Day seven of Sam Bankman-Fried’s criminal trial saw the defense team unable to discredit Caroline Ellison, despite multiple attempts. The defense's questions often seemed aimless, failing to draw any substantial conclusions. Ellison remained steadfast, revealing that SBF had plans to buy Telegram around the time Alameda "borrowed" $14 billion of FTX customer money.

Defense attorney Mark Cohen tried to portray Ellison as the one in charge of Alameda, but she clarified that SBF was the ultimate decision-maker. Ellison also disclosed that she had considered resigning from Alameda but was persuaded by SBF to stay, emphasizing his control over the firm.

The day continued with testimony from Christian Drappi, a former Alameda employee, who corroborated Ellison's account. Zac Prince, founder of the bankrupt crypto lending firm BlockFi, briefly took the stand, setting the stage for his testimony to continue the next day.

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Welcome to The Chopping Block – where crypto insiders Haseeb Qureshi, Tom Schmidt, Tarun Chitra, and chop it up about the latest news. This week, the crew is joined by Gabriel Shapiro, general counsel at Delphi Labs, to talk about the key points in the criminal trial of Sam Bankman-Fried and his lackluster defense strategy so far. They also delve into Michael Lewis’ book and his depictions of SBF’s “lore and backstory,” and discuss how SBF’s “quirks of character” may have actually enticed investors.

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Day 6 of the SBF trial was marked by emotional testimony from Caroline Ellison, who shed tears as she detailed the financial chaos within Alameda and FTX. She also recounted dramatic incidents such as an alleged bribe by Alameda to a Chinese government official, creating accounts using the IDs of Thai prostitutes, and an attempt to raise money by selling FTX shares to a Saudi prince.

Ellison discussed the financial turmoil that began with the crypto market crash and how it led to desperate actions, allegedly directed by SBF. She revealed the manipulation of balance sheets, the use of FTX customer funds for risky investments, and the ethical compromises made to keep Alameda afloat.

The day also delved into the secretive culture within Alameda and FTX, highlighting the use of disappearing messages on Signal for sensitive discussions, and what was really happening behind the scenes as FTX began to implode. 

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Caroline Ellison, former CEO of Alameda Research and SBF's ex-partner, took the stand to reveal the alleged financial mismanagement at Alameda and FTX, which she claimed was at Bankman-Fried’s direction. The cross examination of Gary Wang finally began to show how SBF’s lawyers plan to defend him, though Wang largely appeared to be a yes man who simply trusted and followed his friend and co-founder.

Ellison's revelations included Alameda's hidden trading of FTT to prop up its price, her warnings to SBF about Alameda’s inability to pay back its lenders if he put billions more into venture investments, and his views on risk and “expected value.” For instance, she claimed he said if, with a coin toss came up tails and would mean Earth’s destruction, he would toss the coin if there it was twice as likely that it would more than double prosperity on Earth. However, her testimony seemed designed to preemptively rebut the defense’s potential argument that Alameda needed to borrow customer funds because she had not hedged. 

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The first week of the criminal trial of former FTX CEO Sam Bankman-Fried has come to a close, with his former friends and FTX colleagues Adam Yedidia and Gary Wang delivering powerful testimonies that are forming the foundations for the prosecution’s arguments — arguments that the defense may have a difficult time surmounting. Sam Enzer, partner at Cahill Gordon & Reindel, and Brian Klein, partner at Waymaker, discuss Alameda’s special privileges coded into the FTX software, the reason why a scorched FTX customer may have been chosen as the first witness, and why upcoming key witnesses are going to be a “real problem” for the defense.

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Laura reports on the testimony of Gary Wang on Thursday, who described Alameda’s special privileges that were programmed into FTX’s code as early as July 2019, a few months after the exchange launched. 

These privileges included Alameda’s ability to have a negative balance on its FTX account. This meant that Alameda was able to transfer and withdraw more funds than it had, essentially “borrowing from the exchange.” Those funds, Wang said, belonged to FTX customers, and at the time that FTX declared bankruptcy, Alameda had borrowed $8 billion from the exchange. 

Wang said Alameda had a $65 billion line of credit — far higher than any other customer on the exchange. He also revealed details about FTT, the cryptocurrency that FTX had created, and the concerns that were raised about how the tokens were allegedly used to boost Alameda’s balance on the site.

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The blockbuster trial of Sam Bankman-Fried wrapped up its third day, with multiple witnesses, including former FTX software developer Adam Yedidia, Paradigm co-founder Matt Huang, and FTX cofounder Gary Wang, taking the witness stand. Joshua Ashley Klayman, Senior Counsel, U.S. Head of FinTech and Head of Blockchain & Digital Assets at Linklaters, discusses the main takeaways from the trial so far, the surprising testimonies given by former close associates of SBF, and how the prosecution and defense plan to paint a picture of who SBF is to the jury.

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Laura reports on the testimony of three witnesses on Thursday, including one who declared that “FTX defrauded all of its customers” and another stating that he had committed financial crimes at the direction of Sam Bankman-Fried.

Former FTX software developer Adam Yedidia, Paradigm co-founder Matt Huang, and FTX and Alameda co-founder Gary Wang filled in the details of different aspects of FTX and Alameda’s business. Huang’s testimony detailed how Paradigm expressed concern about FTX’s lack of corporate controls and how the company was “owned and controlled by Sam.” Wang has only started his testimony but has already said he implemented advantages for Alameda into FTX’s code at Bankman-Fried’s direction. 

Yedidia’s account had the most emotional details, describing how he had a strong belief in the company, to the point where, when employees began leaving FTX, he had messaged Bankman-Fried that he loved him and wasn’t going anywhere, but that it flipped once he realized “FTX defrauded all of its customers.” Find out what new information caused him to have a change of heart in this episode. 

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Laura reports on the opening statements of the prosecution and defense, which painted a portrait of Sam Bankman-Fried as power-hungry and discussed how he allegedly managed to fumble customer funds. 

Next witnesses are set to include Matt Huang, cofounder and managing partner at crypto VC firm Paradigm, and Gary Wang, former CTO of FTX. 

Tune in to get the latest updates and insights on a case that could have far-reaching implications for the crypto industry.

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Welcome to The Chopping Block – where crypto insiders Haseeb Qureshi, Tom Schmidt, Tarun Chitra, and Robert Leshner chop it up about the latest news. This week, they discuss the wildest claims in Michael Lewis’ new book on Sam Bankman-Fried, debate whether SBF’s effective altruism was ever genuine, and whether Ethereum should enshrine more features onto its protocol.

Listen to the episode on Apple Podcasts, Spotify, Overcast, Podcast Addict, Pocket Casts, Stitcher, Castbox, Google Podcasts, TuneIn, Amazon Music, or on your favorite podcast platform.

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SBF’s trial: 

Protocol enshrinement:

Others:

• Cryptoslate: Terra's Do Kwon and Daniel Shin conspired to falsify transactions, chat logs show

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