Adam Yedidia Testifies in Former FTX CEO's Trial, Reveals Coding Bug and Unusual Financial Practices
Summary:
Adam Yedidia, former FTX software developer and college roommate of ex-FTX CEO Sam Bankman-Fried, testified in Bankman-Fried's trial. Yedidia shared his roles at FTX and Alameda Research, emphasizing his involvement in code development for automating customer transactions. He highlighted a bug inflating Alameda Research’s liability by $500 million for six months. He revealed that despite the opening of an FTX's bank account, some customer funds continued to flow into an account controlled by Alameda Research, named North Dimension Inc. He spoke of Bankman-Fried's assurance about the company's financial stability, even amid substantial remaining liability. Furthermore, he touched upon the use of the Signal messaging app for communication and how its auto-deletion feature was considered beneficial.
Continuing his testimony on October 5, on the second day of the trial of former FTX CEO Sam Bankman-Fried, Adam Yedidia, an early FTX employee and college roommate of Bankman-Fried, spoke to the jury. Granted immunity, Yedidia was called as a witness for the prosecution. Assisted by U.S Attorney Danielle Sassoon, Yedidia elaborated on his roles at Alameda Research, where he began as a trader, and FTX, where he served from January 2021 through November 2022 as a software developer before resigning.
While in the Bahamas, Yedidia was one of ten people sharing a large apartment at the luxurious Albany Resort. His oversight came from former FTX engineering director Nishad Singh and, unofficially, from Bankman-Fried, and FTX's co-founder Gary Wang. According to Yedidia's understanding, the profits made from Alameda Research's trading on FTX went to Bankman-Fried and Wang. Further, he revealed his involvement in the development of code to automate customer fund inflows and outflows on FTX, a project in which Bankman-Fried was also "actively engaged".
Initially, Yedidia was under the impression that customer deposits were being sent to an FTX bank account. However, he got to know that due to certain difficulties, FTX opened an account in the name of North Dimension Inc, controlled by Alameda Research, where customer deposits were funnelled. Customers wiring funds to this account, though, were oblivious to the account's control by Alameda, based on Yedidia's knowledge. He learned of this setup from either Singh or FTX's head of settlements, Ray Salame.
Towards the end of 2021, FTX successfully opened its own bank account under the name "FTX Digital Markets". Even after this, Yedidia observed that some customer funds continued to flow into the Alameda Research-managed account. These deposits were recorded in an internal FTX database account known as "Fiat at FTX.com". The contents of this account were data, not currency, and ideally, the total customer deposit value should equate to the liability amount noted in this account, explained Yedidia.
In late 2021, Yedidia became aware of a coding bug that he had contributed to creating. This bug reduced the liability recorded in "Fiat at FTX.com" when customer withdrawals occurred, which was appropriate, but failed to decrease Alameda Research's liability to FTX, resulting in an inaccurate product. This bug inflated Alameda Research's liability by approximately $500 million over about six months, and it was finally resolved around June 2022. Yedidia stated that he repaired the bug around mid-June 2022.
Bankman-Fried ordered Yedidia to fix the bug following a meeting on a full financial assessment of both FTX and Alameda Research, attended by Bankman-Fried, former Alameda Research CEO Caroline Ellison, Wang, and Singh. According to Yedidia, when he rectified the bug, the liability of Alameda Research, as recorded in the "Fiat at FTX.com" account, stood at $16 billion. Following the bug's correction, this figure was almost halved to $8 billion, a figure visible to other company members.
Yedidia raised his concerns about the substantial remaining liability to Bankman-Fried, who confidently assured him that the company, having been "bulletproof last year", would again be "bulletproof" within six months to three years. Yedidia inferred "bulletproof" as being synonymous with being in good financial shape.
During his testimony, Yedidia mentioned that the members of their Bahamas residence, colloquially known as the "people of the house", communicated using the Signal messaging app. Through this app, Yedidia sent the details of the customer deposit and withdrawal automation bug fix to Bankman-Fried. The app was configured to automatically delete messages after a specific duration, according to Yedidia. Bankman-Fried explained the benefit of message deletion, clarifying that if any potential regulatory issues were flagged in these messages, it could spell trouble for the company. Yedidia summarized Bankman-Fried's explanation, stating that these were not the exact words used, but effectively conveyed the same idea.
Published At
10/5/2023 9:33:28 PM
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