SBF Trial – FTX general counsel had ‘no idea’ that SBF was misusing customer funds

1 year ago

The last time of Sam Bankman-Fried’s (SBF) proceedings brought further revelations astir what transpired down the scenes astatine the speech arsenic erstwhile FTX lawyer Can Sun took the basal arsenic the day’s archetypal witness.

Sun’s grounds revolved astir FTX Digital Markets’ presumption of work and their pivotal relation successful the ongoing trial. SBF has publically utilized the presumption of work to warrant immoderate of the losses astatine FTX.

Unaware of misuse

Former FTX General Counsel Can Sun — who played a cardinal relation successful drafting FTX Digital Markets’ updated presumption of work successful May 2022 — began his grounds with a astonishing assertion.

Under a non-prosecution statement to support himself, Sun said helium “didn’t bash thing wrong” and had “no idea” that the speech was misusing lawsuit funds.

Sun testified that erstwhile FTX faced a illness successful aboriginal November 2022, helium engaged successful a telephone with backstage equity steadfast Apollo Global. The telephone aimed to unafraid an concern to code the monolithic surge successful lawsuit withdrawals.

Sun told the assemblage that helium was “shocked” to observe that FTX faced a staggering “$7 cardinal shortfall” successful gathering lawsuit withdrawal demands.

“Theoretical justifications”

Sun said that pursuing the call, Apollo requested a equilibrium sheet, which was provided by either SBF oregon erstwhile FTX caput of merchandise Ramnik Arora. The equilibrium expanse painted a grim representation of FTX’s fiscal situation.

Apollo’s effect was to diminution the investment, but not earlier seeking explanations for the missing funds. Sun said that SBF directed him to supply “theoretical justifications” for the disappearance of lawsuit funds.

During his testimony, Sun emphasized that nary “theoretical justifications” were supported by factual evidence. He further stated that determination was nary ineligible justification for diverting the funds from lawsuit accounts.

Another captious revelation during Sun’s grounds was related to the scrutiny of FTX’s borderline trading defense. SBF often cited a conception successful FTX’s presumption of service, which stated that participating successful borderline trading could effect successful collateral nonaccomplishment if the relationship is liquidated.

Sun disclosed that helium had informed SBF that this mentation unsocial was insufficient to relationship for the missing $7 cardinal successful lawsuit funds and could not beryllium utilized to explicate the shortfall. He added that SBF acknowledged this astatine the clip but resorted to utilizing it arsenic a justification during his interrogation with George Stephanopolous.

To underscore this point, the prosecution played a Dec. 1, 2022, interrogation of SBF with George Stephanopolous. In the interview, Stephanopolous pointed retired that FTX’s presumption of work explicitly stated that lawsuit assets would not beryllium loaned out.

However, Bankman-Fried deflected this by pointing to different conception of the terms, the “borrow-lending facility,” besides known arsenic trading connected margin. It was revealed that this installation required customers to opt in; however, adjacent those who had not signed up for it mislaid wealth successful the FTX collapse.

Cross-examination

Sun’s cross-examination further explored the presumption of work of FTX Digital Markets. The defence has antecedently indicated that these presumption could beryllium cardinal to their case.

The presumption of work intelligibly outlined FTX’s committedness to safeguarding lawsuit assets and assuring customers that their deposited assets were exclusively theirs. This aligned with the government’s allegations that Alameda Research accessed and spent lawsuit deposits sent to FTX.

During cross-examination, pb defence lawyer Mark Cohen delved into the borderline trading conception of the terms. Cohen aimed to ascertain the percent of users engaged successful riskier trading strategies.

This accusation could shed airy connected however galore customers suffering losses successful the FTX illness had been progressive successful specified trading. However, Sun couldn’t supply circumstantial numbers, starring Cohen to pivot to different aspects of the terms.

Alameda’s exemption

Cohen besides probed into a conception concerning relationship liquidation, wherever customers were warned they mightiness suffer “all” of their assets if backstop liquidity providers could not efficaciously intervene.

However, Sun did not person responses to queries related to this section.

Furthermore, Cohen inquired astir Sun’s cognition regarding Alameda’s exemption from auto-liquidation. Sun testified that helium became alert of this exemption successful August oregon September 2022.

He revealed that helium had requested its removal, but SBF and FTX co-founder Gary Wang had resisted. Sun besides noted that this carveout for Alameda had ne'er been triggered, arsenic helium was informed during the aforesaid period.

Cohen asked Sun wherefore helium did not resign astatine that time, to which the lawyer explained that helium was unaware that the peculiar privilege exempting Alameda from liquidation besides allowed it to retreat lawsuit funds from FTX.

Sun said helium learned astir the misuse of lawsuit funds connected Nov. 7, 2022, erstwhile Nishad Singh disclosed it to him, and helium submitted his resignation the pursuing day.

Third Point’s investment

Robert Boroujerdi, a managing manager astatine plus manager Third Point, was the adjacent witnesser to instrumentality the stand. His grounds gave the assemblage invaluable insights into the fiscal aspects of FTX and its dealings.

Third Point yet invested $60 cardinal successful FTX International, an concern Boroujerdi present values astatine “zero.”

During his testimony, authoritative Thane Rehn delved into Boroujerdi’s conversations with SBF earlier Third Point’s archetypal $35 cardinal concern successful FTX successful July 2021.

Boroujerdi revealed that FTX had not informed him that Alameda was exempt from FTX’s hazard engine, meaning its trading accounts could not beryllium liquidated and could spell antagonistic infinitely. He added that FTX’s alleged “speedy” hazard motor made it consciousness harmless astir the investment.

When asked however his concern strategy would person changed if helium had known astir Alameda’s peculiar privileges, Boroujerdi stated unequivocally that Third Point would not person proceeded with the investment.

Furthermore, helium pointed retired that Third Point would not person participated had they known that the $35 cardinal would beryllium funneled to Alameda oregon that Alameda could retreat lawsuit funds from FTX.

David Lisner conducted the cross-examination of Robert Boroujerdi, aiming to research the owed diligence conducted by Third Point connected FTX. However, astir of his queries were met with contiguous objections, subsequently sustained by Judge Kaplan, starring to constricted advancement successful his enactment of questioning.

Prosecution connected track

The proceedings continues to unravel analyzable details surrounding FTX, with lone a fewer much witnesses expected to instrumentality the basal astatine the adjacent hearing.

The prosecution said it is connected way to wrapper up its lawsuit by the adjacent tribunal league connected Oct. 26 aft presenting the last witnesses from its side.

The defence said it volition contiguous its lawsuit erstwhile the prosecution rests. However, whether the defence volition contiguous an statement and who they mightiness bring to the basal arsenic witnesses is unclear.

The station SBF Trial – FTX wide counsel had ‘no idea’ that SBF was misusing lawsuit funds appeared archetypal connected CryptoSlate.

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