Background

Sam Bankman-Fried was the founder and CEO of the cryptocurrency exchange FTX and associated trading firm Alameda Research, both of which experienced a high-profile collapse resulting in chapter 11 bankruptcy in late 2022.

Prior to FTX's collapse, Bankman-Fried was ranked the 41st richest American. His net worth peaked at $26 billion.

Bankman-Fried was a major donor to US political campaigns, donating openly to Democratic candidates as well as claiming that he planned to spend around $1 billion in the 2024 U.S. presidential election.

On December 12, 2022, Bankman-Fried was arrested in The Bahamas and was subsequently extradited to the United States.

An indictment of him before the U.S. District Court for the Southern District of New York was unsealed on December 13, revealing eight criminal charges for offenses including wire fraud, commodities fraud, securities fraud, money laundering, and campaign finance law violations. An additional four charges were announced in February 2023.

Chief Executive of Alameda Research Caroline Ellison and FTX co-founder Gary Wang are also on trial.

How Long will the Trial Last?

It's expected to take 4 to 6 weeks. The prosecutors have already acknowledged they are running behind so it should take longer.

Key Witnesses

Adam Yedidia (Former Software Developer at FTX)
Matt Huang (Cofounder and Managing Partner at Paradigm Fund)
Gary Wang (Former Chief Technology Officer at FTX)
Caroline Ellison (Former CEO at Alameda Research)
Christian Drappi (Former Software Engineer at Alameda Research)
Zac Prince (Founder of BlockFi)
Tareq Morad
Nishad Singh
Sam Bankman Fried

UPDATE:

On November 2, 2023, Sam Bankman Fried found GUILTY on all counts

Judge Kaplan: Madam Foreperson, I understand the jury has reached a verdict. Please hand it to Andy. Thank you. The clerk will publish the verdict. Please rise.
Count 1: Guilty.
Count 2: Guilty.
Count 3: Guilty.
Deputy: Count 4? Guilty.
Count 5: Guilty
Count 6: Guilty.
Count 7: Guilty.
Deputy: Thank you.
Judge Kaplan: There's another question, Andy.
Deputy: Either or both?
Both.

Sentencing will take place March 28, 2024

Will give updates on this high profile case.

CEO of Alameda Research Caroline Ellison showed up in court today (Oct 10, 2023).

AUSA Sassoon: The government would like to call Caroline Ellison.
SBF's lawyer: We have some burning issues.
Judge Kaplan: And I'll do it on my timeline.
Caroline Ellison enters the courtroom, in a red dress

AUSA Sassoon: How do you know the defendant?
Ellison: At Jane Street then Alameda. We dated for a couple of years.
AUSA: Did you commit crimes?
Ellison: Fraud.
AUSA: With others?
Ellison: Yes.
AUSA: Do you see Sam Bankman-Fried?
Ellison: He's over there...

AUSA: What was his involvement in the crimes?
Ellison: He was the head of Alameda then FTX. He directed me to commit these crimes.
AUSA: What makes you guilty?
Ellison: Alameda took several billions of dollars from FTX customers and used it for investments.

AUSA: What was the defendant's role?
Ellison: He set up the systems and told us to take the money.
AUSA: How much did Alameda take to repay its lenders?
Ellison: In the ballpark of $10 billion. Ultimately around $14 billion

AUSA: How did you defraud Alameda's lenders?
Ellison: I sent balance sheets that made Alameda look less risky that it was.
AUSA: Why was there not enough money for customers in Nov 2022?
Ellison: We had take it to repay lenders.

Judge Kaplan: You may proceed, Ms. Sassoon.
AUSA: Where did you grow up, and go to college?
Ellison: I grew up around Boston, then went to Stanford. I met the defendant at Jane Street. Then he left and started Alameda. We got coffee...

AUSA: Once you were at Alameda, and you discovered losses, what did the defendant tell you?
Ellison: That he was sorry and would tell me more.
AUSA: Did your relationship remain strictly professional?
Ellison: No.

Ellison: We started sleeping together on and off in the summer of 2020. We dated and broke up.
AUSA: What did the defendant tell you about his ambitions?
Ellison: That he would be President.
AUSA: Of what?
Ellison: The United States.

AUSA: Did there come a time the defendant told you to use FTX funds?
SBF lawyer: Objection! Leading!
Judge Kaplan: Sustained.
AUSA: Where did you borrow from?
Ellison: Third parties and... FTX.

AUSA: When did FTX receive money into Alameda's bank accounts?
Ellison: 2020. And into 2022. North Dimension was the name I was aware of.
AUSA: How much FTX money got deposited with Alameda?
Ellison: Ten to twenty billion dollars.

AUSA: What did Alameda do with the money?
Ellison: Repay loans, investments, and stable coin conversions like USDC. That was about $2 billion.
AUSA: What happened to the rest?
Ellison: It was used for Alameda's purpose and other purposes.

Ellison: FTX marketed itself as safe and well regulated.
AUSA: Was it?
Ellison: No. We also had a line of credit on FTX - we could withdraw coins even if we didn't have them.
AUSA: Were you told the size of the line of credit?
Ellison: No.

AUSA: What size of line of credit would Alameda really have needed?
Ellison: One hundred or two hundred million.
AUSA: Million with an M?
Ellison: Yes, with an M.
AUSA: Were you aware if and when Alameda had to return the money?
Ellison: No.

Ellison: If a coin was trading for higher on Binance, we could withdraw from FTX and sell there.
AUSA: Did you have concerns about Alameda using FTX customer funds?
Ellison: I thought customers weren't aware of. But I was just a trader at the time

AUSA: Did you raise it to the defendant?
Ellison: Yes, I asked if it would show up on the audit. He said don't worry, the auditors won't be looking at that.
AUSA: When was that?
Ellison: 2020.
AUSA: Why did the defendant say you were having an audit?
Allison: He said, to appeal to investors.
AUSA: Was FTX disclosing to customers the Alameda line of credit?
Judge Kaplan: Compound. Rephrase.
AUSA: To auditors?
Ellison: No.
AUSA: Investors?
Ellison: No

AUSA: What is Binance?
Ellison: A competitor which owned $2 billion of our FTX stock. Sam wanted to buy it back in the summer of 2021. AUSA: Who's in this photo?
Ellison: Sam and CZ.
AUSA: Exhibit 1638.
AUSA: What did the defendant say about buying it back?
Ellison: Otherwise Binance would cause trouble.
AUSA: Who was in this discussion and where?
Ellison: Hong Kong office. It was me, Sam and Trabucco.
AUSA: Who is Trabucco?
Ellison: Sam Trabucco, Alameda co-CEO

AUSA: What did you conclude from the defendant telling you to use the line of credit to buy out Binance?
Ellison: That he viewed it as a fund to use for our needs
AUSA: What was Alameda's source of funds in 2021?
Ellison: Loan from third party crypto lending desks

AUSA: Which ones?
Ellison: Genesis. Later in 2021 we found more.
AUSA: What did Alameda pay for the FTT tokens?
Ellison: We paid nothing. Later the price in the seed round was ten cents. Then it went up to a dollar.

AUSA: What did the defendant tell you about FTT?
Ellison: That the one dollar threshold was important and that if it went below that we should start buying.
AUSA: Who was "we"?
Ellison: Alameda. Later FTT went up to $50

Ellison: Sam got upset at me when I discussed our FTT trading in front of others.
AUSA: GX 1622 - what is it?
Ellison: A Signal chat between me and Victor Xu, an Alameda trader at the time

In the message, with self-erase set for 1 week, Ellison told Xu sorry for being cagey in discussing FTT trading, "SBF was upset at me."
AUSA: Did you put FTT on Alameda's balance sheet?
Ellison: Initially no. Because we couldn't sell it for the current price.

AUSA: When the defendant told you to put FTT on the balance sheet, did he say why?
Ellison: To get loans from Genesis. I thought it was misleading.
AUSA: But you did it.
Ellison: Yes.

Ellison: Then there were the Sam coins, including Solano which he didn't create but played a big role in promoting. It was more liquid than the other Sam coins.
AUSA: Who owned the Sam coins?
Ellison: Alameda was a large holder.

AUSA: When did you become co-CEO?
Ellison: 2021. Sam said he wanted to step down, to separate things optically. We were on a break. But we started dating again.
AUSA: How would you describe the power dynamic of your personal relationship?
SBF's lawyer: Objection!

AUSA: Why did you break up?
Ellison: He wasn't spending much time with me.
AUSA: Was it secret?
Ellison: At first. Then he told me I could say we were living together, but no more.
AUSA: What was your salary?
Ellison: $200,000. Then a bonus in 2021 of $20 million

Ellison: I withdrew $10 million for an investment in a start up. $100,000 for a loan to my parents. And $2 million for my own donor-advised fund.
AUSA: Did you have equity in Alameda?
Ellison No. And 0.5% of FTX.

AUSA: When you were co-CEO, what did you do?
Ellison: It didn't change much.
AUSA: Did you feel qualified?
Ellison: Not really. But Sam said I should do it. I checked everything with him. He was the person I reported to. He could fire me

AUSA: Did you get any loans from Alameda?
Ellison: One loan of $3.5 million for a gambling company people at FTX wanted to put in my name since I wasn't on the books of FTX. Money also went to political contributions. Ryan Salame got a $35 million loan

AUSA: What was Ryan Salame using the loans for?
Ellison: Contributions to Republicans. Sam gave $10 million to Biden, he thought it bought him access.

AUSA: What did the defendant you about risk?
Ellison: He said it was OK if positive EV, expected value. He said he was willing to take large coin flips - he talked about being willing to flip a coin & destroy the world, as long as a win would make it twice as good

AUSA: You were speaking about expected value
AUSA: What is this?
Ellison: One of my Google Docs.
AUSA: Did you write parts of this page?
Ellison: Yes. I would keep these Docs, I'd add notes

AUSA: What's this?
Ellison: I cut and pasted from Sam's bad case scenario, with FTT, SOL - we owned a lot of Solana -- and SRM down 75%, and investments down 100%
AUSA: How would that be possible?
Ellison: They were speculative.

AUSA: At this time, what was FTX's equity value?
Ellison: $20 billion.
AUSA: Did you share your conclusions on possible impacts on Alameda with the defendant?
Ellison: Yes. He suggested we shift our loans to fixed term...
AUSA: Did he dispute the risk?
Ellison: No

AUSA: What was the value on paper of the Sam coins?
Ellison: About $10 billion, on paper.
Judge Kaplan: Valued how?
Ellison: Mark to market.
AUSA: Why exclude them?
Ellison: We couldn't sell them easily

AUSA: What's in Cell E-18 of this spread sheet?
Ellison: I thought, We're negative $2.7 billion
AUSA: When you saw the negative, how did it impact your view of making more illiquid investments?
Ellison: We shouldn't continue

AUSA: What's this?
Ellison: What Sam thought the investments would be worth, $300 million and more.
AUSA: This asks what would be the impact of selling more FTT - what did you say?
Ellison: That it would go down 50% and reduce our loans from Genesis.

AUSA: What was the volume of Alameda's loans at the time?
Ellison: Over $9 billion.
AUSA: When you wrote "FTX borrows" what did you mean?
Ellison: The money on the FTX exchange that Alameda could make use of: $7 billion. We had done it before.

AUSA: Did the defendant question the thinking behind your spread sheet?
SBF's lawyer: Objection!
Judge Kaplan: On what basis?
SBF's lawyer: It builds in an assumption.
Judge: Overruled.
AUSA: How are these numbers different?
Ellison: We're down $3 billion

AUSA: You were assuming that FTX customer money would be available to Alameda?
Ellison: That's right.
AUSA: What does this mean, "Genesis freaks out immediately?"
Ellison: That Genesis would call in all our loans.

AUSA: You calculated a 30% chance Alameda could not repay its loans - was that of concern?
Ellison: Yes.
AUSA: Even if you used FTX customer funds?
SBF's lawyer: Objection!
Judge Kaplan: Overruled
AUSA: And you still wouldn't be able to repay
Ellison: That's right

AUSA: Do you remember how you conveyed this document to the defendant?
Ellison: I don't remember if it was over Signal or in person.
AUSA: What was his reponse?
Ellison: He didn't raise any objections.

AUSA: Were you able to convert over to fixed term loans?
Ellison: Not much.
AUSA: Did you tell the defendant?
Ellison: Yes, I regularly updated him. He wanted to expand investments.
AUSA: And if Genesis recalled the loans?
Ellison: We'd borrow from FTX

AUSA: What did the defendant say in this tweet?
Ellison: That FTX was starting a venture fund. This was part of Sam's general push to do more investments.
AUSA: If the money was coming from Alameda, why was it called FTX?
Ellison: The brand.

AUSA: In 2022 did the defendant buy shares in Robin Hood?
Ellison: Yes. It was paid for by Alameda.
AUSA: But why did he move the shares?
Ellison: He didn't want his name associated with Alameda.

AUSA: Here is GX 48A
It has names redacted, except for USD and coin SOL
AUSA: How much crypto was Alameda borrowing from FTX?
Ellison: $3 billion.
AUSA: Here's GX 49A, May 7, 2022 update
Judge Kaplan: Received.
SBF's lawyer: I was about to say, No objection

AUSA: What did you mean by worries slash questions?
Ellison: Just that. I was concerned about telling lenders.
AUSA: Sam Bankman-Fried wrote, it could get worse. You wrote, I don't think so.
Ellison: Our lenders had no resource against Paper Bird

AUSA Sassoon. Did it get worse?
Ellison: Yes
AUSA Sassoon: This would be a good time to break.
Judge Kaplan: OK. The head of our jury department wants to speak with the jurors, please wait for her

Jury leaves
Judge Kaplan: Who are the next witnesses?
AUSA Sassoon: This is by far our longest witness. The cross and direct will definitely take tomorrow. Then Zac Prince, Chris "Drapie" (sp)
Judge Kaplan: When might you rest?
AUSA: October 26 or 27

Judge Kaplan: And a defense case?
SBF's lawyer: A week? Ten days?
Judge Kaplan: What else?
AUSA: The virtual Ukraine witness.
Judge Kaplan: Can't someone else say his things?
AUSA: We're asking for him.
Judge Kaplan: Consider alternatives. I have to be satisfied

AUSA: We'll resubmit this issue later this week... We filed a letter about precluding the value of Anthropic.
SBF's lawyer: We would like to respond.
AUSA Sassoon: This witness made a personal investment in Anthropic.
SBF's lawyer: We'll file by 8 pm

AUSA Sassoon: We have a motion in limine about the all-hands meeting, statements she made before ever talking with the government, in Nov 9, after Binance agreed to acquire FTX and make the customers whole
SBF's lawyer: Coming clean to co-conspirators?

Judge Kaplan: Thanks folks.

Caroline Ellison leaving the courtroom

CAROLINE IS INNOCENT

She already pleaded guilty to two counts of wire fraud, two counts of conspiracy to commit wire fraud, conspiracy to commit securities fraud and conspiracy to commit money laundering.

She might do a light 2 years for her cooperation.

How gullible are these people at the top really who invest billions into these startups? WeWork, Theranos, FTX, the s*** keeps repeating itself

Leave the kid alone

Caroline is sexy