<\/p>\n
What do Chinese bribes, Saudi Crown Prince Mohammed Bin Salman, Toyota Corollas, Thai sex workers, and a lack of haircuts all have in common? Sam Bankman-Fried, allegedly.<\/p>\n
Bankman-Fried, who faces seven counts of fraud and conspiracy related to the collapse of his companies Alameda Research and FTX, wrapped up his second week in court Friday afternoon in Manhattan.<\/p>\n
The jury trial is scheduled to last six weeks, although prosecutors might be slightly ahead of schedule, they told the court Friday. The government expects to rest its case on Oct. 26 \u2013 one day earlier than planned \u2013 perhaps thanks to the defense taking just half a day on their cross-examination of ex-Alameda CEO Caroline Ellison.\u00a0<\/p>\n
During the second week, four government witnesses testified. This has allowed the prosecution to start illustrating the alleged inner workings of Bankman-Fried\u2019s now-tumbled empire to the jury. Here\u2019s what you missed during the last four days of trial:\u00a0<\/p>\n
The question of who exactly knew what was going on at Alameda and FTX \u2014 and, importantly, when they discovered it \u2014 is essential in the government\u2019s quest to prove that Bankman-Fried and his top executives conspired to commit fraud.\u00a0<\/p>\n
One, and perhaps the only, win the defense got when cross-examining Ellison Thursday was when the ex-CEO admitted that she told prosecutors early on that at one point, Bankman-Fried may not have known exactly where fiat FTX customer deposits<\/a> were being held.\u00a0<\/p>\n \u201cI recalled saying that\u2026he might not know this was happening,\u201d Ellison said on the stand, referring to what she may have told prosecutors during a December 2022 meeting. \u201cSomething like that.\u201d\u00a0<\/p>\n Read more: <\/strong>5 hidden gems from Caroline Ellison\u2019s FTX testimony you might\u2019ve missed<\/a><\/p>\n Defense lead counsel Mark Cohen was specifically wondering if Ellison<\/a> had spilled to the government that Bankman-Fried may have been unaware that FTX customer fiat wire transfers were still going to the Alameda-controlled \u201cNorth Dimension\u201d bank account, even after the exchange made a switch.\u00a0<\/p>\n Some legacy FTX customers still transferred funds to North Dimension even after exchange operators had created an account under the FTX<\/a> name, Ellison said.\u00a0<\/p>\n The government has maintained that Bankman-Fried was the ringleader at Alameda, even though on paper it appeared to be co-CEOs Caroline Ellison and Sam Trabucco. Ex-employees have backed up this narrative.\u00a0<\/p>\n \u201c[Bankman-Fried maintained direct communication with Alameda employees,\u201d former software engineer Christian Drappi told the court Thursday.\u00a0<\/p>\n Bankman-Fried still had access to trading data and weighed in on big decisions even after he publicly stepped away from the trading firm, Drappi added.\u00a0<\/p>\n Between the allegations of bribes to Chinese officials<\/a> and taking nearly a minute to identify her ex-boyfriend and former boss in the courtroom, it\u2019s no wonder Ellison\u2019s days-long testimony has ruled headlines this week.\u00a0<\/p>\n Most of her time at Alameda was spent under pressure, she told jurors Wednesday. She uttered the phrase \u201cvery stressed out\u201d three separate times during her testimony. Her fears stemmed from Alameda\u2019s balance sheet, which became more troubling by the day as its liabilities increased throughout 2022, she said.\u00a0<\/p>\n Ellison testified that at Bankman-Fried\u2019s direction, she created seven false, or, as Bankman-Fried called them, \u201calternative,\u201d balance sheets<\/a> to send over to Genesis. Given worsening market conditions, Matt Ballensweig, head of lending at Genesis, asked for an update on Alameda\u2019s financials.\u00a0<\/p>\n \u201cI was very stressed out,\u201d Ellison said about the request, marking the second time she mentioned her tense mental state.\u00a0<\/p>\n \u201cI wanted to reassure them about Alameda\u2019s financial state, but the facts were that Alameda was in a very bad situation\u2026 we had been borrowing increasing amounts of money from FTX customers,\u201d Ellison added.\u00a0<\/p>\n Read more: <\/strong>Sam Bankman-Fried \u2018lied to the world,\u2019 prosecution posits in opening statement<\/a><\/p>\n \u201cI don\u2019t think we can send this to Genesis,\u201d Ellison told Bankman-Fried after she had crunched the real numbers, which tallied Alameda\u2019s total liabilities at more than $14 billion in June 2022.\u00a0<\/p>\n The pair picked one of the seven aforementioned \u201calternative\u201d balance sheets to share with Ballensweig instead, Ellison testified.\u00a0<\/p>\n Ballensweig later told Ellison and Bankman-Fried that Genesis needed $500 million repaid from their loans. Genesis was in a dire situation, Ellison testified.\u00a0<\/p>\n \u201cGenesis really needed the money and implied that they might go under or have to default on some loans if they didn\u2019t get it,\u201d Ellison told the jury.\u00a0<\/p>\n Genesis declared bankruptcy in January<\/a>, roughly two months after FTX and Alameda did the same.\u00a0<\/p>\n The week was undoubtedly dominated by the testimony of the ex-Alameda CEO, but three other witnesses also took the stand.<\/p>\n One such witness, an ex-Alameda employee, not only gave insight into what it was like in the final days of the company, but also into the fateful all-hands meeting hosted by Ellison<\/a> on November 9, 2022.<\/p>\n The government played six audio clips from the meeting, which a former Alameda employee who had worked there less than a week recorded. The defense played one additional clip from the recording during their cross-examination.\u00a0<\/p>\n Prior to the clips being played for the court, Drappi set the scene.\u00a0<\/p>\n He said that he was \u201cutterly shocked\u201d about the Bankman-Fried tweet in 2022 declaring that Binance was planning to acquire FTX. A plan that would later fall through<\/p>\n \u201c[Ellison told us that FTX] had a shortfall of user funds and that this was caused by Alameda borrowing user funds from FTX<\/a> to repay its prior loans, and it had used those prior loans to make illiquid investments in various different ventures and just companies,\u201d Drappi testified.\u00a0<\/p>\n While delivering this \u201cutterly shocking\u201d news, Ellison was slouched on a bean bag chair in the Hong Kong office, Drappi added.<\/p>\n Read more: <\/strong>Alameda was spending more trading than FTX was making in revenue: Co-founder<\/a><\/p>\n In the clips played for the jury, Ellison told Alameda employees that FTX was trying to raise investor money in order to repay customers, a response that raised alarm bells for Drappi.\u00a0<\/p>\n \u201cGenerally, when a company raises money, it\u2019s about, you know, an exciting, you know, future growth and not to fill a hole in a balance sheet,\u201d he said.\u00a0<\/p>\n Also caught on tape, Drappi asked Ellison who knew about all this secret borrowing Alameda had been doing.\u00a0<\/p>\n \u201cI\u2019m not even sure if I knew exactly who was aware,\u201d Ellison responded on the recording.\u00a0<\/p>\n \u201cSam [Bankman-Fried], I guess\u201d allowed it, she added.\u00a0<\/p>\n Ellison\u2019s demeanor at the all-hands was described by Drappi as being \u201csunken.\u201d\u00a0<\/p>\n She can be heard on the clips laughing, a fact defense was keen to point out, but Drappi testified that he\u2019d classify this as \u201cnervous laughter.\u201d\u00a0<\/p>\n \u201cThanks,\u201d Ellison said after an employee thanked her for her honesty in the final clip, which was played by the defense.\u00a0<\/p>\n \u201cI mean, it was kind of fun,\u201d she added, again laughing.\u00a0<\/p>\n Rounding out four days of explosive testimony was the government\u2019s final witness of the week: Zac Prince, founder and former CEO of now-bankrupt lending firm BlockFi.\u00a0<\/p>\n The jury has heard from FTX customers and ex-employees \u2013 and there will be more witnesses from both categories, the government has said \u2013 but Prince offers a unique perspective.\u00a0<\/p>\n BlockFi not only lent to Alameda, it also kept assets \u2013 some of which were on behalf of their own customers \u2013 on the FTX exchange. Combined, the values add up to $1 billion, Prince told the jury Friday. His company filed for bankruptcy in November 2022, just over two weeks after FTX and Alameda had themselves filed.\u00a0<\/p>\n \u201cOnce it became clear that repayment of the Alameda loans and being able to access the funds that we had on FTX was impaired\u2026 Our view of the financial health of BlockFi\u2019s business was such that we needed to declare bankruptcy,\u201d Prince testified.\u00a0<\/p>\n During roughly an hour of cross-examination on Friday, Bankman-Fried\u2019s attorneys did manage to find some inconsistencies in Prince\u2019s testimony.<\/p>\n Cohen referenced several internal documents at BlockFi where the lenders and their risk team outlined the many risks associated with lending to Alameda. BlockFi never received audited financial statements, Alameda was already over on its credit limit and its posted collateral was volatile, to name a few.\u00a0<\/p>\n Still though, Prince maintained that he believes BlockFi would still be running had Alameda and FTX not collapsed.\u00a0<\/p>\n \u201cI don\u2019t think BlockFi would have filed for bankruptcy in November of 2022 if the Alameda loans were still in good standing and the funds we had at FTX were accessible,\u201d he said.\u00a0<\/p>\n The jury trial continues Monday in Manhattan with the government\u2019s next witnesses, FTX customer Elan Dekel and FBI special agent Richard Busick.<\/p>\n Don\u2019t miss the next big story \u2013 join our\u00a0free daily newsletter<\/a>.<\/strong><\/p>\nCaroline spent a lot of time \u201cvery stressed out\u201d\u00a0<\/h2>\n
Not just the Ellison show<\/h2>\n
The government is telling a story, and it\u2019s pretty good\u00a0<\/h2>\n
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