The former chief financial officer of collapsed cryptocurrency exchange FTX testified in Manhattan Federal Court Thursday that he carried out financial crimes alongside company co-founder Sam Bankman-Fried.
Bankman-Fried, 31, is accused of defrauding FTX clients and investors who thought their money was safely stored in the exchange he co-founded with Gary Wang in 2019. Prosecutors charge Bankman-Fried funneled up to $10 billion from the company to pay off the debts of his hedge fund Alameda Research while bankrolling a glamorous lifestyle that had him hobnobbing with celebrities like Larry David and Tom Brady.
Wang, who was FTX’s chief financial officer, and Bankman-Fried’s ex-girlfriend Carolyn Ellison, the former CEO of Alameda Research, earlier pleaded guilty to fraud charges and agreed to cooperate with the feds. Ellison is expected to be a star witness in the trial.
“Did you commit financial crimes while at FTX?” prosecutors on Thursday asked Wang, who was the company’s CFO.
“Yes,” Wong replied, adding that he designed code that allowed Alameda to withdraw funds even when the account had a negative balance thanks to an absurdly high $65 billion line of credit.
Adam Yedidia on Thursday told the court he resigned from his role as a software developer at FTX after finding out Alameda Research had used FTX customer deposits to repay its loans.
Yedidia, who is testifying under immunity, first met Bankman-Fried at MIT, where they both studied. He said he was tasked with fixing a glitch in FTX’s code that overstated an amount of money Alameda owed FTX customers.
He fixed the bug, but in the process discovered Alameda owed FTX customers around $8 billion — money Yedidia wasn’t sure they had.
Immediately concerned, Yedidia brought it up to Bankman-Fried, who admitted there may be trouble at the company.
“Sam said something like, ‘We were bulletproof last year, but we’re not bulletproof this year,’” Yedidia said. “I asked him, ‘How long until we’re bulletproof again?’ … He said, ‘I’m not sure, maybe six months to three years.’”
Yedidia said he placed near complete trust in Bankman-Fried, assuring the CEO in November 2022 that he would stay despite a frenzy of customers withdrawing their funds when the crypto market took a huge downturn.
“I said, ‘I love you Sam, don’t worry, I’m not going anywhere,’” Yedidia said.
But days later, Yedidia resigned from FTX as customers tried unsuccessfully to withdraw their funds.
“I heard that Alameda Research had used FTX customer profits to pay back its loans to creditors,” Yedidia said on the stand, explaining why he quit. “It seemed like a flagrantly wrong thing to do.”
Bankman-Fried faces seven charges of wire fraud and conspiracy. If found guilty, he could be sentenced to more than 100 years behind bars. He faces a second trial for more charges related to FTX in 2024.
