Sam Bankman-Fried directed financial crimes and lied about it, FTX co-founder testifies
Day four of Sam Bankman-Fried's trial on federal fraud and money-laundering charges featured testimony from FTX co-founder Gary Wang, who relayed how he and the defendant engaged in financial crimes and lied about it.
Hammering home the government's case, Wang, 30, the first of three of the prosecution's star witnesses, told a New York jury on Thursday that he and Bankman-Fried illegally diverted billions from the accounts of FTX customers and investors and "lied to the public" ahead of the cryptocurrency trading platform's collapse last November.
Acknowledging his alleged role in committing wire, securities and commodities fraud while serving as FTX's former chief technology officer and part-owner of hedge fund Alameda Research, Wang said that he and Bankman-Fried in 2017 began illegally shifting FTX funds to Alameda and eventually withdrew $8 billion.
Wang said Bankman-Fried directed him to grant "special privileges on their FTX website" to Alameda by altering the computer code controlling its operations to grant a credit line of as much as $65 billion — a number so enormous it prompted Judge Lewis A. Kaplan to make sure Wang meant "billion" instead of "million." He did.
"It can have negative balances and withdraw unlimited amounts of funds," Wang testified of Bankman-Fried's instructions. Asked whose funds he was referencing, Wang said, "customers of FTX."
The damning testimony by Wang, once Bankman-Fried's friend and college roommate, continued Friday as prosecutors laid out their case against the former cryptocurrency superstar, alleging he masterminded a "massive fraud" involving billions of dollars.
Wang is the first of three former top FTX executives slated to testify against Bankman-Fried after they pleaded guilty to fraud in cooperation deals with the government that may win them leniency at sentencing. The other former execs include Carolyn Ellison, Alameda's former CEO and Bankman-Fried's ex-girlfriend, and Nishad Singh, FTX's former engineering director.
Locked up in a Brooklyn jail since August, Bankman-Fried has maintained his innocence since his arrest in the Bahamas last December. The 31-year-old faces a potential prison term of more than a century if convicted of the seven charges against him.
Damaging testimony from former friends
Wang did not make eye contact with Bankman-Fried as he entered a Manhattan courtroom to testify for the prosecution, Bloomberg News recounted. Bankman-Fried swiped at least $10 billion from thousands of customers and investors to finance outside ventures such as political donations and purchases of luxury real estate, Assistant U.S. Attorney Nathan Rehn declared in his opening statement on Wednesday.
Wang's testimony aligned with that of Adam Yedidia, another of Bankman-Fried's former friends and classmates. Yedidia testified that Bankman-Fried privately expressed concern about a potential $8 billion shortfall at FTX from loans to Alameda five months before both companies collapsed.
Under questioning by Assistant U.S. Attorney Danielle Sassoon, Yedidia said he brought up the issue with Bankman-Fried, asking him if things were alright.
"In response, Sam said said something like, 'We were bulletproof last year. We're not bulletproof this year,'" Yedidia testified, describing Bankman-Fried as having appeared atypically nervous.
Yedidia's testimony potentially undercuts Bankman-Fried's contention that he was not closely involved in running Alameda and relied instead on Ellison.
Testifying under immunity from prosecution, Yedidia said he became "longtime friends" with Bankman-Fried while both were students at the Massachusetts Institute of Technology. They later worked and lived together at Bankman-Fried's $30 million apartment in the Bahamas.
Yedidia said he quit his job as an FTX developer and stopped speaking to Bankman-Fried after learning early last November that Bankman-Fried had allegedly diverted FTX customer deposits to cover expenditures of Alameda.
Defense has "very different story" to tell
Defense attorneys contend their client had nothing criminal in mind while building his crypto empire. Bankman-Fried has "a very different story" to relay than the one told by prosecutors, his attorney, Mark Cohen, said in his opening statement.
Describing Bankman-Fried as a "math nerd who didn't drink or party," Cohen told the courtroom that "Sam didn't defraud anyone, didn't intend to defraud anyone."
The proceedings are expected to last six weeks.
Before FTX failed and filed for bankruptcy, Bankman-Fried had a net worth on paper of $32 billion. Known for socializing with politicians, when smaller crypto firms began blowing up in early 2022, Bankman-Friedman publicly said he would help rescue the market.
Prosecutors were correct to focus on Bankman-Fried's use of customer money without their consent, rather than delving too deeply into the world of cryptocurrencies, according to one former federal prosecutor.
"This case is less about complicated investments and all about garden-variety fraud," said Michael Zweiback, co-founder of the law firm Zweiback, Fiset & Zalduendo.
A son of Stanford University law school professors, Bankman-Fried studied at the Massachusetts Institute of Technology in the 2010s before landing at a Wall Street investment firm in 2014. He quit in 2017 to move to San Francisco, where he helped start FTX in 2019.
—CBS News' Cassandra Gauthier and the Associated Press contributed to this report.
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- Sam Bankman-Fried
- Cryptocurrency
- FTX