In a recent court testimony on October 19, former FTX CEO Sam Bankman-Fried was alleged to have instructed his former general counsel, Can Sun, to find a legal explanation for the glaring $8 billion discrepancy in Alameda Research’s financial records.
Sun, who had flown from Japan as part of a non-prosecution agreement with the United States Department of Justice, disclosed this startling information during the ongoing trial.
Sun revealed that he became aware of the substantial financial hole between the two companies on November 7, when he received a spreadsheet detailing the debt.
He expressed his astonishment to the jurors, saying, “I was shocked.” The spreadsheet was initially intended for asset manager Apollo Capital, as FTX was seeking new funding during the tumultuous financial period of early November.
When Apollo Capital inquired about the $8 billion discrepancy, Bankman-Fried reportedly urged Sun to “come up with a legal justification.”
During his testimony, Sun admitted that he had explored various legal options, such as dormancy fees and collateral liquidations during the market downturn.
However, the missing funds were too substantial to be easily explained away. Moreover, FTX’s terms of service explicitly stated that users’ funds were not the property of FTX Trading.
This further complicated efforts to justify the discrepancy.
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Sun claimed that Bankman-Fried appeared unfazed by the situation, while former engineering director Nishad Singh seemed deeply troubled by it.
On the same day, Sun learned from Singh about Alameda’s $65 billion line of credit with FTX. Following this revelation, Sun resigned from his position at the exchange, more than a year after joining.
During his tenure at FTX, Sun had relied on Bankman-Fried’s assurances that user funds were segregated, and he had produced legal documents for FTX while responding to inquiries from regulators.
Sun emphasized that he would never have approved such discrepancies.
The trial of Sam Bankman-Fried has been marked by a series of testimonies from witnesses, including Can Sun. Prosecutors are expected to conclude their case on October 26 after hearing from two more witnesses. It remains uncertain whether Bankman-Fried’s defense will present its case.
Bankman-Fried is facing seven counts of fraud and conspiracy to commit fraud in connection with FTX customers and investors.
If found guilty, he could potentially face a maximum sentence of 115 years in prison. The trial continues to unfold, and the legal community is closely following the developments.
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