto winter set in, Bankman-Fried spoke of FTX and Alameda Research’s “responsibility to seriously consider stepping in, even if it is at a loss to ourselves, to stem contagion.” The companies made a bid for Voyager Digital that was rebuffed.
Bankman-Fried, Ellison and other alumni of Jane Street Capital founded Alameda Research in 2017. Bankman-Fried went on to found FTX with Wang in 2019. Zhao was an early investor in the exchange.
This is a developing story, and further information will be added as it becomes available.
Reform UK has hit back at both the Archbishop of York and the government following criticism of its immigration policies.
Leader Nigel Farage announced the party’s flagship immigration plan during a flashy news conference held at an aircraft hangar in Oxford on Tuesday.
The party pledged to deport anybody who comes to the UK illegally, regardless of whether they might come to harm, and said it would pay countries with questionable human rights records – such as Afghanistan – to take people back.
It also said it would leave numerous international agreements, and revoke the Human Rights Act, in order to do this.
The policy was criticised by the Conservatives, who said Mr Farage was “copying our homework”, while parties such as the Liberal Democrats and the Greens condemned it.
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Image: Archbishop Stephen Cottrell and Richard Tice MP. Pics: PA
But the plan came under fire from an altogether different angle on Saturday, when the Archbishop of York accused it of being an “isolationist, short-term kneejerk” approach, with no “long-term solutions”.
Stephen Cottrell, who is the acting head of the Church of England, told Sunday Morning With Trevor Phillips that he had “every sympathy” with those who find the issue of immigration tricky. But he said Reform UK’s plan does “nothing to address the issue of what brings people to this country”, and would in fact, make “the problem worse”.
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10:50
In full: Richard Tice on Sunday Morning With Trevor Phillips
Speaking on the same programme, Richard Tice, Reform’s deputy leader, responded to the archbishop’s criticisms, saying that “all of it is wrong”.
The MP for Boston and Skegness said he was a Christian who “enjoys” the church – but that the “role of the archbishop is not actually to interfere with international migration policies”.
Mr Tice then turned his fire on the government, accusing ministers of being “more interested in protecting the rights of people who’ve come here illegally… than looking after the rights of British citizens”.
He accused ministers of having “abandoned” their duty of “looking after the interests of British citizens”.
Mr Tice reaffirmed his party’s policy that the UK should leave the European Convention on Human Rights (ECHR), calling it a “70-year-old, out-of-date, unfit-for-purpose agreement”.
The Reform UK deputy leader also:
• Defended plans to pay the Taliban to take migrants back, comparing it to doing business deals with “people you don’t like”
• Said the Royal Navy should be deployed in the English Channel as a “deterrent”, but added: “We’re not saying sink the boats”
• Urged the government to call an early general election
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18:09
Farage ‘wants to provoke anger’
Meanwhile, Bridget Phillipson, the education secretary, told Sky News that Reform “want to provoke anger, but they don’t actually want to solve the problems that we face in front of us”.
She told Sunday Morning With Trevor Phillips the UK had a “proud tradition [of] supporting those facing persecution”.
But she added: “We will make sure that people who have no right to be in this country are removed from this country. That’s right. It’s what people expect. It’s what this government will deliver.”
Ms Phillipson also insisted there “needs to be reform of the ECHR” and said the home secretary is “looking at the article eight provisions”, which cover the right to a private and family life, to see “whether they need updating and reforming for the modern age”.
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However, she refused to say what the government would do if it is found that the ECHR is unreformable. Instead, she defended Labour’s position of staying in the governance of the convention, saying that honouring the “rule of law” is important.
She added: “Our standing in the world matters if we want to strike trade deals with countries. We need to be a country that’s taken seriously. We need to be a country that honours our obligations and honours the rule of law.”
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1:15:33
Sunday Morning With Trevor Phillips
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1:35
Asylum seekers to remain at Bell Hotel
Ms Phillipson was also drawn on the recent court ruling in favour of the Home Office, which overturned an injunction banning The Bell Hotel in Epping from housing asylum seekers.
Challenged on whether the government is prioritising the rights of asylum seekers over British citizens, she said it “is about a balance of rights”.
The cabinet minister also repeated the government’s plans to end the use of hotels to house asylum seekers by 2029.
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7:08
‘We should have overruled law’
Shadow Cabinet Office minister Alex Burghart said the Conservatives would be willing to leave the ECHR – if this route is recommended to them.
The Tories have asked a senior judge to look into the “legal intricacies” of leaving the convention, which he said is “not straightforward”. He said when the party receives that report, it will then make a decision.
Challenged on whether the Tories will leave if that is what the report recommends, he added: “If that’s what’s necessary, we will do it.”
Mr Burghart also said he believed the previous Conservative government’s biggest mistake was that “we did not go far enough on overruling human rights legislation”, which prevented it from “taking the tough action that was absolutely necessary”.
But he added the Conservatives have now “put forward very clear legislation that would solve this problem” – though he concluded Labour “isn’t going to do it” so the problem “is going to get worse”.
The Archbishop of York has told Sky News the UK should resist Reform’s “kneejerk” plan for the mass deportation of migrants, telling Nigel Farage he is not offering any “long-term solution”.
Stephen Cottrell said in an interview with Trevor Phillips he has “every sympathy” with people who are concerned about asylum seekers coming to the country illegally.
But he criticised the plan announced by Reform on Tuesday to deport 600,000 people, which would be enabled by striking deals with the Taliban and Iran, saying it will not “solve the problem”.
Mr Cottrell is currently acting head of the Church of England while a new Archbishop of Canterbury is chosen.
Image: Pic: Jacob King/PA Wire
Image: The Archbishop of York, Stephen Cottrell in 2020.
File pic: PA
Phillips asked him: “What’s your response to the people who are saying the policy should be ‘you land here, unlawfully, you get locked up and you get deported straight away. No ifs, no buts’?”
Mr Cottrell said he would tell them “you haven’t solved the problem”, adding: “You’ve just put it somewhere else and you’ve done nothing to address the issue of what brings people to this country.
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“And so if you think that’s the answer, you will discover in due course that all you have done is made the problem worse.
“Don’t misunderstand me, I have every sympathy with those who find this difficult, every sympathy – as I do with those living in poverty.
“But… we should actively resist the kind of isolationist, short term kneejerk ‘send them home’.”
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2:04
What do public make of Reform’s plans?
Image: Nigel Farage at the launch of Reform UK’s plan to deport asylum seekers. Pic: PA
Asked if that was his message to the Reform leader, he said: “Well, it is. I mean, Mr Farage is saying the things he’s saying, but he is not offering any long-term solution to the big issues which are convulsing our world, which lead to this. And, I see no other way.”
Mr Farage, the MP for Clacton, was asked at a news conference this week what he would say if Christian leaders opposed his plan.
“Whoever the Christian leaders are at any given point in time, I think over the last decades, quite a few of them have been rather out of touch, perhaps with their own flock,” he said.
“We believe that what we’re offering is right and proper, and we believe for a political party that was founded around the slogan of family, community, country that we are doing right by all of those things, with these plans we put forward today.”
Sky News has approached Mr Farage for comment.
Farage won’t be greeting this as good news of the gospel – nor will govt ministers
When Tony Blair’s spin doctor Alastair Campbell told journalists that “We don’t do God”, many took it as a statement of ideology.
In fact it was the caution of a canny operator who knows that the most dangerous opponent in politics is a religious leader licensed to challenge your very morality.
Stephen Cottrell, the Archbishop of York, currently the effective head of the worldwide Anglican communion, could not have been clearer in his denunciation of what he calls the Reform party’s “isolationist, short term, kneejerk ‘send them home'” approach to asylum and immigration.
I sense that having ruled himself out of the race for next Archbishop of Canterbury, Reverend Cottrell feels free to preach a liberal doctrine.
Unusually, in our interview he pinpoints a political leader as, in effect, failing to demonstrate Christian charity.
Nigel Farage, who describes himself as a practising Christian, won’t be greeting this as the good news of the gospel.
But government ministers will also be feeling nervous.
Battered for allowing record numbers of cross- Channel migrants, and facing legal battles on asylum hotels that may go all the way to the Supreme Court, Labour has tried to head off the Reform challenge with tougher language on border control.
The last thing the prime minister needs right now is to make an enemy of the Almighty – or at least of his representatives on Earth.