During the second day of Sam Bankman-Fried's trial in New York, Adam Yedidia, his college roommate and an early FTX employee, continued to testify under questioning by Assistant U.S. Attorney Danielle Sassoon. Yedidia's testimony was provided with immunity.
Yedidia outlined his journey from starting as a trader at Alameda Research to working as a software developer at FTX from January 2021 until his resignation in November 2022. During this period, he was part of a group known as the "family guys," consisting of 10 individuals who lived at the luxury Albany resort in the Bahamas. In terms of reporting structure, Yedidia reported to Nishad Singh, former FTX director of engineering, and had an "informal" connection with FTX co-founders Gary Wang and Sam Bankman-Fried.
He explained that, in his understanding, profits from Alameda Research's trading on FTX ultimately benefitted Bankman-Fried and Wang. Yedidia was involved in developing the code that automated customer deposits and withdrawals from FTX, a project in which Bankman-Fried was actively engaged. Initially, he believed that customer deposits would be placed into an FTX bank account. However, he later discovered that due to FTX's difficulties in securing a bank account, deposits were routed to an account under the name of North Dimension Inc, which is controlled by Alameda Research.
Yedidia mentioned that customers were instructed to send deposit funds to the North Dimension account, and to his knowledge, they were unaware that this account was controlled by Alameda. He learned of this arrangement from either Singh or FTX's head of settlement, Ray Salame.
Yedidia explained that sometime in late 2021, FTX successfully opened a bank account, allowing customers to choose to send funds to the "FTX digital market." However, he noted that some customer deposits continued to go into accounts controlled by Alameda Research. Deposits were also tracked in FTX's internal database under an account called "Fiat at FTX.com," which contained information rather than actual funds. Yedidia clarified that the total amount of customer deposits should have equaled the liabilities recorded under "Fiat on FTX.com."
In late 2021, Yedidia discovered a bug in the automation code he had helped develop. This bug, which remained unfixed for about six months until June 2022, caused customer withdrawals to reduce the liability recorded in "Fiat at FTX.com" but did not reduce Alameda Research's liability to FTX as it should have.
He recounted that either Gary Wang or Nishad Singh informed him about this vulnerability, which subsequently led to a meeting between Bankman-Fried, former Alameda Research CEO Caroline Ellison, Wang, and Singh. The meeting aimed to address the "comprehensive accounting of the two companies," FTX and Alameda Research.
Upon Bankman-Fried's directive, Yedidia fixed the bug in mid-June 2022. Before the fix, Alameda Research's liability recorded in the "Fiat at FTX.com" account stood at $16 billion, and this amount was visible to everyone in the company. After the repair, Alameda Research's liabilities were reduced to $8 billion. Yedidia expressed concern about Bankman-Fried's substantial remaining liability, to which Bankman-Fried reassured him that the company would be "bulletproof" again within six months to three years. Yedidia understood "bulletproof" in this context to mean financial stability.
Yedidia also noted in his testimony that Signal, a messaging app, was used by "members of the House of Representatives" for communication. He explained that he used Signal to provide documentation to Bankman-Fried about bug fixes related to customer deposit and withdrawal automation. Notably, Signal was set up to automatically delete messages after a specified time.
In reference to withholding information, Yedidia testified that Bankman-Fried indicated that it was a downside. He conveyed Bankman-Fried's sentiment by stating that "if regulators find something in the information that they don’t like, that’s going to be bad for the company." While not an exact quote, Yedidia described this as the essence of Bankman-Fried's message.
