4 individuals had been within the room. That a lot is uncontested.
Caroline Ellison, Gary Wang, Nishad Singh and Sam Bankman-Fried sat collectively in June 2022 within the Bahamas workplace of FTX, the crypto trade based by Bankman-Fried and Wang, then value $40bn. Bankman-Fried and Wang additionally owned Alameda, a personal buying and selling agency that Ellison ran. And on that day, Ellison feared Alameda was bankrupt.
Within the weeks after the assembly, Ellison authorised billions in mortgage repayments in the end funded by borrowing from FTX. Bankman-Fried tried unsuccessfully to boost extra fairness for the crypto trade, and he saved telling traders, prospects and the broader world that his two corporations had been fully separate and financially robust. He promised buyer belongings had been protected.
They weren’t. In November 2022, too many shoppers requested for his or her a reimbursement from the trade, and FTX couldn’t pay. Days later, FTX and Alameda filed for chapter. All 4 individuals at that June assembly had been subsequently hit with legal fees — however just one has gone to trial.
As the top of Bankman-Fried’s trial approaches, the case towards him comes right down to what was mentioned within the dialog in Nassau in June, and who knew what and when.
When the jury begins deliberating later this week, it must resolve which model of occasions to consider: did Bankman-Fried order his lieutenants to empty buyer funds and canopy it up? Or did his closest allies make errors that led FTX to catastrophe, which Bankman-Fried didn’t uncover till it was too late?
A central query is whether or not it’s believable that Bankman-Fried — along with his school diploma from the Massachusetts Institute of Expertise, his Jane Avenue Capital pedigree and his well-known mind — left the June assembly after listening to that Alameda might need been bankrupt with out having pinned down the small print.
“You by no means obtained to the underside of that?” assistant US legal professional Danielle Sassoon requested this week in cross-examination. Bankman-Fried mentioned the following three most senior individuals on the firm had been working it out. “I trusted them,” he mentioned.
Wang, Ellison and Singh have all pleaded responsible to fraud and are co-operating with prosecutors, having taken the stand towards their one-time boss. Their reminiscences appeared extra concrete than Bankman-Fried, who advised prosecutors dozens of instances that he “didn’t recall” essential particulars.
Wang, Bankman-Fried’s school pal and taciturn right-hand man, and Ellison, his former girlfriend, each testified that Bankman-Fried was advised concerning the greater than $10bn debt Alameda already owed FTX in June, and nonetheless authorised it to borrow much more to keep away from defaulting on its loans and collapsing his enterprise empire. They mentioned the cash got here from FTX prospects — there was no different supply of a lot money.
Ellison advised the identical story in a gathering together with her staff in November, as FTX was collapsing and earlier than she learnt of the US investigation. The jury heard clips from a tape of the assembly, the place Ellison was requested who had authorised using FTX shoppers’ cash to repay Alameda’s loans.
“Um . . . Sam, I assume,” she replied.
The 31-year-old former crypto billionaire, who maintains his innocence, took the stand in his own defence in a closing high-stakes gamble to keep away from probably many years in jail. He claimed it was Ellison’s concept to repay the loans in June.
“I didn’t consider that Alameda did have to borrow from FTX as a way to course of the mortgage repayments,” he advised jurors. Later, he mentioned he was “undecided . . . whether or not or not that was floated out at one level or one other”.
The fourth individual current within the assembly has advised a barely completely different story. Singh, a childhood pal of Bankman-Fried’s youthful brother, has additionally pleaded responsible and is co-operating. He mentioned he left the June assembly with suspicions, however beneath the impression that the whole lot was positive.
Singh mentioned he realised buyer funds had been being raided in September — when Ellison advised him that Alameda was unable to repay its money owed to FTX. He mentioned he confronted Bankman-Fried on the balcony of their Bahamas penthouse the identical day, and that his boss was not shocked.
As they deliberate, the 12 jurors must weigh these contradictions. Daniel Silva, a former federal prosecutor at legislation agency Buchalter, mentioned Bankman-Fried had tried on the stand to painting that he “knew about some issues, and we made errors, however different individuals had been instantly answerable for a lot of the essential selections . . . It’s a extremely robust line to toe.”
Nonetheless, Silva added: “If he finds one juror who will not be satisfied, it’s a hung jury.”
Over 4 days of marathon testimony, which completed on Tuesday, Bankman-Fried pleaded ignorance. He claimed he thought Alameda’s money owed to the trade had been manageable, roughly $2bn. He mentioned he was “very shocked” in October when he discovered greater than $8bn accounted for in a unique a part of the FTX methods.
The federal government’s relentless cross-examination hammered on the query of the place the $8bn went. “You didn’t inform your staff, don’t spend the FTX buyer cash?” Sassoon requested.
“I don’t recall giving any instructions,” Bankman-Fried mentioned. “I deeply remorse not taking a deeper look into it.”
“Is it your testimony that . . . some unknown individual spent $8bn with out your information?” Sassoon requested. “You didn’t name in your deputies and staff and say ‘who spent $8bn?’”
Questioned by his personal legal professionals, Bankman-Fried later mentioned “funds had been being deposited and withdrawn all over every single day” and that no “clear single individual” was answerable for the spending, which included billions on enterprise investments, actual property and star-studded advertising and marketing.
“Cash is fungible anyway,” he added.
Prosecutors gestured in direction of different theories of Bankman-Fried’s guilt — one being that FTX and Alameda had been a corrupt conspiracy from the trade’s launch in 2019. They confirmed a 2019 tweet when Bankman-Fried mentioned: “Alameda is a liquidity supplier on FTX however their account is rather like everybody else’s.”
The jury has seen a mountain of technical proof and testimony contradicting this declare. Bankman-Fried identified that his tweet was responding to a narrower query about whether or not Alameda may front-run different prospects’ trades on FTX, however he admitted on the stand that he knew since no less than 2020 that his agency obtained a cross on the conventional guidelines for when positions could be liquidated.
The federal government additionally produced personal notes Bankman-Fried wrote after FTX collapsed during which he mentioned: “If Alameda had been a 100 per cent separate fully unrelated buying and selling agency in each approach, this wouldn’t have occurred.”
There’s additionally a attainable narrower floor for conviction. Prosecutors have repeatedly proven the jury tweets Bankman-Fried despatched within the week earlier than FTX collapsed reassuring prospects that their “belongings are positive” and that “FTX has sufficient to cowl all shopper holdings”. Two prospects of the trade testified that they learn these tweets on the time and on that foundation left cash of their FTX accounts till it was too late.
Though he knew about Alameda’s huge money owed, Bankman-Fried claimed that when he despatched the tweet he thought: “Alameda nonetheless had a web asset worth of roughly constructive 10 billion [and] FTX had no holes on its steadiness sheet.”
This perception was largely based mostly on enormous shares of crypto tokens Alameda held that had been carefully tied to FTX. Challenged on whether or not these tokens had been actually liquid, he mentioned: “Liquidity isn’t a binary classification.”
If the jury is doubtful about what actually occurred between the 4 former mates in Nassau in June, or about what was happening inside Bankman-Fried’s head, his determined claims in November 2022 — as he tried to cease the implosion of his empire — could possibly be prosecutors’ final line of defence.
What the federal government lacks is a smoking gun. There isn’t a standout piece of proof that unequivocally reveals Bankman-Fried conspiring in black and white. Prosecutors have made a lot of the truth that he set his encrypted chats to auto-delete to indicate that he intentionally destroyed probably the most incriminating messages.
The connective tissue of the federal government case, like the small print of the June assembly, comes from their star witnesses. In all of the essential conversions, the individuals who had been current are actually telling two completely different tales. All of it comes right down to “he mentioned, they mentioned” — and which facet the jury will consider.