Sam Bankman-Fried asked FTX attorney to ‘come up’ with legal argument for $8B hole
Former FTX CEO Sam Bankman-Fried instructed former general counsel Can Sun to “come up” with any legal explanation for the $8 billion hole in Alameda Research’s books, according to Sun’s testimony in court on Oct. 19.
Sun flew from Japan to testify in the ongoing trial as part of his nonprosecution agreement with the United States Department of Justice. During his testimony, Sun revealed that he learned of the billion-dollar hole between the two companies on Nov. 7 after receiving a spreadsheet indicating the debt. “I was shocked,” he told jurors.
Asset manager Apollo Capital was intended to receive the spreadsheet as FTX attempted to raise new funding during the “liquidity crunch” of early November. In response to Apollo’s inquiry about the $8 billion hole, Bankman-Fried allegedly asked Sun to “come up with a legal justification.”
As Sun admitted in his testimony, he had considered some legal options. Among them were dormancy fees and collateral liquidations during the market downturn, but the missing amounts were too large to ignore. Also, FTX’s terms of service were clear that funds belonged solely to users:
“None of the Digital Assets in your account are the property of, or shall or may be loaned to, FTX Trading; FTX Trading does not represent or treat Digital Assets un user’s accounts as belonging to FTX Trading.”
Bankman-Fried “wasn’t surprised at all” with the circumstances, Sun claimed, while former engineering director Nishad Singh “was gray, like his soul was taken from him.”
Later that same day, Sun learned from Singh about Alameda’s $65 billion line of credit with FTX. He resigned the next day, over a year after joining the exchange.
During his time at the company, Sun relied on Bankman-Fried’s assurance that funds were segregated to produce legal documents for FTX and answer inquiries from regulators, he told jurors. “I’d never approve anything like that.”
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What’s next in Sam Bankman-Fried’s trial?
Sun’s testimony was part of a busy week in Bankman-Fried’s trial, which saw nine witnesses share details of the months that preceded FTX’s collapse.
Prosecutors are expected to rest their case on Oct. 26 following testimony from two final witnesses. Bankman-Fried’s defense, however, has yet to confirm if it will bring a case.
Bankman-Fried is accused of seven counts of fraud and conspiracy to commit fraud against FTX customers and investors. He faces up to 115 years of jail time if found guilty.
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