The trial of Sam Bankman-Fried reveals new details about how FTX died

On a November morning. On October 6, Nishad Singh, a senior executive at cryptocurrency exchange FTX, sent a message in a group chat with two of his senior colleagues. He wrote that customers were rushing to withdraw money from the exchange. In the last day, they attempted to move $1.25 billion from the platform, and $120 million worth of withdrawal requests arrived in the past hour.

Carolyn Ellison, who ran FTX’s sister hedge fund, Alameda Research, responded with an image of a sad face. Sam Bankman-Fried, founder of FTX, responded with one word: “Oof.”

Less than a year later, Mr. Bankman Fried, 31, is on trial in federal court in Manhattan, where he faces criminal charges of stealing more than $8 billion from FTX customers. The company is bankrupt and Mr. Singh and Mrs. Ellison, 28, pleaded guilty to fraud and testified in court against their former friend.

At trial, prosecutors used that testimony as a basis for a candid look at FTX’s meteoric collapse — a frenetic week in November that ended in one of the biggest corporate collapses in modern history. Over the course of dozens of hours, the government built the most comprehensive picture yet of FTX’s final days, drawing on witness accounts, texts and other communications. Prosecutors even created a calendar for November to help jurors follow the quick sequence of events.

While the broad outlines of FTX’s failure are publicly known, the trial opened a window into high-stakes conversations that unfolded secretly at Mr. Hans’ home. Bankman Fried headquarters in the Bahamas. Witness accounts of those behind-the-scenes discussions sparked some of the trial’s most emotional moments.

In her testimony, Mrs. Ellison fought back tears as she called the FTX collapse “the worst week of my life.” Mr. He said Singh was in “severe emotional distress”, to the point where he became suicidal, with a “crazy blame game” raging around him.

Together with Mrs. ellison and mr. Singh, the third-most senior FTX executive, Gary Wang, pleaded guilty and testified for the prosecution. Mr. Bankman-Fried has pleaded not guilty to seven counts of fraud and conspiracy, and faces up to life in prison if convicted. Mark Botnick, a spokesman for his legal team, declined to comment.

FTX started to surge in the first weekend of November when Changpeng Zhao, founder of giant cryptocurrency exchange Binance, Announce He was selling a large amount of digital currency created by Mr. Bankman-Fried who acted as a sort of proxy for FTX shares. Mr. Zhao cited an article on cryptocurrency news site CoinDesk that showed problems with Alameda’s finances. His pledge to sell FTX’s internal currency, FTT, was a sign of this The exchange was in deep trouble.

Ms. Ellison was on vacation in Japan when the crisis began. She said on the witness stand that she was immediately concerned. For years, Alameda borrowed billions of dollars from FTX clients to finance lavish spending, leaving a gaping hole in the exchange’s accounts.

Inside FTX, senior executives debated how to respond to Mr. Chow, a longtime rival. The company’s leaders considered publishing a message on Twitter accusing Mr. Zhao is spreading unfounded rumors, or “fear, uncertainty and doubt” in cryptocurrency parlance. But the initial draft written by Mr. Bankman Fried – “Heh I see *someone* is really trying to scam us this month” – Seems pretty obvious, Mrs. Ellison testified.

After several rounds of reviews, she said She made a post on Twitter In her voice as she defended Alameda, she then followed it up with a He pledges To buy FTT back from mr. Ciao.

This post did little to calm the growing panic. On a November morning. 6, mr. Singh sent a text message to the lady. ellison and mr. Bankman-Fried spoke about the increased withdrawals in a group chat presented to the jury by prosecutors. “FTX processing is not fast enough even if they have the money,” he warned.

That night, Mr. Singh knocked on mr. The door to Wang’s bedroom in the penthouse they shared in Albany, a luxury apartment complex on the island of New Providence in the Bahamas. They discussed FTX withdrawals, mister. Wang testified. Mr. Wang said he did some math — and was pleasantly surprised to find that FTX had enough money to pay off its clients.

But when he shared the news with Mr. Bankman-Fried recalls the FTX founder urging him to look closely, asking, “Does it include our Korean friend?”

Mr. Bankman-Fried was alluding to a mysterious account at FTX where he transferred debts Alameda owed to clients. The calculation showed that $8 billion was missing. Wang testified.

On a November morning. 8, mr. Bankman-Fried announced a rescue plan for FTX: Binance was going to take over management of the exchange. In an Alameda office in Hong Kong, Christian Drape, a software engineer, heard the news from a colleague, who uttered an expletive.

“I was completely shocked,” Mr. Darabi testified as a witness for the prosecution.

The deal with Binance collapsed the next day. Behind the scenes, more than a dozen senior FTX officials—including Mr. Singh, Mr. Wang, Mrs. ellison and mr. Bankman-Fried’s father, Joe Bankman, exchanged frantic text messages in a thread on the messaging app Signal, a kind of digital war room titled “small group chat.”

There were occasional moments of humor, according to screenshots prosecutors showed in court. Ryan Salama, an executive at FTX, posted a link to a Twitter post from an account called MoonOverlord, which expressed hope that customers who refused to withdraw their savings from FTX would receive free money as a reward.

“LOL” mr. Salama wrote. Mr. Bankman-Fried immediately retweeted MoonOverlord’s message.

With the increase in withdrawals, Dr. said: Bankman-Fried looked for other sources of financing to keep FTX afloat. In a Google document that prosecutors presented to the court, he compiled a list of potential backers, including Facebook co-founder Dustin Moskovitz, high-frequency trading firm Gene Street and the Saudi Public Investment Fund.

But it’s too late.

As the panic escalated, one of FTX’s in-house lawyers, Can Sun, reviewed a spreadsheet showing that the exchange would not be able to accommodate customer withdrawals. On the witness stand, Mr. Sun remembered the master’s question. fried bankman and mr. Singh to explain the elements of the spreadsheet. Mr. Singh’s face was pale, sir. “It was like his entire soul had been ripped out of him,” Sun recalls.

“No one was responding,” Mr. Shahad Shams.

That evening, Mr. Sun went for a walk with Mr. Bankman Fried in Albany. Mr. Bankman-Fried wanted to know if Alameda could come up with any legal justifications for borrowing FTX clients’ money. Mr. Sun testified to some theoretical options, but none were supported by “facts.”

“Sam basically said something like, ‘I got it,’ ‘Mr. Sun said. “He wasn’t surprised at all.”

Two nights later, Mrs. Ellison held a staff meeting at the Alameda office in Hong Kong, where she set up shop after her vacation. It gathered about 15 Alameda employees into a circle, according to Mr. Drape certificate. She sat on the beanbag and laughed nervously as she explained how FTX collapsed.

Since FTX’s founding, Alameda has drawn on customer deposits on the exchange to fund all types of spending, she said. These statements were recorded on an audio recording that prosecutors played in court.

“Who made the decision on the use of user deposits?” asked an Alameda employee.

“Mother,” answered Mrs. Ellison. “Sam, I guess.”

Back in the Bahamas, Mr. Singh struggled to adapt. In a letter to Mr. Bankman-Fried, who prosecutors brought to court, said FTX executives became increasingly angry with him and the rest of the company’s leadership.

“FWIW I don’t hate the idea of ​​them being mad at me,” said Mr. Bankman responded uniquely. “It might help them move forward.”

By the time FTX filed for bankruptcy in November. 11, most mr. Bankman-Fried’s allies abandoned him. Mr. Singh flew to his family in the San Francisco Bay Area. Ms. Ellison took refuge in her family’s home in the northeastern United States, where she was staying with her boyfriend, when the FBI showed up with a search warrant in mid-November.

Mr. Wang was the last member of Mr. Bankman Fried’s inner circle leaves the Bahamas back to the United States on November 16.

The next day, Mr. Wang said, he met with prosecutors.

J. Edward Moreno Contributed to reports.