FTX’s Former General Counsel Reveals Alameda Research’s $8 Billion Hole
In court on Oct. 19, FTX’s former general counsel Can Sun testified that Sam Bankman-Fried, CEO of FTX, instructed him to find a legal explanation for the $8 billion deficit in Alameda Research’s books. Sun flew from Japan to testify as part of his non-prosecution agreement with the U.S. Department of Justice. He revealed that he learned about the hole on Nov. 7 after receiving a spreadsheet indicating the debt.
During the “liquidity crunch” in early November, FTX intended to raise new funding, and asset manager Apollo Capital was supposed to receive the spreadsheet. When Apollo inquired about the $8 billion hole, Bankman-Fried asked Sun to come up with a legal justification.
Legal Options Considered
Sun admitted that he considered legal options such as dormancy fees and collateral liquidations during the market downturn but found the missing amounts too significant to ignore. Additionally, FTX’s Terms of Service clearly stated that funds belonged solely to users. Bankman-Fried appeared unsurprised by the circumstances, while Nishad Singh, former director of engineering, seemed deeply affected.
On the same day, Sun learned from Singh about Alameda’s $65 billion line of credit with FTX and resigned the following day after over a year at the exchange.
Bankman-Fried’s Assurances
During his time at FTX, Sun relied on Bankman-Fried’s assurance that funds were segregated in order to produce legal documents and respond to regulators’ inquiries. Sun emphasized that he would never have approved such actions.
What’s Next in Sam Bankman-Fried’s Trial?
Can Sun’s testimony was part of a busy week in Bankman-Fried’s trial, with nine witnesses sharing details leading up to FTX’s collapse. Prosecutors are expected to conclude their case on Oct. 26 after two final witnesses testify. It is uncertain whether Bankman-Fried’s defense will present a case. The CEO faces seven counts of fraud and conspiracy to commit fraud against FTX customers and investors, potentially resulting in a 115-year prison sentence if found guilty.
Hot Take: Alameda Research’s $8 Billion Hole Exposed in Court
In the ongoing trial against Sam Bankman-Fried, FTX’s former general counsel Can Sun testified about the $8 billion deficit in Alameda Research’s books. The revelation that Bankman-Fried instructed Sun to find a legal explanation for the hole raises questions about the company’s financial practices. This case highlights the importance of transparency and trust in the crypto industry, particularly when it comes to managing user funds. As the trial continues, it remains to be seen how this revelation will impact the outcome and whether further evidence will emerge regarding FTX’s operations.
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