Four people were in the room. That much is uncontested.
Caroline Ellison, Gary Wang, Nishad Singh and Sam Bankman-Fried sat together in June 2022 in the Bahamas office of FTX, the crypto exchange founded by Bankman-Fried and Wang, then worth $40bn. Bankman-Fried and Wang also owned Alameda, a private trading firm that Ellison ran. And on that day, Ellison feared Alameda was bankrupt.
In the weeks after the meeting, Ellison authorised billions in loan repayments ultimately funded by borrowing from FTX. Bankman-Fried tried unsuccessfully to raise more equity for the crypto exchange, and he kept telling investors, customers and the wider world that his two companies were completely separate and financially strong. He promised customer assets were safe.
They were not. In November 2022, too many customers asked for their money back from the exchange, and FTX could not pay. Days later, FTX and Alameda filed for bankruptcy. All four people at that June meeting were subsequently hit with criminal charges — but only one has gone to trial.
As the end of Bankman-Fried’s trial approaches, the case against him comes down to what was said in the conversation in Nassau in June, and who knew what and when.
When the jury begins deliberating later this week, it will have to decide which version of events to believe: did Bankman-Fried order his lieutenants to drain customer funds and cover it up? Or did his closest allies make mistakes that led FTX to disaster, which Bankman-Fried did not discover until it was too late?
A central question is whether it is plausible that Bankman-Fried — with his college degree from the Massachusetts Institute of Technology, his Jane Street Capital pedigree and his famous intellect — left the June meeting after hearing that Alameda might have been bankrupt without having pinned down the details.
“You never got to the bottom of that?” assistant US attorney Danielle Sassoon asked this week in cross-examination. Bankman-Fried said his top lieutenants were working it out. “I trusted them,” he said.
Wang, Ellison and Singh have all pleaded guilty to fraud and are co-operating with prosecutors, having taken the stand against their one-time boss. Their memories appeared more concrete than Bankman-Fried, who told prosecutors dozens of times that he “didn’t recall” crucial details.
Wang, Bankman-Fried’s college friend and taciturn right-hand man, and Ellison, his former girlfriend, both testified that Bankman-Fried was told about the more than $10bn debt Alameda already owed FTX in June, and still authorised it to borrow even more to avoid defaulting on its loans and collapsing his business empire. They said the money came from FTX customers — there was no other source of so much cash.
Ellison told the same story in a meeting with her employees in November, as FTX was collapsing and before she learnt of the US investigation. The jury heard clips from a tape of the meeting, where Ellison was asked who had approved the use of FTX clients’ money to pay off Alameda’s loans.
“Um . . . Sam, I guess,” she replied.
The 31-year-old former crypto billionaire, who maintains his innocence, took the stand in his own defence in a final high-stakes gamble to avoid potentially decades in prison. He claimed it was Ellison’s idea to repay the loans in June.
“I did not believe that Alameda did need to borrow from FTX in order to process the loan repayments,” he told jurors. Later, he said he was “not sure . . . whether or not that was floated out at one point or another”.
The fourth person present in the meeting has told a slightly different story. Singh, a childhood friend of Bankman-Fried’s younger brother, has also pleaded guilty and is co-operating. He said he left the June meeting with suspicions, but under the impression that everything was fine.
Singh said he realised customer funds were being raided in September — when Ellison told him that Alameda was unable to repay its debts to FTX. He said he confronted Bankman-Fried on the balcony of their Bahamas penthouse the same day, and that his boss was not surprised.
As they deliberate, the 12 jurors will have to weigh these contradictions. Daniel Silva, a former federal prosecutor at law firm Buchalter, said Bankman-Fried had tried on the stand to portray that he “knew about some things, and we made mistakes, but other people were directly responsible for most of the critical decisions . . . It’s a really tough line to toe.”
Still, Silva added: “If he finds one juror who is not convinced, it’s a hung jury.”
Over four days of marathon testimony, which finished on Tuesday, Bankman-Fried pleaded ignorance. He claimed he thought Alameda’s debts to the exchange were manageable, roughly $2bn. He said he was “very surprised” in October when he found more than $8bn accounted for in a different part of the FTX systems.
The government’s relentless cross-examination hammered on the question of where the $8bn went. “You didn’t tell your employees, don’t spend the FTX customer money?” Sassoon asked.
“I don’t recall giving any directions,” Bankman-Fried said. “I deeply regret not taking a deeper look into it.”
“Is it your testimony that . . . some unknown person spent $8bn without your knowledge?” Sassoon asked. “You didn’t call in your deputies and employees and say ‘who spent $8bn?’”
Questioned by his own lawyers, Bankman-Fried later said “funds were being deposited and withdrawn all over the place every day” and that no “clear single person” was responsible for the spending, which included billions on venture investments, real estate and star-studded marketing.
“Money is fungible anyway,” he added.
Prosecutors gestured towards other theories of Bankman-Fried’s guilt — one being that FTX and Alameda were a corrupt conspiracy from the exchange’s launch in 2019. They showed a 2019 tweet when Bankman-Fried said: “Alameda is a liquidity provider on FTX but their account is just like everyone else’s.”
The jury has seen a mountain of technical evidence and testimony contradicting this claim. Bankman-Fried pointed out that his tweet was responding to a narrower question about whether Alameda could front-run other customers’ trades on FTX, but he admitted on the stand that he knew since at least 2020 that his firm got a pass on the normal rules for when positions would be liquidated.
The government also produced private notes Bankman-Fried wrote after FTX collapsed in which he said: “If Alameda had been a 100 per cent separate completely unrelated trading firm in every way, this wouldn’t have happened.”
There is also a possible narrower ground for conviction. Prosecutors have repeatedly shown the jury tweets Bankman-Fried sent in the week before FTX collapsed reassuring customers that their “assets are fine” and that “FTX has enough to cover all client holdings”. Two customers of the exchange testified that they read these tweets at the time and on that basis left money in their FTX accounts until it was too late.
Even though he knew about Alameda’s massive debts, Bankman-Fried claimed that when he sent the tweet he thought: “Alameda still had a net asset value of roughly positive 10 billion [and] FTX had no holes on its balance sheet.”
This belief was largely based on huge stocks of crypto tokens Alameda held that were closely tied to FTX. Challenged on whether these tokens were really liquid, he said: “Liquidity isn’t a binary classification.”
If the jury is in doubt about what really happened between the four former friends in Nassau in June, or about what was going on inside Bankman-Fried’s head, his desperate claims in November 2022 — as he tried to stop the implosion of his empire — could be prosecutors’ last line of defence.
What the government lacks is a smoking gun. There is no standout piece of evidence that unequivocally shows Bankman-Fried conspiring in black and white. Prosecutors have made much of the fact that he set his encrypted chats to auto-delete to imply that he deliberately destroyed the most incriminating messages.
The connective tissue of the government case, like the details of the June meeting, comes from their star witnesses. In all the crucial conversions, the people who were present are now telling two different stories. It all comes down to “he said, they said” — and which side the jury will believe.