The inner circle of FTX consisted of close friends. At math camp, Sam Bankman-Fried saw Gary Wang, FTX's chief technology officer, as they were growing up, and engineering chief Nishad Singh was close friends with Bankman-Fried's brother.
Prosecutors have exploited that intimacy in their criminal case against Bankman-Fried, which began on Tuesday with jury selection. After calling a French cocoa trader and FTX victim as its first witness, the government turned to one of Bankman-Fried's closest friends, Adam Yedidia, a former senior developer for FTX and Bankman-Fried's housemate at MIT.
When Yedidia's testimony began on Wednesday, with Bankman-Fried just feet away at a table flanked by his lawyers, it was the first time the two men had seen each other since November, when FTX collapsed and Yedidia resigned after finding out the exchange had misappropriated customer assets. Prosecutors asked if his friend and former boss were in the room. When Yedidia pointed at Bankman-Fried, the slumping crypto founder straightened in his chair.
Bankman-Fried and Yedidia met when they were undergraduate students at MIT, living at the college's nerdy version of a dorm, Epsilon Theta, where housemates would play board games and host square dances.
As Bankman-Fried's fortunes increased, he had the opportunity to recruit Yedidia twice: first at his trading firm, Alameda Research, and then after Yedidia left to complete a Ph.D., as a core developer at FTX. Yedidia followed Bankman-Fried from Hong Kong to the Bahamas, living with the founder and eight others at the soon-to-be-infamous $30 million penthouse at the Albany luxury resort. Yedidia's other benefits included more than $10 million in bonuses in the form of cash and stock options.
On Thursday, Yedidia revealed the crucial role he played for FTX: He helped develop an automated system for customer deposits and withdrawals to be processed from bank transfers.
The government's criminal case against Bankman-Fried revolves around the trading firm Alameda, using customer deposits from the exchange FTX to its own purposes. On Thursday, Yedidia told the news site that customer deposits were not actually being sent to FTX, but instead to an Alameda-controlled account called North Dimension at Silvergate Bank.
While Yedidia was not initially concerned about Alameda's expanding debt to FTX in the form of customer deposits, that changed as the figure grew to $8 billion. Under direct examination by the Department of Justice prosecutor Danielle Sassoon, Yedidia described a fateful meeting he had with Bankman-Fried in the middle of a game of padel tennis at their Albany home in June 2022, just a few months before FTX collapsed.
Bankman-Fried, 74, responded to Yedidia. We're not bulletproof this year. Bankman-Fried said it could take six months to three years to rectify that.
Although Bankman-Fried told Yedidia he was trying to raise money from Saudi Arabia and the United Arab Emirates to bolster the exchange's cash reserves, his efforts were unsuccessful, according to Yedidia.
After CoinDesk released a balance sheet for Alameda in November, a series of rapid events that saw customers rush to withdraw their deposits from FTX could not make its users whole. In a few days, the company declared bankruptcy.
As FTX teetered on the edge, Yedidia said he still trusts Bankman-Fried to manage the crisis. As employees left, he sent his longtime friend a message over Signal.
That changed after Yedidia learned about Alameda's use of FTX customer deposits to repay loans to creditors. He said he quit just after leaving the Bahamas and later agreed to cooperate with prosecutors under immunity, meaning he would not be prosecuted for his testimony.
In a suit that appeared to dwarf his tiny frame, Yedidia spoke in carefully measured words as he described what he learned about how his former MIT housemate had used customer funds.
Yedidia said: A flagrantly wrong thing to have done.