While the U.S. Department of Justice (DOJ) has precluded the testimony of all of accused crypto fraudster Sam Bankman-Fried’s seven witnesses in his imminent trial, the prosecution team is readying a deep bench of his former colleagues, investors and customers.
Bankman-Fried’s trial, the result of which could see the one-time paper billionaire jailed for over a century, is set to begin Tuesday (Oct. 3) with jury selection and is slated to last for more than a month.
The 31-year-old FTX founder and former CEO, whose reign atop the cryptocurrency exchange saw it dramatically implode and send fatal shockwaves throughout the entire industry, faces seven criminal counts of fraud.
While Bankman-Fried maintains that he did not knowingly or intentionally commit fraud and simply suffered lapses in oversight while at the helm of his multibillion-dollar platform and its sprawling group of enterprise affiliates, at least four of FTX’s top lieutenants — all of whom were substantially enriched by their tenure at the crypto exchange — have pleaded guilty to criminal charge that overlap considerably with those filed against Bankman-Fried.
The former colleagues are cooperating with federal prosecutors, and all except for Ryan Salame, former co-CEO of FTX’s Bahamas subsidiary, will testify at their former boss’s trial regarding the part they played in helping him illegally misappropriate FTX’s customer funds.
Read also: Bankman-Fried Trades Cargo Shorts for Trousers as Trial Looms
“The Government expects to call certain witnesses who entered guilty pleas to participating in a conspiracy to commit wire fraud with the defendant and who are testifying pursuant to cooperation agreements, as well as witnesses who will testify pursuant to grants of immunity for their testimony,” wrote federal prosecutors in a Saturday (Sept. 30) court filing.
Among the witnesses are FTX Co-founder Gary Wang; the exchange’s former head of engineering Nishad Singh; and one-time Alameda Research CEO Caroline Ellison.
Wang, who worked as a software engineer at Google before co-founding Alameda and FTX with college friend Bankman-Fried, is accused of creating the specific software code that allowed Alameda Research, a crypto hedge fund and market maker, to divert FTX customer funds for its own use.
He served as the former chief technology officer of FTX and Alameda and knew Bankman-Fried from high school math camp. The two later became college roommates at MIT. During his time at FTX and Alameda, Wang was the recipient of around $246 million in personal payouts and loans. His testimony is expected to center around the exchange’s complicated and compromised relationship with its sister trading firm, Alameda Research, which included many technically baked-in special privileges.
Also set to testify about the special privileges Alameda enjoyed, which executives at FTX were reportedly well aware of, is Nishad Singh — the exchange’s former head of engineering. Singh was a high school friend of Bankman-Fried’s older brother and owned a 7.8% stake in FTX, which at one point made him a billionaire himself.
In a separate suit, the Commodities Futures Trading Commission (CFTC) charged Singh with fraud, saying “Singh was responsible for creating or maintaining various undisclosed components in the code underlying FTX that, operating together with other features, granted Alameda functionalities that allowed it to misappropriate FTX customer assets. Among other things, these features in the FTX code favored Alameda and allowed it to execute transactions even when it did not have sufficient funds available, including, critically, a ‘can withdraw below borrow’ functionality that allowed Alameda to withdraw billions of dollars in customer assets from FTX.”
Beyond his equity ownership, Singh also received around $587 million in payouts and loans from the exchange, which he has since returned.
Read more: More Back Doors Found in Bankman-Fried’s Black Box at FTX
Around May 2020, Bankman-Fried allegedly told FTX engineers to exempt hedge fund Alameda from the auto-liquidation feature of FTX’s spot margin trading services, a key risk-management control. This exemption allowed Alameda to make trades without putting up the required collateral, leaving no backstop for risky trades that might fail, and ultimately led to the downfall of the exchange and its more than 130 affiliate companies, as well as the incineration of billions of dollars of customer deposits.
In August 2022, former Alameda Research CEO Caroline Ellison claimed that FTX and Alameda were separate companies, that Alameda received no special treatment on the FTX platform, and that there was an “ethical wall” between them preventing sharing of customer information between FTX and Alameda.
At the end of last year (Dec. 19), Ellison admitted these previous statements were “knowingly misleading” and pleaded guilty to charges filed against her, agreeing to cooperate with authorities.
Ellison will be the prosecution’s star witness. She worked with Bankman-Fried at Wall Street trading firm Jane Street Capital and was his on-again-off-again romantic partner over the years.
She was the first to flip on Bankman-Fried, and her guilty plea to charges of wire fraud, engaging in a conspiracy to commit commodities fraud and securities fraud, and conspiring to commit money laundering implicated many of the other FTX executives set to testify.
“The defendant hereby acknowledges that the defendant has accepted this Agreement and decided to plead guilty because the defendant is in fact guilty,” Ellison’s plea stated.
Bankman-Fried has consistently tried to shift the blame for FTX’s collapse to Ellison’s actions at Alameda, and he had his bail revoked in advance of the trial due to what the court called his attempts to intimidate her by sharing her private documents with a reporter.
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