Sam Bankman-Fried’s Trial: FTX Co-Founder Admits to Financial Fraud

• FTX Co-Founder Gary Wang’s admitted guilty to financial fraud and implicated Sam Bankman Fried.
• Former FTX software developer Adam Yedidia’s testimony revealed that FTX was using customer deposits to repay Alameda’s loans.
• Yedidia said, “FTX defrauded all its customers.”

October 5 was the third day of Sam Bankman-Fried’s trial, and three people testified.  FTX Co-Founder Gary Wang, Former FTX Software Developer Adam Yedidia, and Paradigm Co-Founder Matt Huang.

Gary Wang was the co-founder of FTX and Alameda Research, and he pleaded guilty to committing wire fraud, securities fraud, and commodities fraud. The prosecution began the testimony by asking Wang, “Did you commit financial fraud while working at FTX?” which Wang confirmed.

The prosecution asked Wang if he saw any of the people with whom he committed fraud in the courtroom, to which “he stood up, spotted Sam Bankman-Friend, and said yes,” according to CNBC. Furthermore, Wang was also FTX’s chief technology officer and claimed that SBF directed him to place code inside FTX’s software, which gave special privileges to Alameda.

The code, according to Wang, gave Alameda “special privileges on FTX that gave unlimited withdrawals on the platform to Alameda”. Wang stated that Alameda had a $65 billion line of credit.

Another witness was Yedidia, a former employee of FTX and Alameda. Yedidia testified on SBF’s second day of trial and stated that he resigned from FTX. On the third day, he shared in detail the reasons behind his resignation. Yedidia said he became aware of a bug in FTX’s codebase that overstated how much money Alameda owed FTX.

Yedidia shared that he discovered the bug in December 2021, and at that time, FTX’s system indicated that Alameda owed $500 million to FTX customers. However, when the bug was fixed in June 2022, the system showed that Alameda owed $8 billion to FTX.

Furthermore, Yedidia shared that Leila Clark, a fellow FTX developer, told him that Alameda was using FTX customer deposits to pay Alameda’s loans to the lenders. Yedidia was concerned about this news and said in the courtroom, “If Alameda was repaying its loans with FTX customers’ money, that implied that it didn’t have money of its own to repay the loans with, which means the money was simply gone.”

Yedidia shared that in November 2022, when the employees started leaving, he reassured SBF and said he wasn’t going to leave. The prosecutor asked Yedidia if he used to believe in FTX, and what made him change his mind. Yedidia’s response silenced the courtroom as he said, “Well, FTX defrauded all of its customers.”