The trial of Sam Bankman-Fried, the former CEO of FTX, has begun and has already revealed a troubling narrative of deception and mismanagement that led to the downfall of the trading firm and Alameda Research. Witnesses who have taken the stand painted a picture of a company that operated with secrecy and informality, despite its high valuation. One shocking revelation was that an $8 billion liability owed to FTX by Alameda was discussed as early as June 2022. This suggests that FTX was not as robust as it appeared, even as it courted billions in investment. Another bombshell came from a co-founder of FTX, who revealed that Alameda Research had special privileges including a $65 billion credit line and the ability to maintain a negative account balance without authorization. Issues with FTX’s backstop insurance fund were also exposed. The trial’s second week will feature testimony from former Alameda CEO Caroline Ellison, which is expected to provide further insight into the workings of FTX and Alameda Research. The revelations from the first week have already raised questions about the integrity of FTX and its former CEO.
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