During the third day of the criminal trial of Sam "SBF" Bankman-Fried, former MIT roommate and FTX developer Adam Yedidia provided crucial testimony regarding the cryptocurrency exchange's reported $8 billion deficit before its bankruptcy.
Yedidia appeared in court on October 5 to shed light on the connection between the cryptocurrency exchange and Alameda Research. This trial is taking place in the U.S. District Court for the Southern District of New York, and Bankman-Fried is facing allegations of fraud. Yedidia reportedly informed Bankman-Fried about a bug in FTX's code that led to "Alameda's liabilities not being reduced," resulting in an estimated $8 billion error.
Curiously, when Yedidia inquired about when FTX would become financially secure again, Bankman-Fried responded with "six months to three years" and appeared visibly nervous during the exchange. Yedidia's resignation from FTX, he claimed, came after revelations that Alameda had used customer deposits to repay loans. Yedidia also alleged that Bankman-Fried instructed him to address FTX code issues using the messaging app Signal.
Regarding the use of Signal, Yedidia explained that Bankman-Fried recommended its use to the entire company due to its auto-deletion feature. Bankman-Fried expressed concerns that retaining messages could be detrimental if regulators discovered unfavorable information.
Additionally, Yedidia recounted a conversation near a "padel tennis court" in the Bahamas where he confronted Bankman-Fried about the $8 billion loophole. During this conversation, Bankman-Fried assured him that the issue would be resolved.
Assistant U.S. Attorney Danielle Sassoon's questioning also delved into Yedidia's knowledge of Bankman-Fried's personal relationship with former Alameda Research CEO Carolyn Ellison. Yedidia disclosed that Bankman-Fried had admitted to having a sexual relationship with Ellison and asked for Yedidia's opinion on whether they should date. Yedidia advised against it.
Ellison is anticipated to testify against Bankman-Fried as part of her plea agreement with prosecutors. Notably, Judge Lewis Kaplan revoked Bankman-Fried's bail in August following allegations that he had disclosed personal diaries of Ellison and others to a New York Times reporter, which led to witness intimidation.
Bankman-Fried's first criminal trial commenced on October 3 with jury selection and is expected to run until November. Gary Wang, one of FTX's co-founders, may provide testimony after Yedidia. Prosecutors have indicated that they might also subpoena former FTX engineering director Nishad Singh and former FTX chief operating officer Constance Wang.
