The former chief lawyer for cryptocurrency exchange FTX testified Thursday that its founder, Sam Bankman-Fried, asked him to present “legal justifications” for why it was missing $7 billion in client funds four days before the company would declare bankruptcy.
Can Sun, former general counsel of FTX, testified in the Bankman-Fried fraud trial that the company, on November 7, 2022, asked the Apollo investment fund for emergency capital to cover a wave of customer withdrawals.
After Apollo requested FTX’s financial statements, Sun testified, Bankman-Fried or another executive sent him a spreadsheet indicating that the cryptocurrency exchange was billions of dollars short of meeting customer withdrawals and that Bankman -Fried also owed him billions of dollars. Cryptocurrency-focused hedge fund Alameda Research.
“I was surprised,” said Sun, who testified under a non-prosecution agreement in the third week of the trial in Manhattan federal court.
Sun told jurors that after FTX shared the spreadsheet with Apollo, Bankman-Fried took him aside to the luxury Bahamas apartment complex where the 31-year-old former billionaire lived and told him that Apollo had asked for legal justification. for missing funds.
Former FTX lawyer Can Sun testified that Sam Bankman-Fried or another executive sent him a spreadsheet indicating that the cryptocurrency exchange was billions of dollars short of meeting customer withdrawals. Above, Bankman-Fried in court this week.REUTERS
“He asked me to present legal justifications,” Sun testified. “It basically confirmed my suspicion that had been building all day that FTX did not have the funds to meet customer withdrawals and that Alameda had misappropriated them.”
Sun said he told Bankman-Fried that same day that he could not identify any legal justification. FTX filed for bankruptcy on November 11, 2022, leaving customers with billions of dollars in losses.
Apollo declined to comment Thursday.
Sun’s testimony could complicate Bankman-Fried’s defense that he believed in good faith that Alameda’s use of FTX customer funds was appropriate.
Sun testified that Bankman-Fried told him that Apollo had asked for legal justification for the missing funds.
Bankman-Fried is accused of looting billions of dollars in FTX client funds to make investments, donate to U.S. political campaigns and prop up Alameda. Bankman-Fried pleaded not guilty to two counts of fraud and five counts of conspiracy. He could spend decades in prison if he is convicted.
Prosecutors have said Bankman-Fried funneled FTX client funds to Alameda. The hedge fund then loaned $2.2 billion to Bankman-Fried and other executives, according to a document shown in court Thursday. The executives used those loans to make risky investments, buy real estate and donate to political campaigns, according to prosecutors.
Sun also testified that Bankman-Fried told him that the company had kept its clients’ funds secure and separate from its own assets, and that it never approved the loan of FTX client funds to Alameda. Sun said he was involved in “documenting” Alameda loans to Bankman-Fried and other executives, but that he did not know they came from client funds.
Bankman-Fried could spend decades in prison if convicted.REUTERS
Sun said that after learning of the shortfall, he questioned Bankman-Fried and former FTX engineering chief Nishad Singh about it, but received no direct answers. Sun said Bankman-Fried was “typing on his computer” during the meeting, while Singh appeared pale.
“It seemed like his soul had been taken from him,” Sun said of Singh, who pleaded guilty to fraud and testified against Bankman-Fried on Monday and Tuesday.
Singh testified that Bankman-Fried maintained wasteful political spending and risky investing for months after it became clear that FTX was billions of dollars short.
Singh said he had been suicidal at the time of the FTX collapse.
On cross-examination, Bankman-Fried’s lawyer, Mark Cohen, asked Sun about a section of FTX’s terms of service that states that some users’ funds could be “recaptured” to cover other users’ losses.
Cohen also pressed Sun on his decision not to resign in the summer of 2022, when he learned that Alameda was exempt from a procedure that automatically liquidated FTX clients’ positions if their trades were losing money.
Sun said he didn’t know the waiver was what allowed Alameda to withdraw billions of dollars from FTX until Singh told him on the night of Nov. 7.
The trial is scheduled to resume on October 26, when the prosecution is expected to drop the case.
Categories: Trending
Source: vtt.edu.vn