During the ongoing trial involving former FTX CEO Sam Bankman-Fried, revelations have emerged suggesting that Bankman-Fried directed the former general counsel of FTX, Can Sun, to find a legal explanation for an apparent $8 billion shortfall in Alameda Research's accounts. Sun, testifying in court on October 19, explained that he only became aware of the $1 billion discrepancy between the two companies when he received a spreadsheet on November 7, detailing the debt. His reaction to this revelation was one of shock, and he conveyed this to the jurors. Asset manager Apollo Capital was originally meant to receive this spreadsheet as FTX was attempting to secure new funds during a liquidity crisis in early November.
When Apollo inquired about the $8 billion deficit, it is alleged that Bankman-Fried asked Sun to "come up with a legal basis." Sun's testimony revealed that he had considered various legal options, including dormancy fees and collateral liquidations in the event of a market downturn. However, the large sums involved made these missing amounts difficult to ignore. Furthermore, FTX's terms of service explicitly stated that user funds do not belong to the exchange but rather to the users themselves.
Sun testified that Bankman-Fried did not appear surprised by the situation, while Nishad Singh, the former engineering director, looked visibly distraught, as though he had lost his spirit. On the same day, Sun learned from Singh that Alameda had extended a $65 billion credit line to FTX. Subsequently, Sun resigned from the company the following day. During his tenure at the firm, Sun had relied on Bankman-Fried's assurance of fund segregation to prepare legal documents for FTX and respond to regulatory inquiries. His testimony added another layer to the complex trial, shedding light on the months leading up to FTX's collapse.
As the trial nears its conclusion, prosecutors are set to wrap up their case on October 26 after two final witnesses give their testimony. However, it remains uncertain whether charges will be filed against Bankman-Fried, as his defense has yet to confirm. Bankman-Fried faces seven counts of fraud and conspiracy to defraud FTX customers and investors, and if convicted, he could potentially be sentenced to up to 115 years in prison.
