Prosecutors are placing strong emphasis on text messages exchanged between Sam Bankman-Fried and his onetime intimate associates and chief associates in the case against the FTX founder. The messages serve to demonstrate Bankman-Fried's cognizance of the issues his enterprises were going through and the steps he took to keep them secret. In the Signal discussion group named "People of the House", often referred to was Bankman-Fried's $35 million penthouse - which many workers were inhabiting.
Much of the government's proof against Sam Bankman-Fried centers on the reports and text messages from those in his crypto entourage who turned against him late in 2021 after the failure of FTX and Alameda Research hedge fund. Of the dozens of items that have been brought before a jury in the initial three weeks of the trial, a bank of messages delivered via encrypted app Signal provide a significant insight into the alleged criminal behavior of Bankman-Fried. He is facing seven criminal counts, including wire fraud, securities fraud and money laundering, which could potentially lead to life behind bars. Bankman-Fried, son of two Stanford legal scholars, has pleaded not guilty to all the accusations.The prosecution is attempting to establish its case to a New York jury by referring to numerous Signal exchanges involving Bankman-Fried, his former girlfriend and former head of Alameda Research, Caroline Ellison, and former friends and business professionals Gary Wang, Nishad Singh and Ryan Salame. These communications date back to November 2021.This array of messages has allowed the jurors to get a unique view of the casual conversations that resulted in what U.S. Attorney Damian Williams has referred to as "one of the largest financial scams in American history". We have not altered the messages in terms of spelling or grammar as they were presented as evidence.
The Signal thread known as "small group chat" involves Ellison, Bankman-Fried and Joe Bankman, the dad of the accused, who gave counsel to the organisation on tax-related matters and other issues. Ramnik Arora, a previous product lead for FTX, Ryne Miller, the former general counsel of the business, Constance Wang, the ex-chief operating officer, and Salame, Singh, Wang and four additional people are also in the thread.
On Nov. 7, 2022, Bankman-Fried posted two messages on a thread just as FTX was announcing a liquidity crisis and attempting to find cash to cover its deficit. At the time, Bankman-Fried publicly professed nothing was wrong, tweeting that "FTX is fine. Assets are fine" (which has since been deleted). Prosecutors claim that FTX executives were becoming increasingly concerned over the situation, and in the "small group chat" thread Bankman-Fried suggested strategies such as halting withdrawals, publishing a "confident tweet thread", and contacting venture capital firms to procure funds. Later, an anonymous crypto trader tweeted that they were expecting an "FTX airdrop for not moving any of my funds". Bankman-Fried offered suggestions on how to manipulate the post to give FTX customers the impression that they would receive free tokens if they remained on the platform.
On the following day of November 8, Ellison appealed to the group to help her with optics and public messaging. She asked, "What should I tell people internally that they should do regarding responding to any external parties who say 'Alameda is solvent'? Should I suggest that they just stall on responding? Or what should I suggest?" At the same time, FTX had put a halt to any customer withdrawals. The price of FTT, FTX's native token, fell by more than 75%, resulting in a bank run. With no other options, Bankman-Fried reached out to Binance CEO Changpeng Zhao, who proclaimed that he had signed a non-binding letter of intent to acquire FTX.
On Nov. 9, Ellison sought guidance from the group regarding the all-hands meeting of Alameda's roughly 30 employees. She proposed saying, "Alameda is likely to shut down" with "no pressure" to stay, but help with financial matters such as paying back lenders is "highly appreciated". Bankman-Fried suggested she say something about having "a future of some sort for those who are excited". At the meeting, Ellison disclosed more information. She said Alameda had taken out a lot of loans, which went into investments, but when crypto prices dropped, FTX had a lack of user funds and customers began pulling out. When asked whose thought it was to use FTX customer funds to pay off Alameda's loan debts, she replied with "Um, Sam, I guess", followed by a giggle. Additionally, she mentioned that "FTX basically always allowed Alameda to, like, borrow user funds, as far as I know". The next day, after signing a non-binding purchase agreement, Binance pulled out of the deal due to reports of "mishandled customer funds" and federal investigations.
Zhao, who had been an early investor in FTX prior to becoming the company's primary rival, had already made himself a major player in the drama of FTX's decline. On Nov. 6, he tweeted that due to "recent revelations," they had chosen to get rid of all remaining FTT in their possession. Singh said in a group chat that began that day, talking with Bankman-Fried, Ellison, and himself, that there were many withdrawals from FTX and the net changes had been $1.25 billion in the last day, $230 million within the last three hours, and $120 million within the last hour. Ellison and Bankman-Fried both responded with sorrowful symbols when Singh proposed that they reach out to Zhao in private to attempt to "stem the bleed," although they were apprehensive that Binance wouldn't agree to deescalation publicly. Ellison tried to determine what to tell Salame concerning whether or not FTX could cover all withdrawals and Bankman-Fried proposed she inform him that "we can meet a ton, although it is already getting large."
Sam Trabucco, who had stepped down as co-CEO of Alameda Research in August 2022, was part of a discussion with Ellison, Ben Xie (Alameda's head of trading), and Bankman-Fried on how to respond to Zhao's threat to liquidate his FTT tokens. Ellison, who said she generally stayed away from social media, declared she would tweet at CZ, Zhao's alternate moniker, to suggest FTX would purchase his entire stake at $22 per coin. During her testimony, Ellison also alluded to the practice of utilizing FTX customer funds that were channelled through Alameda to purchase FTT to stabilize the price during times of market volatilty.
Bankman-Fried spoke up shortly after, saying, "The primary purpose of this is to oppose the PR/storyline - and Binance is likely not to accept our offer. Additionally, I reckon the market will be more likely to purchase if we post about it on Twitter, but I'm not certain." (FWIW is an acronym meaning for what it's worth. IDK signifies I don't know.)
Michael Lewis, the author of the book profiling Bankman-Fried that was released on the start of the trial, was the topic of some conversations occurring on Signal. On January 5th, 2022, Bankman-Fried informed Ellison and Singh that Lewis was planning to come to the Bahamas during the next month to complete some research. Ellison expressed a desire to stay "under the radar", to which Bankman-Fried countered that his personal inclination was "exactly the opposite".
Adam Yedidia, a key witness for the prosecution, first encountered Bankman-Fried at the Massachusetts Institute of Technology, and the two have been close associates ever since.He testified to a Signal discussion known as the "People of the House", concerning Bankman-Fried's multi-million dollar penthouse, where a number of workers were leasing.Yedidia remembered Bankman-Fried expressing that he believed Alameda was the one footing the bill.
Singh's testimony centered around the topic of campaign donations. He accused his former supervisor, Bankman-Fried, of utilizing accounts tied to Alameda Research to finance political contributions despite knowing FTX was unable to reimburse its customers their $13 billion. Even though Bankman-Fried is not being charged for campaign violations right now, the prosecution has added allegations to two of the remaining charges--wire fraud and money laundering--claiming he used customer funds to fund approximately $100 million in contributions for the 2022 midterm elections.
Singh gave the jury an overview of how the system operated. He detailed a Signal conversation labelled "Donation Processing" which included Bankman-Fried, his brother Gabe, Salame, and Michael Sadowsky, the political consultant. Singh mentioned that Bankman-Fried or his brother would employ this discussion to ask for donations to be made using Singh's name. Salame, having access to Singh's Prime Trust Bank account, would effect the transfer and then inform Singh in the chatroom to check his email for directing the wire transfer. Singh stated that his responsibility was simply to click a button; however, Salame had other possible methods to draw from Singh's funds that did not require Singh doing anything.
In a private chat between Singh and Sadowsky on Jul. 5, 2022, Singh expressed reluctance towards "explicitly-woke stuff" but conceded that it was difficult to interact productively with Democrats without it. Sadowsky characterized Singh as the "center left face of our spending," implying he would be providing money for "a lot of woke s---," cautioning him to "think about that a lot" if it made him uneasy. Singh responded that he didn't want to be forced to only socialize with people he didn't like. He mentioned he would have to examine if there were "other viable people at FTX for it."
It appears that the government focused on debts Singh and Wang owed in millions of dollars. In a direct message to Bankman-Fried, on Nov. 6, 2022, Singh implored him to help him remove his debt obligations. He indicated that a major portion of the debt was from exercising stock options and other were U.S. investments. Singh offered to return whatever amount was in his bank account, although it was not a considerable amount. Bankman-Fried replied that he would "think about this."
In the same discussion, Singh mentioned on 8th Nov. that Ryne Miller, FTX's General Counsel, appeared "highly agitated" and "very likely to resign" if things didn't improve. He stated that "it might be selfish on my part, but they probably need to know that it was not a large group of people that planned this." He also added that "this will probably make them more motivated to stay and help repair the damage and save the others".
Ellison confided in Bankman-Fried after the grand scheme fell apart, writing, "this is the best mood I've been in in like a year tbh," using the abbreviation for 'to be honest.' Bankman-Fried replied with a series of three messages - "wow," "uh," and "congrats?" - to which Ellison responded that he had had an "increasing dread of this day" for a long time, and now that it was over, he felt great.
Caroline Ellison of SBF was featured in a report on CNBC, discussing their involvement in overseeing Alameda Research.
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