Bankman-Fried completed her testimony during her criminal trial.
Pressed by prosecutors on Tuesday, Bankman-Fried acknowledged that she had better knowledge of Alameda Research's problems than she previously claimed.
Sam Bankman-Fried, the former CEO of bankrupt crypto exchange FTX, wrapped up his testimony at his criminal trial on Tuesday, as both sides prepared for closing arguments scheduled to begin tomorrow.
During cross-examination of the former billionaire, prosecutors have been able to poke holes in Bankman-Fried's line of defense that he didn't understand how bad things were at FTX and its sister trading company Alameda Research until the very end.
Assistant U.S. attorney Danielle Sassoon pressed Bankman-Fried about events in June 2022, months before the bankruptcy. The moment is important because it was when a former FTX executive who worked with the government said the $8 billion hole in Alameda's balance sheet was first discovered. SENDOKKeep up with the latest news, trends, charts and views on crypto and DeFi with a new bi-weekly newsletter from Frank Chaparro of The Block Also get The Daily and our weekly Data & Insights newsletters - both FREEBy signing up, you agree to our Terms of Service and Privacy Policy
Fiat@, again
According to the recollections of former FTX engineering chief Nishad Singh and developer Adam Yedidia, they both talked to Bankman-Fried about Alameda's massive negative balance, which was essentially money borrowed from FTX customers and never returned.
Bankman-Fried, for her part, testified Monday that although she was told about the so-called " fiat@ " account in Alameda, she lacked the necessary context to understand its significance. It wasn't until October 2022 that he stated he knew what was going on.
The version of events Bankman-Fried gave on Tuesday was unclear. He said that in June, he "heard" his team discussing the fiat@ account, but was not told directly. When he asked employees for details, "they told me they were busy and I should stop asking."
A day earlier, Bankman-Fried testified that while he knew Alameda's deficit was $10 billion, he believed the company had $5 to $10 billion in liquid assets and a net positive balance of $10 billion. On Tuesday, Sassoon gathered evidence that suggests Bankman-Fried's understanding of the situation may be more realistic than that.
'Fluid is not a binary term'
For example, a spreadsheet with Alameda's assets and liabilities in October, which prosecutors obtained, listed $3.9 billion worth of FTT tokens, a cryptocurrency created by FTX, among Alameda's liquid assets. However, when asked if he understood that Alameda would not be able to liquidate that many tokens without hurting the market, Bankman-Fried agreed that he understood that.
Then prosecutors asked whether on November 6, when he said he was confident about Alameda's solvency, he knew that the FTT tokens in the company's balance were actually illiquid. "Fluid is not a binary term," Bankman-Fried answered in a vague manner, typical of her style throughout the trial.
Prosecutors showed screenshots of a Signal group chat in which Bankman-Fried and a small group of FTX and Alameda executives discussed options during the ongoing liquidity crisis. In the chat group, Bankman-Fried posted his own estimate of the assets Alameda could sell within a week to meet user withdrawals.
The amount he proposed at 3 a.m. on November 7 was $3.9 billion, according to the screenshot, while $8 billion is needed. Based on the same group chat, Bankman-Fried realized at that time that the FTT, SRM, and SOL tokens in Alameda's balance could not be liquidated that quickly.
Meanwhile, Alameda's cash in the bank as of October 2022 amounted to no more than $449 million, according to the same spreadsheet.
Sassoon also touched on other issues, such as Bankman-Fried's efforts to befriend the Bahamian government, including Prime Minister Philip Davies, with steps such as offering to pay the country's debt. The episode, described in Michael Lewis' book, "Going Infinite," is not something Bankman-Fried can remember, she said.
Prosecutors also touched on Bankman-Fried's mindset after FTX's collapse, while former subordinates pleaded guilty to fraud and began collaborating with the government. According to Google documents reportedly drafted by Bankman-Fried and obtained by the government, at one point, she pondered why Nishad Singh had not joined Caroline Ellison and Gary Wang in pleading guilty.
The trial will continue with closing arguments on Wednesday, as the defense has no more witnesses to present.
