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Ongoing Trial of Ex-FTX CEO Sam Bankman-Fried: Inside Look at $8 Billion Asset Discrepancy & Charges

Algoine News
Summary:
This article follows the ongoing trial of ex-FTX CEO Sam “SBF” Bankman-Fried, charged with conspiracy and fraud in connection with the collapse of cryptocurrency exchange FTX. Included are testimonies from significant figures like Gary Wang and Adam Yedidia, shedding light on the complex relationships between crypto companies, the alleged fraudulent activities, and the massive $8 billion discrepancy in customer assets. The court case is still developing, with more updates expected.
Cointelegraph journalists are in New York monitoring the court case of ex-FTX CEO Sam “SBF” Bankman-Fried closely. This article will continue to be updated with the most recent developments. On Oct. 5, in a testimony that lasted over four hours, Gary Wang, who co-founded Alameda Research and FTX with Sam Bankman-Fried, explained the intricate ties between the crypto companies and highlighted an alarming $8 billion discrepancy in customer assets. Wang testified that in 2019, a few months after FTX was established, it provided Alameda certain special privileges. Utilizing FTX’s database screenshots and details accessible on GitHub, it was revealed that Alameda was allowed an infinite negative balance on FTX, a unique credit line worth $65 billion in 2022, and exemption from the process of asset liquidation. As time passed, the issue of asset co-mingling and disputes between the businesses increased. During this period, the rule regarding Alameda's negative balance changed multiple times, based on Wang's testimony. Characteristic privileges, like those given to Alameda, were argued to be part of its role as the principal market maker for FTX by the defense. The defense also pointed out that comparable privileges were accessible to other market makers on FTX. The prosecution also highlighted an exploit involving MobileCoin (MOB) that occurred in 2021. They allege that Bankman-Fried had directed Wang and another employee, Caroline Ellison, to offset the deficit on Alameda's balance sheet rather than FTX's in order to hide this loss from FTX's investors. Wang's testimony will continue on Oct. 10, the same date Ellison is slated to testify. During the Oct. 5 cross-examination of Adam Yedidia, who is a close friend of Bankman-Fried and also worked as a developer at FTX, prosecutors examined the claim that Alameda owed FTX $8 billion in liabilities. In his testimony, Yedidia acknowledged that FTX had been using an Alameda account named North Dimension to deposit users' funds while facing difficulties in opening their own bank account since early 2021. Yedidia also claimed he had discussed the liability with Bankman-Fried during a tennis game upon learning about it in 2022. In response to queries posed by prosecutors, Yedidia stated his trust in the people of Alameda and, after finding out that Alameda was employing the funds to fulfill its debt obligations, he resigned in November 2022. The defense, on the other hand, emphasized that FTX's failure to open a bank account and its dependency on Alameda's North Dimension for fund deposits were widely known. The trial of the former FTX CEO began with his defense and the U.S. Department of Justice (DOJ) laying out their arguments. The DOJ portrayed Bankman-Fried as a criminal figure who consciously misled investors to amass wealth and advance his own enterprise. On the other hand, the defense presented Bankman-Fried as a young entrepreneur whose business decisions merely didn't pan out as expected. Furthermore, they alleged that all transactions were valid or were carried out in good faith by Bankman-Fried during the cryptocurrency market downfall and FTX's subsequent collapse in November 2022. The trial of Sam Bankman-Fried commenced on Oct. 3 with the jury selection. Bankman-Fried has been charged with seven counts of conspiracy and fraud related to the FTX collapse, and he has pleaded not guilty to all charges. Bankman-Fried was taken into custody upon his arrival in the United States from the Bahamas on Dec. 21, 2022. Prior to this, he was arrested in the Bahamas on Dec. 12 after the U.S. government officially informed the country of the charges filed against him. Although he initially intended to resist extradition from the Caribbean country, after a week in Bahamian jail, he agreed to be extradited. His troubles began with the unfolding of the FTX collapse in November 2022. The CEO of competing exchange, Binance, announced a liquidation of FTT (FTX's utility token) holdings worth an estimated $2.1 billion, which led to a run on FTX. Before the downfall of FTX, Bankman-Fried was considered a prominent figure in the business world and the crypto sphere by both communities and the public. He promoted the ideology known as "effective altruism" and was actively involved in politics, financially supporting various candidates. Alameda Research was established in 2017 by Bankman-Fried, Ellison, and several other Jane Street Capital alumni. Bankman-Fried and Wang then founded FTX in 2019. This is a developing story, and more details will be added as they become available.

Published At

10/6/2023 7:19:38 PM

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