SBF Trial – Forensic accountant reveals almost 70% of Alameda’s loans were serviced with FTX customer funds

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The eleventh day of the Sam Bankman-Fried (SBF) trial revolved around the testimony of accounting experts brought forward by the prosecution to shed light on the disappearance of $9 billion in FTX customer funds that preceded the cryptocurrency exchange’s bankruptcy.

The main witnesses for the day were Professor Peter Easton, an esteemed accounting expert from the University of Notre Dame, and FBI accountant Paige Owens, who revealed the findings of their in-depth analysis of FTX and Alameda’s accounts and bank statements.

Peter Easton’s testimony

Easton’s testimony was a meticulous analysis that unveiled the extent of the purported misappropriation of FTX customer and investor funds by the exchange’s sister hedge fund, Alameda Research.

Easton’s scrutiny disclosed that from January 2021 until Nov. 11, 2022, accounts held by Alameda on FTX consistently displayed substantial deficits despite continuing payouts to meet financial obligations.

Easton revealed that out of the $11.3 billion in FTX customer funds that were supposed to be held by Alameda Research, only $2.3 billion were found in its bank accounts. He detailed how these funds were diverted for various purposes, including investments at SkyBridge Capital, property acquisitions, political contributions, and charity foundations.

One particularly telling trace of funds led to Modulo Capital, where a substantial sum of customer funds was invested through Alameda. Additionally, FTX customer crypto assets were used to repay a significant portion of a loan that Alameda had received from Genesis Capital.

The professor asserted that a staggering 68% of Alameda’s third-party loans, valued at roughly $4.5 billion, were serviced with FTX customer funds — a disturbing mingling of resources.

The testimony also revealed that the acquisition of Binance’s $2.2 billion stake by FTX was financially underpinned by $1.2 billion sourced from “customers on the FTX exchange.”

He also told the courtroom that SBF’s parents, Joe Bankman and Barbara Fried, acquired a $16.4 million property in the Bahamas, most likely by utilizing customer funds.

Trail of political contributions

The next witness to take the stand from the prosecution was FBI accountant Paige Owens, who provided insights into the extensive political donations attributed to SBF, Nishad Singh, and Ryan Salame.

According to Owens, Alameda’s Prime Trust account executed seven transfers — cumulatively amounting to $47 million — to SBF’s personal Prime Trust account between January 2022 and April 2022.

The prosecution contends that a substantial portion of these funds was directed towards various political action committees, including Guardians Against Pandemics, Building a Stronger Future, and multiple Democratic PACs.

Nishad Singh’s political donations, surpassing $3 million, originated from Alameda and FTX Digital Markets bank accounts, with recipients including numerous PACs and campaign funds. Ryan Salame, the CEO of FTX Digital Markets, similarly received funds for political donations.

Public statements and censure

The prosecution also brought Eliora Katz, the former director of government relations and policy at FTX’s US division, to the stand to discuss some of SBF’s public statements.

Katz read tweets and written testimonies by SBF from congressional hearings held in 2021 and 2022.

Some of these statements contradicted the timeline of her employment at the company, suggesting that SBF had made public assertions about FTX before she officially joined in April 2022.

Another witness, Google Cory Gaddis, also took the stand briefly but was censured by Judge Kaplan due to a lack of expertise. The judge admonished both the prosecution and the defense for wasting the court’s time.

The defense expressed concerns about SBF’s access to Adderall and its potential impact on his capacity to focus, raising questions about whether he will testify. SBF will reportedly be given an extended-release dose from Oct. 19.

Early conclusion likely

The trial is progressing ahead of schedule, with the prosecution likely to conclude its case next week, leaving the defense with critical decisions regarding its strategy.

Easton’s testimony marked a crucial moment in the trial, as he is one of the final government witnesses before prosecutors conclude their case in the third week of proceedings. Earlier testimonies included three members of SBF’s inner circle – Caroline Ellison, Gary Wang, and Nishad Singh — all pleaded guilty and cooperating with the government.

Despite the defense’s efforts to undermine their accounts, these witnesses painted a picture of Bankman-Fried allegedly orchestrating the fraud and making high-risk decisions, even when close associates raised concerns.

The ongoing trial continues to captivate observers as it uncovers allegations of financial impropriety and political contributions linked to one of the cryptocurrency industry’s prominent figures. Should SBF be convicted of the charges, he faces substantial legal consequences.

Posted In: FTX, U.S., Legal

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