Prosecutors rest their case as Sam Bankman-Fried prepares to testify

October 26, 2023 Coin Telegraph

Defense lawyers representing SBF called two witnesses, a Bahamas-based attorney and an expert from a litigation consulting firm, before the former FTX CEO’s testimony.

Attorneys representing the United States Justice Department rested their case against Sam “SBF” Bankman-Fried after more than three weeks of expert witnesses and testimonies from former FTX and Alameda employees.

According to reports from the courtroom on Oct. 26, the U.S. government’s last witness before resting was FBI agent Mark Troiano, who primarily testified on SBF’s involvement in more than 300 groups with the messaging app Signal. Following Toiano’s testimony, Bankman-Fried’s lawyers motioned to dismiss, which was quickly denied by Judge Lewis Kaplan.

SBF’s attorneys, Mark Cohen and Christian Everdell, presented two witnesses before Bankman-Fried. Krystal Rolle, a Bahamas-based attorney previously representing the former FTX CEO, testified she accompanied SBF to a meeting with the Securities Commission of the Bahamas in November 2022 and witnessed him transferring FTX assets to authorities.

Joseph Pimbley from litigation consulting firm PF2 Securities testified he had been paid more than $50,000 to extract data from Amazon Web Services on Alameda Research’s line of credit with FTX and data on roughly 9 to 11 million users of the crypto exchange. At the time of publication, attorneys with the Justice Departure had not yet had the opportunity to cross-examine him.

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— Cointelegraph (@Cointelegraph) October 5, 2023

Based on reporting from the courtroom, Judge Kaplan often pushed back on questions posed by Everdell or Cohen to witnesses, saying, “This is not helpful” and “Can we get to the point?” At the time of publication, Bankman-Fried had not yet testified, but his lawyers said they expected him to be on the stand for roughly four hours.

Defense attorneys told Kaplan in an Oct. 25 conference call that they planned to have Bankman-Fried testify as part of their case defending the former FTX CEO. Prosecutors previously called former Alameda CEO Caroline Ellison, former FTX chief technology officer Gary Wang and former FTX engineering director Nishad Singh to testify on SBF directing efforts to have Alameda use FTX funds.

Bankman-Fried’s trial is expected to end within a few business days amid closing arguments and the judge considering any motions submitted by prosecutors or defense lawyers. However, the former FTX CEO is scheduled to face five more criminal counts in a second trial expected to begin in March 2024. He has pleaded not guilty to all charges in both cases.

Magazine: Can you trust crypto exchanges after the collapse of FTX?

Sam Bankman-Fried has no way to ‘out-fox’ prosecutors: Scaramucci

October 26, 2023 Coin Telegraph

Coin Telegraph

SBF taking the stand in his criminal trial is “a very bad move” as the FTX co-founder will be “skinned alive” by prosecutors, says Anthony Scaramucci.

Sam Bankman-Fried will be no match for government prosecutors who will poke holes in his defense when he takes the stand in his criminal trial, says SkyBridge Capital founder Anthony Scaramucci.

In an Oct. 25 interview on CNBC’s “Last Call,” Scaramucci said the Department of Justice prosecutors will “point out all the contradictions” he believes Bankman-Fried has made which will “add years to his sentence."

"He’s gonna get skinned alive, there’s no way to escape. He thinks he’s going to out-fox the prosecutors but they’re very, very well experienced with this stuff."

Scaramucci believed there’s been a “whole revision of history” on Bankman-Fried as around a year ago he was thought of as a “congenial nerd who was going to give all his money away” but the testimony of former FTX executives showed "there was malevolence."

“He thought he was going to take that money and he was so smart that he would out-trade the market and put the money back and end up as a half-a-trillionaire but it never works like that,” he added.

In September 2022 FTX Ventures acquired a 30% stake in SkyBridge which Scaramucci is trying to buyback from the now-bankrupt firm.

*Scaramucci (middle left), Bankman-Fried (middle right) and Kevin O'Leary dining at a New York conference. Source: SALT*

In January he told Cointelegraph he thought Bankman-Fried was "the Mark Zuckerberg of crypto" before the allegations that the former FTX CEO misappropriated customer funds.

On CNBC, Scaramucci said he took Bankman-Fried to heads of state which he was now “embarrassed” about but at the time he saw “a smart guy who was well intended."

"He's gonna get nailed here going on the stand" Scaramucci added. "It's a very bad move for him."

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Former FTX CEO Sam Bankman-Fried Decides To Testify in Court After Damning Testimonies From Colleagues: Report

October 25, 2023 The Daily Hodl

Sam Bankman-Fried seeks expert to counter testimony from DOJ witnesses

October 24, 2023 Coin Telegraph

Caroline Ellison

Former FTX CEO Sam Bankman-Fried intends to call on a financial expert to rebuff testimonies from Caroline Ellison, Gary Wang, Nishad Singh and Adam Yedidia.

Sam Bankman-Fried’s lawyers are planning to put forward an expert witness to counter testimony from former Alameda Research CEO Caroline Ellison and other witnesses about the extent of financial ties between FTX and the trading firm.

In an Oct. 23 letter to New York District Judge Lewis Kaplan, Bankman-Fried’s attorneys said Joseph Pimbley from litigation consulting firm PF2 Securities would testify on behalf of the former FTX CEO.

The letter lays out that Pimbley will testify — based on FTX database information — that Alameda’s line of credit with FTX “fluctuated between approximately $1 billion and $3 billion” between October 2021 and September 2022 and decreased in June 2022 which has the goal of establishing a definitive timeline for the line of credit.

Pimbley will also testify that the majority of balances for non-FTX and non-Alameda users are in U.S. dollars, Bitcoin (BTC), Ether (ETH) and Tether (USDT) and over 75% of non-FTX and Alameda user balances “arise from accounts that have spot margin enabled, spot margin lending enabled, or show futures activity” — which could provide context to testimony made by former FTX executives.

*Highlighted excerpt of the letter on testimony Pimbley will counter regarding FTX customer trading. Source: CourtListener*

The testimony is also set to rebuff a testimony by Ellison, FTX co-founder Gary Wang, former FTX engineering director Nishad Singh and former FTX employee Adam Yedidia regarding Alameda’s line of credit and FTX customer use of margin trading.

Dr. Pimbley is set to counter Ellison’s testimony that Alameda had “an essentially unlimited line of credit on FTX” and Wang’s testimony that the firm had borrowed “around $3 billion” from the credit line.

Pimbley’s 54-page disclosure details various charts, spreadsheet excerpts, diagrams, and database queries pulled from FTX’s Amazon Web Services database that relate to FTX’s line of credit with Alameda between October 2021 and November 2022.

Pimbley is being remunerated at a rate of $720 an hour plus expenses for his work but said he has “no financial interest in the outcome of this case.”

He was one of seven expert witnesses earlier put forward by Bankman-Fried’s legal team, which Judge Kaplan barred from testifying but allowed future testimony if they were to respond to government witness testimony and clarify their claims.

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An SBF Testimony Could Add ‘Decades’ to His Prison Sentence, According to Lawyer – Here’s Why

October 16, 2023 The Daily Hodl

Sam Bankman-Fried requests long-acting Adderall to focus during trial

October 16, 2023 Coin Telegraph

adderall

Lawyers for the FTX founder have asked if he can take long-release ADHD medication as he’s been unable to properly concentrate during his trial.

FTX co-founder Sam Bankman-Fried has asked a United States judge for long-release Adderall, saying he’s finding it hard to concentrate properly during his criminal trial.

In an Oct. 15 letter to New York District Judge Lewis Kaplan, Bankman-Fried’s lawyers asked if Bankman-Fried could take a “12-hour extended-release 20mg dose of Adderall” before he’s transported to trial on Oct. 16.

SBF's lawyer asked the judge to get Sam more adderall on Friday so he can focus.

They want extended release so he doesn't lose focus during court sessions.
— NFTNick.eth (@allnick) October 16, 2023

The lawyers added that Bankman-Fried’s lack of the prescribed stimulant during trial hours means he’s “not been able to concentrate at the level he ordinarily would” and wouldn’t be able to “meaningfully participate” in presenting his defense.

The former FTX CEO has been “doing his best to remain focused during the trial” despite his lack of medication during trial hours, the letter added.

Even if Bankman-Fried takes the requested medication, there’s “no way of knowing at present whether the extended-release dose will be effective,” his lawyers said.

They requested the court stop the trial for one day — on Tuesday, Oct. 17 — if Bankman-Fried was either unable to take the long-release dose or if the medication didn’t work so they could “find a solution that will work for the remainder of [the] trial.”

Alternatively, the lawyers requested that Judge Kaplan permit them to provide Bankman-Fried with his prescription of Adderall at the District Court during the trial.

The lawyers claimed they had attempted to solve the issue with the Bureau of Prisons, but had not received a response to “numerous emails and voice messages.”

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Sam Bankman-Fried blamed Binance for balance sheet leak to media: Court evidence

October 12, 2023 Coin Telegraph

Binance

An internal document was revealed in court showing Sam Bankman-Fried believed Binance leaked Alameda’s balance sheet to the media in 2022.

Evidence presented in court as a part of the ongoing criminal trial against Sam “SBF” Bankman-Fried, former CEO of crypto exchange FTX, reveals SBF believed Binance leaked an Alameda balance sheet to the media in 2022.

On Oct. 11, Caroline Ellison, former CEO of Alameda Research, said SBF created a memo that dates back to Nov. 6, 2022 and that outlined possible investors and other parties to reach out for a bailout.

According to the document, Bankman-Fried wrote that Binance had been “engaging in a PR campaign against us.”

It continued to say that Binance “leaked a balance sheet; blogged about it; fed it to Coindesk; then announced very publicly that they were selling $500m of FTT in response to it while telling customers to be wary of FTX.”

On Nov. 2, 2022, CoinDesk reported that it saw a balance sheet from Alameda and that the firm was possibly not in good standing. This was a key event in the lead-up to the run on FTX and its ultimate bankruptcy.

SBF also noted that FTX was capitalized but not entirely liquid, which Ellison clarified by saying that out of the $12 billion in client assets said to be held by the exchange, only $4 billion was available to process withdrawals.

The document also revealed Justin Sun, the founder of the Tron network and a Huobi adviser, as a potential investor — though it reads that it “turns out he’s close to [Binance CEO] CZ.”

Inner City Press, which has been in the courtroom, reported on X (formerly Twitter) that Ellison said she was “stressed” when Changpeng Zhao tweeted about liquidating his share of FTX Token (FTT).

Ellison: The tweet characterizes the delay as being about anti-spam and nodes. But we just didn't have the money.
AUSA: Are these the tweets of CZ of Binance?
Ellison: Yes. He tweeted, "we have decided to liquidate any FTT on our books." I was stressed out.
— Inner City Press (@innercitypress) October 11, 2023

This is the second week of Bankman-Fried’s criminal trial. He faces seven charges of conspiracy and fraud tied to the collapse of FTX, to which he has pleaded not guilty.

A second trial is scheduled for sometime in March 2024, during which SBF will face another six charges, including bank fraud and foreign bribery conspiracy charges.

Ellison has been a key witness in the trial thus far and is scheduled for cross-examination by the defense’s attorneys on Oct. 12.

Cointelegraph reporters are on the ground in New York covering the trial. As the saga unfolds, check here for the latest updates.

Magazine: SBF trial underway, Mashinsky trial set, Binance’s market share shrinks: Hodler’s Digest, Oct. 1–7

Caroline Ellison testimony: SBF bribed Chinese officials for $150M to unfreeze funds

October 12, 2023 Coin Telegraph

Caroline Ellison testimony: SBF bribed Chinese officials for 0M to unfreeze funds

Coin Telegraph

Caroline Ellison, the star witness in the Sam Bankman-Fried criminal trial, testified that SBF tried to use identities linked to Thai sex workers to unfreeze funds before bribing Chinese officials for millions.

Caroline Ellison, the former romantic partner of embattled FTX founder Sam “SBF” Bankman-Fried and the former CEO of Alameda Research, has claimed in her courtroom testimony that SBF bribed Chinese officials for millions of dollars to unfreeze funds locked in local exchanges.

In her Oct. 11 testimony, Ellison said there was $1 billion in funds locked up in China and that to access them, Alameda paid a $150 million bribe to Chinese government officials.

AUSA: How much was frozen in China?
Ellison: $1 billion. Sam wanted to find ways to address it.
AUSA: How were they unfrozen?
Ellison: Alameda paid a bribe to Chinese government officials
SBF: Objection, move to strike.
Judge Kaplan: I will strike that
— Inner City Press (@innercitypress) October 11, 2023

The funds, which belonged to Alameda Research, were frozen on the cryptocurrency exchanges Huobi and OKX following a 2021 money laundering probe opened by Chinese authorities.

Ellison testified that Bankman-Fried ordered her and other FTX employees to delete all related messages sent via the encrypted messaging app Signal.

However, before bribing Chinese officials, Ellison said they attempted to hire a local lawyer in China who could help with negotiations with the government.

After attempts with lawyers were unsuccessful, Ellison claimed that Bankman-Fried attempted to use wallets of “other people’s accounts” to unsuccessfully access the funds. This included what turned out to be Thai sex workers.

Ellison said, “On OKX, we made several accounts using the IDs of different people who I believe were Thai prostitutes, and we tried to basically have our main account lose money and have those other accounts make money, so do very imbalanced trades between the two accounts so those other accounts would be able to make money and withdraw it.”

When questioned how the accounts were ultimately unfrozen,, Ellison said she thought they were unfrozen after Alameda paid the bribe.

According to a post on X (formerly Twitter) from a witness in the courtroom, Ellison must return on Oct. 12 for a cross-examination from SBF’s lawyer, Mark Cohen.

Oh, she has to (come back tomorrow) - now for cross examination by Bankman-Fried's lawyer Mark Cohen, which began a big slow and disorganized at the end of today's session. We'll see tomorrow - I aim to be live tweeting it, starting at 9:30 am https://t.co/mUdG7ST2qm
— Inner City Press (@innercitypress) October 12, 2023

SBF faces 13 charges. The first seven charges of fraud are being heard in his current trial, which began on Oct. 3 and do not include charges of bribing Chinese officials.

However, in a second trial scheduled for March 2024, he faces six additional charges, including bank fraud and foreign bribery conspiracy charges. Bankman-Fried has pleaded not guilty to all charges.

Cointelegraph reporters are on the ground in New York covering the trial. As the saga unfolds, check here for the latest updates.

Magazine: SBF trial underway, Mashinsky trial set, Binance’s market share shrinks: Hodler’s Digest, Oct. 1–7

Alameda Research lost $190M to scams and ‘questionable’ blockchains: Whistleblower

October 12, 2023 Coin Telegraph

Alameda Research lost 0M to scams and ‘questionable’ blockchains: Whistleblower

Coin Telegraph

Former Alameda Research engineer Aditya Baradwaj says one trader lost more than $100 million after clicking on a fake link.

FTX’s sister hedge fund, Alameda Research, lost at least $190 million of its trading funds due to arguably avoidable scams, according to a former engineer at the firm.

In an Oct. 12 post to X titled “The Hacks,” former Alameda Research engineer turned whistleblower Aditya Baradwaj claims that the firm’s “breathtaking” agility led to “major security incidents” as often as every few months.

Incident #1:

An Alameda trader got phished while trying to complete a DeFi transaction by accidentally clicking a fake link that had been promoted to the top of Google Search results

Cost: $100M+

Postmortem: Implemented extra checks on our internal wallet software
— Adi (e/acc) (@aditya_baradwaj) October 11, 2023

In an example of one of the biggest exploits, Baradwaj claims a trader at Alameda once lost more than $100 million of the firm’s funds after clicking a malicious link promoted to the top of Google Search results.

The trader was attempting to sign off on a decentralized finance transaction, said Baradwaj.

In another example, he said Alameda was yield farming on a new blockchain of “questionable legitimacy” — a move that saw the trading firm eventually rack up losses of more than $40 million.

Baradwaj wrote that FTX founder Sam Bankman-Fried believed that the “single most important thing” for Alameda and FTX was their ability to move quickly. This ethos led to Alameda routinely ignoring industry-standard engineering and accounting practices for such firms, he said.

“This meant virtually no code testing and incomplete balance accounting. Safety checks for trading would only be added on an as-needed basis,” wrote Baradwaj.

“Blockchain private keys and exchange API keys were stored in plaintext in a file that several employees could access.”

This led to another security incident that cost the firm millions after an old version of the plaintext files containing keys to Alameda’s wallets were leaked.

The attacker transferred funds out of “some exchanges,” and the incurred losses tallied up to more than $50 million, explained Baradwaj.

These are just a few incidents - there's many more, including from before my time at the company.

FTX had its own issues, including the MobileCoin fiasco that Gary recently testified about during the trial.
— Adi (e/acc) (@aditya_baradwaj) October 11, 2023

He said that Alameda suffered through “many more” incidents of similar scope to the ones he’d described, but many of these were before his time at the company.

The former engineer has been speaking publicly about the many faults of Alameda and FTX in the wake of their collapse in November last year, telling Cointelegraph how its founder, Sam Bankman-Fried, justified many of his “ridiculous” actions under the guise of an idealistic philosophy known as Effective Altruism.

Baradwaj’s comments come amid former Alameda CEO Caroline Ellison taking the stand to testify against Bankman-Fried on the sixth day of his fraud trial. In the preceding days, a number of former colleagues, including Adam Yedidia and Gary Wang, have brought a wealth of new evidence against the former billionaire.

Wang has admitted to writing in specific code that allowed for Alameda to trade with a near-unlimited line of credit from FTX, while Caroline Ellison has explained the intricate details of FTX’s alleged commingling of funds with Alameda.

Bankman-Fried has pled not guilty to the charges brought against him and maintains his innocence in the ongoing trial.

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SBF’s lawyers ask court to allow introduction of Anthropic evidence

October 11, 2023 Coin Telegraph

Coin Telegraph

Sam Bankman-Fried’s lawyers addressed Judge Kaplan in a letter to allow the defense to use evidence of its venture investment into Anthropic back from April 2022.

In a motion filed on Oct. 10, Sam “SBF” Bankman-Fried’s lawyers requested that the court allow for the introduction of evidence supporting positive investment outcomes such as an investment in the artificial intelligence (AI) start-up Anthropic.

This comes after United States prosecutors filed a request on Oct. 9 to bar SBF’s legal team from making any arguments related to FTX customer funds recovery through the Anthropic investment.

It is known that Bankman-Fried made a $500 million investment in the AI startup back in April 2022, before the exchange’s combustion. The Department of Justice (DoJ) is set to give evidence that the investment was made using fraudulent funds from customer deposits.

However, the lawyers attest that the government’s position “miscasts” the relevance of the evidence and “respectfully” asked the court to deny the government’s motion.

They continued to point out that the government had raised Alameda’s venture investments multiple times during the trial and argued they were “risky” and “losing money.”

“In response, the defense should be permitted to introduce evidence of positive investment outcomes (i.e. Anthropic) of such venture investments…”

Anthropic has recently received major investments from e-commerce giant Amazon for $4 billion and $100 million from South Korean telecommunications giant SK Telecom.

SBF’s lawyers said the defense has no objection to the court providing an “appropriate limiting instruction” regarding the way in which Anthropic investment evidence could be used.

The second week of the criminal trial for the former FTX exchange CEO continues on Oct. 11. SBF faces charges of seven counts of conspiracy and fraud tied to the collapse of FTX, to which he has pleaded not guilty.

Cointelegraph reporters are on the ground in New York covering the trial. As the saga unfolds, check here for the latest updates.

Magazine: SBF trial underway, Mashinsky trial set, Binance’s market share shrinks: Hodler’s Digest, Oct. 1–7

Trial