FTX’s Former General Counsel Testifies About Missing Customer Funds
In a testimony on Thursday, Can Sun, the former general counsel of FTX, revealed that Sam Bankman-Fried, the founder of the crypto exchange, asked him to come up with “legal justifications” to explain the disappearance of billions of dollars in customer funds. The exchange was facing difficulties processing customer withdrawals in November last year and Bankman-Fried believed that raising money from investment fund Apollo could help resolve the situation.
Seeking “Legal Justifications” for Missing Funds
Sun informed Bankman-Fried during a conversation at FTX’s headquarters in The Albany resort in the Bahamas that there were no valid legal justifications supported by the facts. He explained that it wouldn’t be viable to claim that the funds were taken from dormant customer accounts or to use the exchange’s terms of service as an explanation, as they explicitly stated that customer assets couldn’t be touched.
No Surprise from Bankman-Fried
Sun noted that Bankman-Fried didn’t appear surprised during their conversation and seemed to accept that none of the possible explanations provided held up. While Sun discussed the issue, he observed a noticeable difference in Bankman-Fried’s demeanor compared to other employees present at the resort. Specifically, Nishad Singh, FTX’s former head of engineering and an alleged co-conspirator, appeared visibly distressed.
Revelations about Alameda Research and Personal Loans
Later that night, Sun said Singh explained to him how customer funds could be accessed through Bankman-Fried’s trading firm, Alameda Research. Shockingly, Sun discovered in August that Alameda’s trading positions couldn’t be liquidated on FTX. Additionally, Sun revealed his involvement in structuring personal loans for FTX insiders, totaling around $2 billion.
Misuse of Customer Funds
Sun emphasized that he believed customer funds were segregated from company cash and that withdrawals would always be possible in case of solvency issues. He stated that protecting customer funds was a core value at FTX and expressed his shock at learning about their misuse.
Hot Take: Serious Allegations against FTX Founder
The testimony from FTX’s former general counsel raises serious allegations against Sam Bankman-Fried. The request for “legal justifications” and the revelation of missing customer funds paint a troubling picture of potential misconduct within the exchange. As the trial continues, it remains to be seen how these allegations will impact Bankman-Fried’s reputation and the future of FTX.
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