Hey, Gary Wang: What are we, chopped liver?
The FTX co-founder and former chief technology officer continued testifying in Sam Bankman-Fried’s trial Friday, sharing how the Alameda hedge fund was able to access an enormous credit line at the exchange with his former colleague’s blessing.
Prosecutors walked him through the events of the last few years (Alameda owed FTX over $100 million as far back as 2019!) but spent extra time on November 2022, putting a calendar up so the jury (and those of us watching from the back) could keep track of what happened when. FTX and Alameda were troubled for years, with Alameda borrowing billions from FTX over the course of the exchange’s lifetime and requiring an ever-increasing credit line from its sibling company, Wang said. The situation really escalated, however, after “some crypto news site” published a leaked balance sheet, he said.
“There was some balance sheet of Alameda that got leaked to some websites, and it was published on some crypto news site,” Wang said. (Ed. note: As far as I know, the sheet wasn’t leaked to “some websites” – CoinDesk reporter Ian Allison sourced it through the course of being a professional journalist, helping us win three awards.)
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The trial has started off strong for the Department of Justice. Some expected the DOJ to bring its most important witnesses – namely Sam Bankman-Fried’s former inner circle – toward the end of the trial – but oh how wrong we were. After a brief testimony from a French trader who fell victim to FTX, we heard from a former software developer and close friend of Bankman-Fried – Adam Yedidia – on Wednesday and the majority of Thursday.
In one sense, Yedidia was a prosecutor’s dream witness. The former math and engineering major from MIT seemed genuine and at times slightly worried that he might say the wrong thing. His answers were clearly well-rehearsed, if not always accessible to the layperson. At one point, Judge Kaplan had to ask follow-up questions to his answer just to make sure he understood what Yedidia said, and it wasn’t because the subject itself was complicated.
“I was trying to quantify my uncertainty about how many users FTX had during 2022,” Yedidia said.
After each question asked by the defense, Yedidia paused, as he anticipated an objection from the prosecution. When there wasn’t one, he answered.
On Friday, Judge Kaplan overruled (which means rejected) 65% of the objections by the defense, which was a much smaller proportion than the day before, when Bankman-Fried’s lawyer’s really got on his nerves. In comparison, he rejected none of the prosecution’s objections Friday.
Yedidia was followed by one of the strongest witnesses in this case so far: Gary Wang, who started off by saying that he committed financial crimes at FTX and that he committed them with the defendant, Sam Bankman-Fried.
Wang’s testimony walked the jury through what turned out to be a veeeeeeery long explanation of how deposits, codes, algorithms, accounting (and more boring stuff) worked at FTX. Yes, we saw some occasional yawns, but nobody in the courtroom fell asleep, so that’s an improvement from Thursday!
Wang testified that Alameda had “special privileges” at FTX that allowed the crypto hedge fund to spend $8 billion of exchange customers’ money, among other things. While he wrote the code allowing that spending, he did so at the direction of Bankman-Fried, he said. It is safe to say just about everybody witnessing this week’s trial so far has the same conclusion: It doesn’t look good for the former FTX CEO.
Defense woes continue
The defense team began cross-examining Wang, but as it did yesterday, it quickly ran afoul of the judge.
At one point, defense counsel Christian Everdell asked Wang to read (to himself, not aloud) a sentence from a document to refresh his memory about something he supposedly said to the DOJ. This document wasn’t shown to the jury. After reading it, Wang said he could not recall what he specifically said to the DOJ, leading Everdell to describe the contents of the – again, unshown – memo and say “Is it true that that's what's said there?”
The prosecution objected and Judge Lewis Kaplan admonished the defense for a second time in as many days: “Don’t do that again.”
As he did on Thursday, the judge also urged the defense to stop going over information previously asked and answered, ultimately ending court proceedings a few minutes early. He was seen driving off in his vehicle once again barely 30 minutes later.
What we're expecting
Gary Wang will wrap up testimony as the defense tries to complete a cross-examination without having every question objected to. But most of Wang’s testimony Friday centered around technical details. Prosecutors literally brought up lines of code to ask questions about how the FTX platform and website worked. Boring! I mean not really, it’s actually quite fascinating stuff, but you get what I mean.
Potentially as soon as later Tuesday, though, we’re going to hear from Caroline Ellison, the one-time Jane Street trader turned Alameda Research CEO. There's two reasons why people want to hear from her: For one thing, she ran Alameda, the company that took FTX customer funds and somehow lost billions of dollars. For another, she is Bankman-Fried’s ex-girlfriend, the one he threw under the bus in the New York Times, and there is a fair bit of intrigue about what she’ll say from that perspective.
But let’s focus: Alameda and its borrowing of FTX customer funds is the real issue at the heart of this trial, and Ellison’s testimony can clarify to what extent Bankman-Fried may have been aware of and/or directed the financial malfeasance prosecutors allege took place.
There's no court today owing to the federal holiday, as a reminder. We will be back in session at 9:30 a.m. ET Tuesday.
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