FTX co-founder Gary Wang took the stand at Sam Bankman-Fried’s trial and almost immediately said he and his onetime math camp friend and MIT roommate committed a multibillion-dollar fraud.
Wang didn’t make eye contact with Bankman-Fried as he entered the Manhattan courtroom Thursday afternoon to testify as government witness. Prosecutors claim Bankman-Fried orchestrated a massive fraud in which billions of dollars in FTX customer funds were secretly transferred to affiliated hedge fund Alameda Research. Wang already pleaded guilty to fraud and agreed to cooperate against his onetime friend.
On the stand, Wang, who was also FTX’s chief technology officer, said Bankman-Fried directed him to alter the cryptocurrency exchange’s code so that Alameda was able to draw a $65 billion line of credit.
“When customers deposited money on FTX, the money went to Alameda instead,” Wang said, adding that Alameda “withdrew so much that FTX was not able to pay customers who tried to withdraw.”
That was the concern expressed earlier on Thursday by another of Bankman-Fried’s former Massachusetts Institute of Technology classmates who worked with him at FTX. Adam Yedidia testified that Bankman-Fried privately expressed concern about a potential $8 billion shortfall at FTX from loans to Alameda five months before both companies collapsed.
Yedidia’s testimony potentially undercuts Bankman-Fried’s contention that he was not closely involved with the running of Alameda and relied instead on its chief executive officer, Caroline Ellison, who is also his ex-girlfriend.
Wang and Yedidia are the first of a parade of close friends — and at least one lover — who prosecutors are putting forth as witnesses. The testimony of Ellison was touted by prosecutors in opening statements Wednesday.
As Yedidia first entered the courtroom and walked down the aisle to take the stand, Bankman-Fried slightly nodded at him, and the two made eye contact.
Bankman-Fried’s lawyers, who are arguing that he made mistakes but had no ill intent, will try to undermine those witnesses. On cross-examination by the defense, Yedidia told jurors he was testifying under grant of immunity from prosecution.
Under questioning by Assistant US Attorney Danielle Sassoon, Yedidia said he discovered that Alameda had a massive liability to FTX in June 2022 while working on an internal accounting program. He said he decided to discuss the matter with Bankman-Fried.
“It concerned me,” Yedidia testified. “It seemed like a lot of money for Alameda to be owing FTX. And I wanted to be certain that Alameda could repay that debt.” Pressed by Sassoon on why he was concerned, Yedidia said, “It was possible that FTX customers might need that $8 billion.”
Yedidia said he raised the issue with Bankman-Fried in a conversation outside the $35 million luxury Bahamas penthouse that they shared with eight other people. “Are things okay?” he said he asked.
“In response, Sam said said something like, ‘We were bullet proof last year. We’re not bullet proof this year,’” Yedidia testified, adding that Bankman-Fried appeared nervous and worried. Yedidia said that was atypical of the friend he’d known for many years.
Yedidia’s testimony also offered a window into the work and play lives of FTX’s top staffers. While he was on the stand, Sassoon showed jurors photographs of the Bahamas apartment as well as Bankman-Fried, Yedidia and Ellison eating around the common dining room table.
On cross-examination, Bankman-Fried lawyer Christian Everdell questioned Yedidia about FTX’s strong growth prior to its November 2021 collapse. Yedidia said he was working “nine hours a day, six days a week” and that FTX was often short of developers. Despite the labor shortfalls, Yedidia said he was confident at the time that FTX was on track to surpass Binance.
He received a $6 million cash bonus at the end of 2021, Yedidia testified. He immediately invested it in FTX stock. Though his base salary was between $175,000 and $200,000, Yedidia said he received several millions of dollars in cash bonuses and stock options.
The defense tried to downplay Bankman-Fried’s own wealth, once estimated at $26 billion, comparing the Bahamas penthouse to a dorm and asking Yedidia if he ever witnessed his friend buying watches, sports cars, yachts or fancy clothes. Yedidia said he did not.
“I didn’t see him wearing any fancy clothes,” he testified.
Prosecutors sought to highlight the close friendship between Yedidia and Bankman-Fried, asking the former about a conversation in which the FTX co-founder sought advice on his relationship with Ellison.
‘I Love You, Sam’
Yedidia testified that, sometime in 2019 that Bankman-Fried told him he and Ellison, who was not yet Alameda CEO, had had sex and asked whether it would be a good idea for them to date.
“I said no,” Yedidia said, without elaborating.
Later, as customers were rapidly pulling out of FTX in November 2022, Yedidia and Bankman-Fried were texting each other.
“I said ‘I love you, Sam, I am no going anywhere, don’t worry,’” Yedidia said on the stand.
But he said he wound up resigning shortly afterward, when he learned that Alameda Research had been using FTX customer funds to repay its creditors.
Yedidia said he hadn’t spoken to Bankman-Fried since resigning.
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Author: Bob Van Voris, Ava Benny-Morrison and Yueqi Yang
