FTX's founder, Sam Bankman-Fried, wanted to repay $8 billion liabilities

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FTX's founder, Sam Bankman-Fried, wanted to repay $8 billion liabilities

About five months before the crypto exchange FTX was dissolved, its CEO, Sam Bankman-Fried, met with a longtime friend and coworker on the sideline of a paddle tennis court, one of the many amenities inside the luxurious Bahamian apartment complex where they both lived.

According to Yedidia's testimony in Manhattan federal court yesterday, Yedidia asked Bankman-Fried to be removed as a senior software developer. Yedidia was worried about an $8 billion liability he'd found hanging over the balance sheet of FTX's sister firm, Alameda Research.

We were bulletproof last year, we're not bulletproof this year, Yedidia said.

The 8 billion FTX customers would be owed if they decided to withdraw their deposits, Yedidia said. It appeared like a very large debt, and Yedidia wanted to know if Alameda could repay it.

But he didn't press the issue, he said, and that he hoped SBF or other executives would be able to handle the situation.

The close financial links to Alameda are a crucial part of FTX's case against the U.S. prosecutors. At the direction of Bankman-Fried, FTX routed customer accounts directly into a bank account controlled by Alameda, which was, on paper, not connected to FTX except for having a common founder. The government contends that FTX misled customers about the whereabouts of their funds and how they were being used.

Bankman-Fried, 27, pleaded not guilty to seven counts of fraud and conspiracy. It is not yet clear whether he will testify in his trial, which could last up to six weeks. Prosecutors plan to call other colleagues in the coming days to testify against Bankman-Fried as part of their plea agreements.

Yedidia said he stood by his friend, whom he has known since they were MIT undergrads, until the moment he learned that Alameda, which was supposed to be a separate company from FTX, used FTX customers' deposits to pay Alameda's creditors.

It appeared like a 'flagrantly wrong thing to have done', he said.

The witness's testimony appears to support reporting from the Wall Street Journal that a group of employees discovered computer code inside FTX that allowed Alameda to 'back door' access to FTX customer funds. The discovery was made in the spring of 2022, several months before the company failed, according to the Journal, which cites people familiar with the matter. The workers reported the code to their boss of their division, who discussed it with one of Bankman-Fried's lieutenants.