Examination of the Initial Week in the Courthouse Proceedings of Sam Bankman-Fried
In the heart of Manhattan, the multi-count fraud trial of Sam Bankman-Fried, the former CEO of the now-collapsed crypto exchange FTX, commenced on Tuesday.
The trial follows Bankman-Fried's arrest 10 months ago in the Bahamas, where FTX was based. The exchange, once valued at $32 billion, crumbled under allegations of financial mismanagement and fraud.
Matt Huang, co-founder and managing partner of crypto firm Paradigm, testified that the $278 million his firm invested in FTX in 2021 and 2022 has been "marked...to zero." Huang, who had been eyeing FTX for potential investment since 2019, revealed that he was not informed about FTX's ability to withdraw customer deposits or Alameda Research's access to the funds.
Gary Wang, FTX co-founder and former technology chief, testified that he helped write the code that granted Alameda Research unchecked access to borrow up to $65 billion from FTX customers. This line of credit for Alameda Research is more than twice as much as FTX was ever worth.
Wang pleaded guilty in December to four counts of wire fraud and wire fraud conspiracy, as well as conspiracy to commit commodities and securities fraud. He could receive up to 50 years in prison but agreed to cooperate with the Justice Department in the case against Bankman-Fried.
Former FTX Chief Technology Officer Gary Wang, former Alameda Research CEO Caroline Ellison, and former FTX Director of Engineering Nishad Singh are scheduled to testify against Bankman-Fried. Multiple former high-level executives from FTX and its sister companies have pleaded guilty to crimes in the scheme.
The Securities and Exchange Commission (SEC) charged Bankman-Fried with orchestrating a scheme to defraud equity investors of more than $1.8 billion. The first witness to testify against Bankman-Fried was London-based cocoa trader Marc-Antoine Julliard, who lost $100,000 with the fall of FTX. Specific names of other witnesses for the trial are not provided in the available sources.
Next up to testify are either Zac Prince, founder and CEO of bankrupt crypto lender BlockFi, or Elan Dekel, vice president of product at AI firm Pinecone.
Accommodations for a juror will lead to an early wrap-up on Friday at 2 p.m. Former FTX employee Adam Yedidia, who received immunity for his testimony, told the courts that he was concerned about contributing to the commission of a crime as a developer at FTX. Huang recalled Bankman-Fried's resistance to typical corporate governance and investors' calls for board seats during Paradigm's first investment into FTX in 2021.
The trial is expected to shed light on the inner workings of FTX and the alleged fraud that led to its downfall. The outcome could have significant implications for the crypto industry as a whole.
