SBF has cast a peculiar spotlight on the crypto industry. For an year now, there have been conspiracies, contradictions and significant revelations on SBF and the collapse of FTX. Crypto investors will be able to put that to rest in the next 6 weeks. However, as the case progresses many of SBF’s statements in the last year have been called to question. Was he lying the whole time?
SBF is an interesting character
On the third day of Sam “SBF” Bankman-Fried’s criminal trial, the former CEO’s MIT roommate and FTX developer Adam Yedidia testified about the crypto exchange’s $8 billion debt prior to its bankruptcy.
According to reports from the United States District Court for the Southern District of New York, Yedidia testified on Oct. 5 in the United States District Court for the Southern District of New York about the connections between the crypto exchange and Alameda Research — one of the key pieces of information at the heart of SBF’s alleged fraud.
Remember that failure that SBF did not foresee? According to reports, Yedida told Bankman-Fried of a bug in FTX’s code that ensured “Alameda’s liabilities did not decrease,” resulting in a $8 billion error.
In response to questions from Assistant US Attorney Danielle Sassoon, Yedidia reportedly stated that his resignation from FTX was prompted by the discovery that “Alameda had used customer deposits to pay its loans.” He further alleged that SBF urged him to communicate about FTX’s code via the messaging app Signal:
He told me to use Signal. He told the entire company. It also had auto-delete. […] He said it [auto-delete] was all down-side to keep messages around. If regulators found things they didn’t like, it could be bad for the company.
Adam Yedidia
SBF’s old roommate later confronted him about the $8-billion hole near a ‘paddle tennis court’ in the Bahamas, to which the then-CEO made guarantees. Sassoon’s line of questioning also addressed Yedidia’s awareness of Bankman-Fried’s personal relationship with former Alameda Research CEO Caroline Ellison.
FTX employees knew about the backdoor to Alameda before the collapse
According to a Wall Street Journal investigation on Thursday, several FTX personnel in the United States were aware of the backdoor in the exchange that allowed Alameda Research to withdraw billions in customer assets.
The personnel reported their discovery to FTX’s director of engineering Nishad Singh, but the problem was never resolved, according to persons familiar with the situation.
The team, which worked for LedgerX, a crypto derivatives exchange acquired by FTX in 2021, was investigating whether the code for FTX’s primary exchange could be used in the United States when they found the finding.
Julie Schoening, LedgerX’s top risk officer, addressed the issues with her supervisor, Zach Dexter, who then discussed them with Nishad Singh, one of FTX founder Sam Bankman-Fried’s closest deputies.
Schoening was sacked in August 2022, allegedly because she annoyed her supervisors by bringing up the difficulties.
Following a thorough internal investigation, LedgerX has found no evidence that any of its employees were aware of any reported code enabling Alameda to take FTX customer assets, and firmly denies any contrary allegation.
Miami International Holdings, LedgerX’s new owners
While the trial continues, FTX customers are still grappling with crypto platform’s collapse. Sam Bankman-Fried is accused of stealing $10 billion from unwary consumers to fund his hedge fund Alameda Research, purchase luxurious residences, and make political donations.
On Wednesday, Bankman-Fried’s attorney said in court that his client had neglected risk management but did not steal money from customers. Bankman-Fried has entered a not-guilty plea to the allegations.
Prosecutors have summoned certain FTX customers to testify that they were told their assets were safe and to describe how the company’s demise affected them.
