Examining Social Media Posts and Audio Recordings: Investigating Allegations Against Sam Bankman-fried of FTX

Prosecutors have submitted screenshots of messages, social media posts, and internal documents as evidence in the historic fraud trial of Sam Bankman-Fried. These materials aim to illustrate how the 31-year-old supposedly masterminded a multibillion-dollar scheme at his FTX cryptocurrency exchange and trading firm Alameda Research. By examining these documents, one can gain insight into the mechanics of the alleged fraud and the inconsistencies between Bankman-Fried’s public statements and private directives to his close associates.

Former colleagues — including Caroline Ellison and Gary Wang — gave the jurors insight into how to interpret the documents when they testified in a federal courthouse in New York.

Prosecutors also played tapes of a secretly recorded meeting between Ellison and Alameda employees in Hong Kong in the final week of the trading company’s collapse. Asked who made the decision to repay Alameda’s lenders with FTX client funds, Ellison said, “Sam, I guess.”

ALL HAND MEETING RECORDING

At the November 9, 2022, Alameda General Assembly — days before the company filed for bankruptcy — Ellison addressed the company’s problems and told them it was likely to close. “The basic story here is that starting last year, Alameda borrowed tight money through revolving loans and used it for various illiquid investments,” he said on the tape. On cross-examination, Ellison was asked if he admitted his wrongdoing to the employees. “Yes, I was,” he said. While Alameda employees seemed shocked by the misconduct, they were grateful that he had been open and honest with them, she said. Christian Drappi, a former Alameda software engineer, told the court that Ellison laughed nervously during the meeting.

SEVEN BALANCE SHEETS

In June 2022, as crypto prices rise, lenders in Alameda call in their loans. Ellison said Bankman-Fried told him to prepare “alternative” balance sheets in response to a request for financial information from one of his lenders, Genesis. “I realized that he was directing me to come up with ways to hide things on our balance sheet that we both agreed would look bad,” he testified. He came up with seven possible versions, and Bankman-Fried chose “Alt 7,” which would hide Alameda’s large loans from FTX customers. Exhibits include a main balance sheet with seven additional tabs for each option.

Balance “alt 7” was finally sent to Genesis. In this version, the paragraph “swap loans” – referring to the $9.9 billion that Alameda borrowed from FTX – was deleted. It also cut Alameda’s debt from $15 billion to about $10 billion. Ellison testified that the document was “dishonest.”

THE GARY WANG CODE

Gary Wang, one of the founders of FTX and a longtime friend of Bankman-Fried, testified that Alameda Research had a $65 billion credit facility with FTX, one of the ways the trading firm was able to embezzle funds from FTX clients. The exhibit below shows that under the “borrow” column, Alameda’s main trading account had the ability to borrow up to $65,355,999,994 from the exchange. The number was set so high that it meant Alameda could make almost unlimited withdrawals from FTX.

In addition, Wang, who went to MIT with Bankman-Fried, testified that an old friend of his had asked for the “allow negative” balance feature to be added to Alameda, and another former FTX executive, Nishad Singh, implemented the code change. This allowed Alameda to withdraw more funds than it actually had, which is one way to embezzle funds from FTX customers. The exhibit below shows that this feature was added in July 2019 – just a few months after FTX was founded.

PADEL TENNIS

Adam Yedidia, another Massachusetts Institute of Technology alum who went to work for FTX, was one of nine people who lived and socialized in the luxury penthouse shared with Bankman-Fried in the Bahamas. Prosecutors showed a photo of them eating to show their close relationship in both professional and personal settings. He testified that in June 2022, Bankman-Fried told him: “We were bulletproof last year. We’re not bulletproof this year,” when asked about FTX’s financial status. The conversation took place on the paddle tennis court at The Albany, a luxury resort where they lived, Yedidia said.

GROUPS OF PEOPLE IN THE HOUSE

Yedidia said 10 people, including Bankman-Fried, Ellison, Wang and Singh, who lived together, shared a Signal chat group called “People of the House.” The exhibit shows that when Yedidia and others raised concerns about the rent, Bankman-Fried responded that she “assumed that basically only Alameda would pay for it.” The answer went right to the heart of the prosecution’s case that Bankman-Fried used Alameda’s money, embezzled from FTX client funds, to fund her expensive lifestyle.

PARADIGMA EMAILS

Part of the government’s case is that Bankman-Fried not only defrauded clients, but also the venture capitalists who fueled his rapid rise. Matt Huang, CEO of crypto VC firm Paradigm, testified that his firm raised concerns about FTX’s governance, including its relationship with Alameda, before investing in the crypto exchange. He said Bankman-Fried assured them there was no preference for Alameda. Read the full email here and the FTX pitch deck here.

ALAMEDA SHUTDOWN

Wang testified that Bankman-Fried considered closing Alameda Research in September 2022 because of public concerns about conflicts of interest between the two. The exhibit shows Bankman-Fried’s personal note before she finally decided she couldn’t close the hedge fund because it had spent and spent so much of FTX clients’ funds that it couldn’t pay them back, Wang said. The document shows that Bankman-Fried was fully aware of the reputational damage that would occur if Alameda’s shady dealings with FTX were revealed. Read the full PDF here.

THINGS THAT SAM IS WONDERFUL ABOUT

Ellison testified that he kept several Google Docs on his to-do list and priorities. In the exhibit below, he wrote about “things Sam is concerned about,” including hedging Alameda’s portfolio risks. The documentary presents Bankman-Fried’s own concerns about Alameda’s economic status. Mark Cohen, Bankman-Fried’s lawyer, claimed in his opening statement that Bankman-Fried was concerned about the dramatic price swings of crypto payments months before Alameda’s bankruptcy and urged Ellison to protect their exposure from further losses, but he did not. on the list was “getting regulators tight on Binance.” Bankman-Fried believed that suppressing Binance, the largest crypto exchange and FTX competitor, would be the best way for FTX to increase its market share, he said. Read the full PDF here.

OFFER BUY FTT for $22

Following CoinDesk’s publication of the leaked Alameda Balance, Binance CEO Changpeng Zhao tweeted that his exchange had decided to liquidate FTT — FTX’s own crypto token — on its books “due to recent revelations.” Behind the scenes, Alameda’s top brass had become increasingly desperate as they tried to stabilize the price of the FTT token and meet the withdrawal demands of FTX customers. The exhibit showcases Alameda’s internal conversation that led to Ellison’s Twitter post that Alameda would be willing to buy all of Binance’s FTT for $22 per token.

HISTORY OF ELLISON AND THE BANKMAN-FRIED CHAT

The week of the Alameda and FTX collapse, Ellison confessed to Bankman-Frid that he had “a growing dread of this day that weighed on me for a long time, and now that it’s actually happening, it feels great to get over it. One way or another.” When Ellison was asked to read his message on the pedestal, he cried. He explained that the emotional burden of perpetuating Alameda’s lies had become unbearable in the months leading up to the collapse. “It was, all in all, the worst week of my life,” he said on the stand. Ellison and Bankman-Fried never met after that.