breathe. We finally have a break on the Sam-Bankman-Fried-palooza case, as the trial of the former CEO of now-bankrupt cryptocurrency exchange FTX is on hold until Thursday.
Prosecutors in the Southern District of New York started small, subpoenaing a French cocoa bean trader to testify that he lost about $100,000 after FTX suddenly crashed in November. But then came the Justice Department’s big guns, including three FTX insiders who launched an attack on Bankman-Fried shortly after employees fled the Bahamas in November.
The testimonies of Gary Wang, Caroline Ellison and Nishad Singh were powerful. Equally eye-opening are the messages between FTX’s three deputies and their boss, Bankman-Fried, including messages they shared almost entirely in lowercase in the final days before FTX’s collapse.
This is the story of a crypto empire’s final week, told through sad faces, heartfelt messages and Bankman-Fried’s infamous “yes.”
“sad face”
Provided by the Southern District of New York
Four days after CoinDesk launch Published an article FTX began seeing an increase in customer withdrawals after Alameda Research, a cryptocurrency hedge fund founded and controlled by Bankman-Fried, leaked its balance sheet.
“Big withdrawals are queuing on ftx,” Singer, the former head of engineering at FTX, texted in all lowercase letters to former Alameda CEO Ellison and Bankman-Fried on Sunday, November 6.
“Thanks,” Ellison responded, before Singer followed up and said withdrawals “continue to grow at about 120 million per hour so far,” meaning customers are withdrawing $120 million per hour.
“You looked sad when you wrote back,” prosecutor Danielle Sassoon told Allison on the witness stand about a year later. “Why write a sad face?”
“I mean, I was scared,” Allison said.
“How did the defendant react?” Sassoon asked.
“He responded ‘Oh,'” she said.
‘Just having a hard time’
Provided by the Southern District of New York
Singer contacted the former FTX executive on the same day he reported the acceleration in customer withdrawals to Bankman-Fried and Ellison.
“What would help me a lot is if I had no debt,” he wrote, referring to the hundreds of millions of dollars in loans he received from FTX for venture capital, political donations and personal expenses.
He told Bankman-Fried that as FTX bankruptcy becomes increasingly likely, he hopes to backdate transactions to repay part of the hundreds of millions in loans. “Sorry, I know this isn’t an important thing to focus on and it’s not the point, I’m just going through a really rough time and I thought this might help me come back, I don’t know,” he wrote.
“(Would consider that),” Bankman-Fried replied, before telling him that backdating the trade “might be OK.”
When Singer later took the stand at his former boss’s trial, prosecutor Nicholas Roos asked him why he wanted to get out of the loan. “I was really afraid of what it was going to look like,” he testified, “that I was going to look very corrupt and, you know, I was going to be interpreted very negatively to them.”
“Have you finished the deal?” Ruth asked.
Singer responded that he ultimately did not do so. Why? “It didn’t feel right,” he said.
‘The fear of this day grows’
Provided by the Southern District of New York
Around November 7, one day after text messages between FTX insiders detailing the increase in withdrawals, Ellison contacted her on-again, off-again boyfriend, Bankman-Fried.
“This is the best I’ve been in a year,” she wrote to him.
“Wow,” Bankman-Fried responded. “Uh, congratulations? Because shit is exciting?”
“I guess I’m just getting more and more scared of this day, it’s been something that’s been bothering me for a long time, and it’s actually happening, and it feels great to have it end one way or another,” she wrote back.
A weight was finally lifted off Allison’s shoulders when she took the stand, pleading guilty to a crime that could have resulted in up to 110 years in prison. Prosecutor Sassoon texted Bankman and asked her why – Freed , she was in such a good mood when FTX collapsed.
“To be clear, that was the worst week of my life,” Allison responded, crying in court. “I feel relieved because I don’t have to lie anymore and I can start taking responsibility and being honest about what I do.”
Super fucked up/etc.”
Provided by the Southern District of New York
On November 8, after Allison told Bankman-Fried she felt relieved, Singer contacted the former cryptocurrency tycoon privately again.
“When I briefly called Dan, he was very upset with us and basically blamed the three of us and said it was terrible and stuff,” he texted, referring to former FTX chief regulatory officer Daniel Daniel Friedberg. “Ryne seems very nervous that if we don’t get this right, he might resign,” he added, referring to former FTX general counsel Ryne Miller.
“Yeah, that makes sense,” Bankman-Fried replied. “FWIW, I don’t hate the idea of them being angry at me – I know there are pros and cons, and probably mostly cons, but it might help them move on.”
“That’s so selfish of me, but they probably need to know that this wasn’t staged by a lot of people,” replied Singer, who wanted to clarify the role that insiders played in the fraud. “I think it makes it more likely that they’ll want to come here and help save the situation, at least save other people.”
Singer’s message was subtle, but, almost a year later, on the witness stand, he said he wanted Bankman-Fried to exonerate him of fraud. “I wanted him to clarify that I did not orchestrate this incident and that I knew about it very late,” he told prosecutor Ruth. “I want Sam to clarify that he orchestrated this.”
“BH Regulator”
Provided by the Southern District of New York
On November 11, Bahamas-based FTX filed for bankruptcy, and the next day, the Bahamas Securities Commission ordered Bankman-Fried and former FTX chief technology officer Wang to appear at 2 p.m. at Poinciana House, a government building directly overlooking the ocean.
“Gary and I are part of the BH regulator,” Bankman-Fried texted in a so-called “group chat” on the messaging app Signal for FTX insiders (including Bankman-Fried’s father, Joseph Bankman) Chat group.
According to Wang’s testimony, five days later, on November 17, he met with federal prosecutors. Around November 20, Singh began meeting with the government. Ellison also met with prosecutors after FBI agents raided the home where her parents lived on Dec. 8.
All three have pleaded guilty, agreed to cooperate with the government and testified against Bankman-Fried. Bankman-Fried is the only person who has yet to testify as the prosecution’s case draws to a close. His chance may come soon.
Svlook
