FTX founder Sam Bankman-Fried’s fraud trial is in full swing. The beleaguered crypto evangelist faces up to 110 years in prison if convicted. The details of one of the biggest fraud cases since the turn of the century will come out during this six-week trial. Here are the five biggest revelations so far in this week’s Five For Friday:
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#5: SBF’s big ambitions
One of the most anticipated moments of the trial to date is the testimony of SBF’s ex-girlfriend, Caroline Ellison, who played a direct role in the alleged fraud. She revealed some of Bankman-Fried’s big-time ambitions on the stand.
One bombshell from Ellison was that SBF once claimed there was a 5% chance he’d become president. He also contemplated paying Donald Trump $5 billion to sit out the 2024 presidential election, according to author Michael Lewis.
While Bankman-Fried is now accused of misusing billions in customer funds, he once dreamed of giving away much of his fortune even before he acquired it. While a student at MIT, he subscribed to effective altruism, a specific type of philanthropy that aims to use logic and data to do good. Once he did make the big bucks, he was quick to sign the Giving Pledge to donate most of his wealth, alongside folks like Bill Gates and Warren Buffett.
#4: $500 million USB drive
A high-profile trial like this will bring out some good stories that aren’t necessarily told on the stand. The same day FTX declared bankruptcy, someone started stealing hundreds of millions of dollars worth of cryptocurrency.
Wired just published all the details of the scramble to thwart the $1 billion heist. FTX staffers, who had already been through quite a bit that day, spotted mysterious outflows of the digital currency in real time. As they tried to figure out a way to get their crypto to safety offline, a consultant ended up using a personal USB drive to protect $500 million in FTX funds. It’s not the safest solution: If something were to happen to the keys, drive or consultant, that money could have been lost forever. In the end, it worked, and the hackers only made off with $415 million.
#3: Ten’s company
Tech startups are known for wild lifestyles. After all, if you think you’re changing the world, the adrenaline must be pumping. A lot has been made of Bankman-Fried’s $35 million penthouse in the Bahamas, which was paid for by FTX’s hedge fund Alameda Research.
According to testimony from FTX developer Adam Yedidia, nine other employees also lived with the CEO, who was worth $26 billion at his height. SBF was also known to nap on a bean bag there. Could a good night’s rest have prevented some of the bad decisions that sunk the exchange?
#2: Alameda’s backdoor
FTX co-founder Gary Wang already pleaded guilty to fraud charges, but testified that SBF had the final say on all the deals that sent FTX money to Alameda Research. Wang said he and another programmer put in a backdoor to allow the loans at the behest of his co-founder.
In 2019, Wang said Alameda could only borrow as much as FTX made in revenue from trading fees, roughly $300 million at the time. But Wang said the line of credit soon grew to $65 billion, while customers and investors were kept in the dark.
#1: FTX wasn’t bulletproof
Bankman-Fried has repeatedly claimed ignorance, but his coworkers are testifying that he knew the company’s financials weren’t up to snuff. Yedidia said he confronted SBF last summer while playing paddleball about whether Alameda could repay the $8 billion it owed FTX at the time. Yedidia said SBF’s answer was rather ominous.
“We were bulletproof last year,” SBF said, according to Yedidia. “We’re not bulletproof this year.”
SBF added that it would be six months to three years to get back to bulletproof. Yedidia said he looked “worried or nervous.” The company filed for bankruptcy four months later.
Simone Del Rosario:
Disgraced FTX founder Sam Bankman Fried’s fraud trial is in full swing. The beleaguered crypto bro is facing a max sentence of 110 years in prison if convicted. Over six weeks we’re getting the nitty gritty of one of the biggest fraud trials this century. Here are 5 of the biggest revelations to date in this week’s Five For Friday.
In the highly-anticipated testimony of ex-girlfriend Caroline Ellison, she revealed SBF’s big life ambitions. She said he once claimed there was a 5% chance he’d become president. Despite being accused of misusing billions in customer funds, SBF long dreamed of giving away much of his own fortune, even before he had it. He subscribed to Effective Altruism while still a student at MIT, and once he did strike rich, he signed the Giving Pledge to donate most of his wealth, alongside icons like Bill Gates and Warren Buffett.
Not all the fireworks are happening on the stand. Did you know the same day FTX declared bankruptcy, someone started stealing hundreds of millions from the company? Wired just released details of the all-night scramble to thwart the $1 billion crypto heist. Exhausted staffers spotted mysterious outflows of FTX’s crypto in real time. A consultant used a personal USB drive to shield half a billion in FTX funds. Not the safest solution, but in the end it worked and hackers stole off with $415 million, not more.
Tech start-ups are known for wild lifestyles and FTX was no different. A lot’s been made of SBF’s $35 million penthouse in the Bahamas which was paid for by FTX’s hedge fund Alameda Research. But according to testimony from FTX developer Adam Yedidia, 9 other employees lived there with the CEO, who was worth $26 billion at his height. SBF was known to nap on a bean bag there. Perhaps a good night’s rest could have prevented some of these bad decisions.
Co-founder Gary Wang, who already pleaded guilty to fraud charges, testified SBF had final say in all the deals that funneled FTX money to Alameda. Wang says he and another programmer put in a back door to allow the “loans” at the behest of his co-founder. In 2019, Alameda could only “borrow” as much as FTX made in revenue from trading fees, roughly $300 mil. But Wang says that soon grew to $65 billion, all while customers and investors were kept in the dark.
Despite SBF’s repeated claims of ignorance, his coworkers say he absolutely knew the company’s financials were cracking. Yedidia reportedly confronted SBF last summer while playing paddleball about whether Alameda could repay the $8 billion it owed FTX. SBF’s answer was somewhat ominous, saying “we were bullet proof last year, but we’re not bulletproof this year,” adding it would be 6 months to 3 years to get back to bulletproof, whatever that means. Yedidia said Sam looked “worried or nervous.” Four months later, FTX went bankrupt.
Remember SBF’s presidential ambitions? Here’s an extra credit tidbit. Author Michael Lewis, who wrote a book on this whole saga, says SBF contemplated paying Donald Trump $5 billion not to run for president in 2024. That’s Five For Friday. I’m Simone Del Rosario. It’s Just Business.
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