Sam Bankman-Fried seems at federal courtroom in New York on Oct. 4, 2023, on this courtroom sketch.
Artist: Claudia Johnson
A lot of the federal government’s case in opposition to Sam Bankman-Fried hinges on the testimony and textual content messages from these in his crypto interior circle who turned in opposition to him late final 12 months after the implosion of FTX and sister hedge fund Alameda Analysis.
Of the handfuls of things entered into proof within the first three weeks of the trial, a financial institution of messages on encrypted app Sign paint maybe the clearest image of Bankman-Fried’s alleged crimes.
Bankman-Fried faces seven legal counts, together with wire fraud, securities fraud and cash laundering that would land him in jail for all times. Bankman-Fried, the son of two Stanford authorized students, pleaded not responsible to all prices.
In attempting to show its case to a Manhattan jury, the federal government has offered a collection of Sign exchanges involving Bankman-Fried, Caroline Ellison (his ex-girlfriend and the ex-CEO of Alameda Analysis), and former associates and prime enterprise execs Gary Wang, Nishad Singh and Ryan Salame. They date again to November 2021.
The messages gave jurors a uncommon look contained in the informal conversations that culminated in a scheme described by U.S. Legal professional Damian Williams as “one of many greatest monetary frauds in American historical past.”
We’re quoting immediately from the Sign messages that had been entered as proof, and never making spelling or different grammatical adjustments.
Caroline Ellison, former chief govt officer of Alameda Analysis LLC, heart, arrives at courtroom in New York, US, on Tuesday, Oct. 10, 2023.
Yuki Iwamura | Bloomberg | Getty Pictures
‘Small group chat’
The Sign thread dubbed “small group chat” contains Ellison, Bankman-Fried, and Joe Bankman, the defendant’s father who suggested the corporate on tax-related points and different issues. Additionally within the group had been Ramnik Arora, a former product lead for FTX, Ryne Miller, who was the corporate’s common counsel, Constance Wang, ex-operating chief, in addition to Salame, Singh, Wang and 4 others.
Prosecutors are relying closely on textual content messages despatched amongst FTX and Alameda Analysis executives within the case in opposition to Sam Bankman-Fried.
Supply: SDNY
The thread begins with two messages from Bankman-Fried posted at 3:47 a.m. on Nov. 7, 2022, the day FTX introduced a liquidity disaster and commenced looking for money to plug the gaping gap in its stability sheet.
On the time, Bankman-Fried pretended in public that every one was effectively.
“FTX is ok. Belongings are effective,” he wrote in a tweet that day. The publish has since been deleted.
However as Bankman-Fried was tweeting reassurances and promising that buyer funds had been secure, executives had been rising more and more alarmed on the increasing shortfall, in response to prosecutors.
Within the “small group chat” thread, Bankman-Fried put forth some “potential todos,” together with halting withdrawals, sending a “assured tweet thread” and reaching out to companies like Silverlake, Sequoia, and Apollo as they “get up over the following few hours” to try to shore up money.
Later that morning, at about 5:22 a.m., Salame linked to a tweet from an nameless crypto dealer saying, “cant await my FTX airdrop for not shifting any of my funds.”
Bankman-Fried chimed in with completely different concepts about methods to reap the benefits of the publish in an obvious effort to offer false hope to FTX clients that they’d obtain free tokens in the event that they stored their funds on the platform.
Prosecutors are relying closely on textual content messages despatched amongst FTX and Alameda Analysis executives within the case in opposition to Sam Bankman-Fried.
Supply: SDNY
The following day, Nov. 8, Ellison appealed to the group for assistance on optics and public messaging.
She wrote, “a number of individuals internally asking me whether or not they need to proceed to make statements to exterior events like ‘Alameda is solvent.’ ought to i recommend they stall as an alternative? simply stall on responding to their messages? or what?”
That is the identical day FTX issued a pause on all buyer withdrawals. The worth of FTT, FTX’s native token, plummeted by over 75%, and a high-tech financial institution run was in full power. Out of choices, Bankman-Fried turned to Binance CEO Changpeng Zhao, who introduced he’d signed a non-binding letter of intent to acquire FTX.
Prosecutors are relying heavily on text messages sent among FTX and Alameda Research executives in the case against Sam Bankman-Fried.
Source: SDNY
On Nov. 9, Ellison again looked to the group for guidance about how to handle the now infamous all-hands meeting of Alameda’s roughly 30 employees.
She proposed saying, “Alameda is probably going to wind down” and that there was “no pressure” to stay but help with “stuff like making sure our lenders get paid” would be “super appreciated.”
Bankman-Fried suggested she say something about there “being a future of some sort for those who are excited.”
Ellison ended up divulging a lot more than that in the staff meeting.
“Alameda borrowed a bunch of money,” which it used to make investments, Ellison said at the meeting, a secret recording of which was played by the prosecution. But as crypto prices fell, “FTX had a shortfall of user funds” and then “users started withdrawing their funds” and they “realized they would not be able to continue.”
When she was asked by a staffer whose idea it was to plug Alameda’s loan losses with FTX customer money, she said, “Um, Sam, I guess,” and giggled.
“FTX basically always allowed Alameda to, like, borrow user funds, as far as I know,” Ellison said on the recording.
Meanwhile, a day after signing the non-binding purchase agreement, Binance withdrew the offer, citing reports of “mishandled customer funds” and federal investigations.
Prosecutors are relying heavily on text messages sent among FTX and Alameda Research executives in the case against Sam Bankman-Fried.
Source: SDNY
‘Lots of withdrawals’
Zhao, an early investor in FTX before becoming a principal rival, had made himself a central character in the FTX downfall days earlier.
On Nov. 6, he tweeted that due to “latest revelations which have got here [sic] to gentle, we have now determined to liquidate any remaining FTT on our books.”
In a bunch chat with Bankman-Fried, Ellison, and Singh beginning that day, Singh wrote “a number of withdrawals on ftx are queueing up,” with internet adjustments of $1.25 billion within the final day, $230 million within the final three hours, and $120 million within the final hour.
Ellison responded with a “:(” and Bankman-Fried with an “oof” after first mistakenly writing “of.”
The three continued to strategize. Singh recommended just a few hours later that they attain out to Zhao privately and “ask for a truce” to “stem the bleed,” although he and Bankman-Fried each apprehensive that Binance would not deescalate in public.
Ellison individually tried to determine what to inform Salame about whether or not FTX may meet all withdrawals. Bankman-Fried recommended she write, “we are able to meet a ton, although it is already getting giant.”
Prosecutors are relying closely on textual content messages despatched amongst FTX and Alameda Analysis executives within the case in opposition to Sam Bankman-Fried.
Supply: SDNY
Later, Sam Trabucco, who had already departed as co-CEO of Alameda Analysis in August 2022, in addition to Ellison, Ben Xie (Alameda’s head of buying and selling), and Bankman-Fried, had been in a bunch chat discussing how to reply to Zhao’s risk to liquidate his FTT tokens.
Ellison, who instructed jurors that she largely averted social media, mentioned she would tweet at CZ, a nickname for Zhao, that FTX would purchase his whole stake at $22 per coin. Ellison additionally testified in regards to the apply of utilizing FTX buyer funds funneled by way of Alameda to purchase FTT to buoy the value throughout instances of market volatility.
Prosecutors are relying closely on textual content messages despatched amongst FTX and Alameda Analysis executives within the case in opposition to Sam Bankman-Fried.
Supply: SDNY
Bankman-Fried weighed in inside minutes, writing, “I feel the principle level is simply to counter the PR/narrative right here — and Binance most likely will not take us up on it; I additionally suppose FWIW that the market is probably going to purchase extra if we tweet it, however idk.” (FWIW is an acronym for for what it is price. IDK stands for I do not know.)
Prosecutors are relying closely on textual content messages despatched amongst FTX and Alameda Analysis executives within the case in opposition to Sam Bankman-Fried.
Supply: SDNY
The creator’s go to
Writer Michael Lewis, whose e-book profiling Bankman-Fried was revealed the day the trial started, was additionally the topic of some Sign exchanges.
In a chat on Jan. 5, 2022, Bankman-Fried alerted a bunch that included Ellison and Singh that Lewis could be coming to the Bahamas the following month to do reporting.
Ellison mentioned her “instincts are extra towards underneath the radar.” Bankman-Fried, a infamous press hound, responded, “similar, besides precisely the other.”
‘Individuals of the Home’
Adam Yedidia, one of many prosecution’s lead witnesses, met Bankman-Fried in school on the Massachusetts Institute of Expertise, and the pair remained shut associates.
In his testimony, Yedidia referred to a Sign thread known as “Individuals of the Home,” referring to Bankman-Fried’s $35 million penthouse, the place many workers lived.
When it comes to who was paying the hire, Yedidia recalled Bankman-Fried saying he “assumed it is simply alameda paying for it in the long run.”
Prosecutors are relying closely on textual content messages despatched amongst FTX and Alameda Analysis executives within the case in opposition to Sam Bankman-Fried.
Supply: SDNY
The topic of marketing campaign donations was pivotal to Singh’s testimony. The previous FTX engineering chief, who pleaded responsible to 6 prices in February, alleged that his former boss was behind a lot of the scheme to funnel cash to political campaigns.
Singh testified that Bankman-Fried directed cash held in accounts belonging to Alameda Analysis be used for political donations. That continued even after Bankman-Fried was apparently conscious that his crypto hedge fund could not pay again the $13 billion in FTX buyer funds it had borrowed.
Whereas Bankman-Fried would not face chares for marketing campaign violations on this trial, a superseding indictment alleged he used buyer funds to make greater than $100 million in marketing campaign contributions for the 2022 midterm elections. The federal government has included that accusation inside two of the costs which might be nonetheless standing: wire fraud and cash laundering.
Prosecutors are relying closely on textual content messages despatched amongst FTX and Alameda Analysis executives within the case in opposition to Sam Bankman-Fried.
Supply: SDNY
‘Donation Processing’
Singh walked the jury by way of how the method labored.
He described a Sign chat dubbed “Donation Processing” that included Bankman-Fried and his brother, Gabe, Salame, and a political advisor named Michael Sadowsky, amongst others. Singh testified that Bankman-Fried or his brother would use this chat to request donations be made in Singh’s title. Salame, who had entry to Singh’s checking account at Prime Belief Financial institution, would arrange the switch after which ping Singh within the channel to immediate him to go to his electronic mail and approve the wire request.
“My position was to click on a button,” Singh mentioned of the operation, including that Salame had different methods to make the switch from Singh’s funds that didn’t contain Singh having to do something in any respect.
Prosecutors are relying closely on textual content messages despatched amongst FTX and Alameda Analysis executives within the case in opposition to Sam Bankman-Fried.
Supply: SDNY
Prosecutors are relying closely on textual content messages despatched amongst FTX and Alameda Analysis executives within the case in opposition to Sam Bankman-Fried.
Supply: SDNY
Prosecutors are relying closely on textual content messages despatched amongst FTX and Alameda Analysis executives within the case in opposition to Sam Bankman-Fried.
Supply: SDNY
In a separate Sign chat between Singh and Sadowsky, Singh wrote on Jul. 5, 2022, that he was “averse” to “explicitly-woke stuff” however added that it was “arduous to work together productively with democrats with out that.”
Sadowsky known as Singh the “heart left face of our spending,” which means that he could be “giving to lots of woke s—.”
So, “should you’re not comfy about it, you must take into consideration that lots,” wrote Sadowsky.
Singh responded, “do not love boxing myself into solely associating with individuals i do not like” and mentioned he would look to see if there have been “different viable individuals at FTX for it.”
In questioning witnesses, the federal government homed in on loans made to Wang and Singh within the vary of lots of of hundreds of thousands of {dollars}.
Direct messages between Singh and Bankman-Fried confirmed an try by the witness to be cleared of those debt obligations.
In a direct attraction to Bankman-Fried, Singh wrote on Nov. 6, 2022, “one factor that’d severely assist me is that if I did not have money owed.”
He wrote, “I feel most of them are loans: 500m for me exercising, extra for US investments. I hope we are able to unwind these however undecided.” He mentioned he would return something he had in his checking account, however there wasn’t a lot there.
I “(will take into consideration this),” Bankman-Fried wrote.
Prosecutors are relying closely on textual content messages despatched amongst FTX and Alameda Analysis executives within the case in opposition to Sam Bankman-Fried.
Supply: SDNY
In the identical thread, on Nov. 8, Singh wrote that Ryne Miller, FTX’s common counsel, appeared “tremendous on edge” and “prone to resign” in the event that they did not get it proper.
Singh wrote, “that is wildly egocentric of me, however they could have to know that it wasn’t a ton of individuals orchestrating it.” He added that, “it makes them extra prone to wish to be right here to assist save the scenario and the others a minimum of.”
Prosecutors are relying closely on textual content messages despatched amongst FTX and Alameda Analysis executives within the case in opposition to Sam Bankman-Fried.
Supply: SDNY
Because the grand scheme collapsed, Ellison expressed an excessive amount of reduction in a personal chat with Bankman-Fried.
Ellison wrote, “that is the perfect temper I have been in in like a 12 months tbh.” (TBH is brief for to be sincere.)
In three consecutive messages, Bankman-Fried responded, “wow,” “uh,” “congrats?”
Ellison wrote, “I feel I simply had an rising dread of this present day that was weighing on me for a very long time, and now that it is truly taking place, it simply feels nice to get it over with a technique or one other.”
Prosecutors are relying closely on textual content messages despatched amongst FTX and Alameda Analysis executives within the case in opposition to Sam Bankman-Fried.
Supply: SDNY
