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The topic of the cross-examination of Adam Yedidia by the prosecution on October 5 was an $8 billion liability from Alameda to FTX. Sam Bankman-Fried’s close buddy Yedidia worked as a developer at FTX. Additionally, he was one of the ten residents at Bankman-Fried’s $35 million opulent Bahamas property.
Prosecutor’s Witness –
Yedidia’s Testimony
Yedidia testified, claiming that in early 2021, FTX deposited user funds into an Alameda account titled “North Dimension” because it was having trouble obtaining its bank account. The money would be viewed as Alameda’s obligation to FTX, which amounted to $8 billion in June 2022.
Even though Yedidia knew about this massive amount of money sent to Alameda’s account, he didn’t think much of it when he learned about it in 2021. However, after being informed of the responsibility amount in 2022, he spoke with Bankman-Fried about his worries while playing tennis.
Yedidia claims that Bankman-Fried stated that the companies should pay off their debt within six months to three years. Yedidia expressed his concern to Bankman-Fried, emphasizing the urgency of paying off the debt.
Bankman-Fried assured Yedidia that they would prioritize resolving the obligation and explore various strategies to expedite repayment.
In response to queries from prosecutors, he claims that he trusted Sam Bankman-Fried, Caroline, and others in Alameda to manage the problem. Yedidia resigned in November 2022 after discovering that Alameda was not only keeping the money but also using it to pay its debtors.
Gary Wang’s Testimony:
Gary Wang, co-founder of FTX and Alameda Research, and Matthew Huang, co-founder of Paradigm, testified during the second phase of the Sam Bankman-Fried trial on October 5.
Between 2021 and 2022, Paradigm invested $278 million in FTX through two fundraising rounds. Huang claims that neither the venture capital firm nor the privileges enjoyed by Alameda with the cryptocurrency exchange were aware of the mixing of funds between FTX and Alameda.
Among these benefits was Alameda’s exclusion from the liquidation engine of FTX, a device that closes holdings at risk of liquidation. Alameda could leverage its position and keep a negative balance with FTX because of the exception.
The co-founder of Paradigm further admitted that the company relied on information from Bankman-Fried and did not perform further due diligence on FTX.
The absence of a board of directors at FTX was another issue for Paradigm. Huang claims that Bankman-Fried agreed to create a board of directors for FTX and choose qualified executives to sit on it despite being “very resistant” to having investors serve.
Wang admitted throughout his brief testimony that he and Bankman-fried Caroline Ellison and others had engaged in wire fraud, securities fraud, and commodities fraud.
Wang also mentioned that Alameda has special benefits from FTX, including a $65 billion line of credit and the opportunity to withdraw an unlimited amount of money from the exchange. Wang used the contrast between Alameda’s credit line, which was in the billions, and the credit limit of any other market maker to demonstrate these rights.
According to reports, Wang mentioned a $200 million to $300 million loan from Alameda, ostensibly in connection with purchasing further cryptocurrency businesses. But the loans were never recorded in his account. He will continue his testimony on October 6.
Response From The Defence:
In response to the prosecution’s arguments that demonstrated how the corporations were mixing funds, Bankman-Fried’s defense attorney aimed to provide the jury with a more comprehensive understanding of FTX and Alameda’s connection.
The defense emphasized that FTX was expanding quickly and that Bankman-Fried, who at the time handled numerous divisions of the company, and other senior members worked more than 10 hours per day during the bull market of 2021.
Protection of Yedidia –
Another major issue raised by the defense counsel was the SEC’s guarantee of providing Yedidia immunity. Yedidia had been the subject of multiple inquiries from prosecutors due to an immunity order, which meant cooperating with prosecutors would shield him from being held accountable for his involvement at FTX.
Additionally, according to Bankman-Fried’s defense, FTX’s difficulty acquiring a bank account and its reliance on Alameda’s ‘North Dimension’ to deposit money was well known. The cross-examination of Yedidia will continue this afternoon in the lower Manhattan federal courtroom.