FTX founder Sam Bankman-Fried’s fraud trial is in full swing. The beleaguered crypto evangelist faces up to 110 years in prison if convicted. The details of one of the biggest fraud cases since the turn of the century will come out during this six-week trial. Here are the five biggest revelations so far in this week’s Five For Friday:
#5: SBF’s big ambitions
One of the most anticipated moments of the trial to date is the testimony of SBF’s ex-girlfriend, Caroline Ellison, who played a direct role in the alleged fraud. She revealed some of Bankman-Fried’s big-time ambitions on the stand.
One bombshell from Ellison was that SBF once claimed there was a 5% chance he’d become president. He also contemplated paying Donald Trump $5 billion to sit out the 2024 presidential election, according to author Michael Lewis.
While Bankman-Fried is now accused of misusing billions in customer funds, he once dreamed of giving away much of his fortune even before he acquired it. While a student at MIT, he subscribed to effective altruism, a specific type of philanthropy that aims to use logic and data to do good. Once he did make the big bucks, he was quick to sign the Giving Pledge to donate most of his wealth, alongside folks like Bill Gates and Warren Buffett.
#4: $500 million USB drive
A high-profile trial like this will bring out some good stories that aren’t necessarily told on the stand. The same day FTX declared bankruptcy, someone started stealing hundreds of millions of dollars worth of cryptocurrency.
Wired just published all the details of the scramble to thwart the $1 billion heist. FTX staffers, who had already been through quite a bit that day, spotted mysterious outflows of the digital currency in real time. As they tried to figure out a way to get their crypto to safety offline, a consultant ended up using a personal USB drive to protect $500 million in FTX funds. It’s not the safest solution: If something were to happen to the keys, drive or consultant, that money could have been lost forever. In the end, it worked, and the hackers only made off with $415 million.
#3: Ten’s company
Tech startups are known for wild lifestyles. After all, if you think you’re changing the world, the adrenaline must be pumping. A lot has been made of Bankman-Fried’s $35 million penthouse in the Bahamas, which was paid for by FTX’s hedge fund Alameda Research.
According to testimony from FTX developer Adam Yedidia, nine other employees also lived with the CEO, who was worth $26 billion at his height. SBF was also known to nap on a bean bag there. Could a good night’s rest have prevented some of the bad decisions that sunk the exchange?
#2: Alameda’s backdoor
FTX co-founder Gary Wang already pleaded guilty to fraud charges, but testified that SBF had the final say on all the deals that sent FTX money to Alameda Research. Wang said he and another programmer put in a backdoor to allow the loans at the behest of his co-founder.
In 2019, Wang said Alameda could only borrow as much as FTX made in revenue from trading fees, roughly $300 million at the time. But Wang said the line of credit soon grew to $65 billion, while customers and investors were kept in the dark.
#1: FTX wasn’t bulletproof
Bankman-Fried has repeatedly claimed ignorance, but his coworkers are testifying that he knew the company’s financials weren’t up to snuff. Yedidia said he confronted SBF last summer while playing paddleball about whether Alameda could repay the $8 billion it owed FTX at the time. Yedidia said SBF’s answer was rather ominous.
“We were bulletproof last year,” SBF said, according to Yedidia. “We’re not bulletproof this year.”
SBF added that it would be six months to three years to get back to bulletproof. Yedidia said he looked “worried or nervous.” The company filed for bankruptcy four months later.
