(New York) When Sam Bankman-Fried’s cryptocurrency exchange collapsed in November, one of his oldest friends sent him a message of support.
“I love you, Sam,” said Adam Yedidia, a classmate of Sam Bankman-Fried who later worked for him at FTX. ” I’m not going anywhere. Don’t worry. »
A few days later, Yedidia resigned from FTX. Last week, during Bankman-Fried’s fraud trial in Manhattan federal court, Yedidia appeared to testify for the prosecution and recounted the conversation to the jury.
The Bankman-Fried trial offered a vivid window into one of the most spectacular corporate collapses in recent history, a $10 billion implosion that touched the worlds of Washington politics, finance of Wall Street and investing in Silicon Valley. But the case also has a deeply personal aspect: the rapid crumbling of a close social group that ended up pitting friends against each other.
At FTX’s headquarters in the Bahamas, Bankman-Fried lived and worked with a tight circle of more than half a dozen friends, including a former lover, a confidant from high school math camp, and a childhood friend of his young brother. At least four of these allies turned on him and agreed to cooperate with the government, either by pleading guilty or receiving immunity.
In the courtroom, the personal dynamic between Bankman-Fried and her friends became a vital part of the case. Prosecutors showed photographs of Bankman-Fried hobnobbing with Yedidia and other former confidants, seeking testimony about the relationships at the heart of FTX. On the witness stand, Bankman-Fried’s former allies mostly avoided looking at him.
“You can expect the United States to emphasize this point in oral argument: These are people who were close personal friends of SBF,” said Daniel Silva, a former federal prosecutor. “This immediately establishes their credibility as people who were present when the events occurred. »
Bankman-Fried, 31, is accused of masterminding a massive conspiracy to divert as much as $10 billion from FTX customer accounts to fund political contributions, real estate purchases and other large expenses. He has pleaded not guilty to seven counts of fraud, conspiracy and money laundering, and faces a life sentence if convicted.
So far, three members of his inner circle – Yedidia, Gary Wang, co-founder of FTX, and Caroline Ellison, Bankman-Fried’s former girlfriend – have testified against him. At least one other ally — Nishad Singh, an FTX executive and childhood friend of Bankman-Fried’s younger brother Gabe — is expected to testify.
By all accounts, Bankman-Fried never had many friends, even before the fall of FTX made him an international pariah. But when he was a student at the Massachusetts Institute of Technology, he became attached to some of his roommates in a group house at Epsilon Theta, a fraternity that attracted a group of students who were a little too nerdy, including Yedidia and Wang.
Bankman-Fried ended up hiring Yedidia as a developer at FTX. They lived together in a five-bedroom penthouse in the Bahamas, where Yedidia was joined by his fiancée, Andrea Lincoln, whom Bankman-Fried had also hired.
During Yedidia’s testimony, prosecutors showed the jury a photo of him and Bankman-Fried eating together. They were close enough that Bankman-Fried confided to Yedidia about his on-again, off-again relationship with Ellison, who was CEO of FTX’s sister hedge fund, Alameda Research.
“The defendant told me that he and Caroline had had sex and asked me if it was a good idea for them to date,” Yedidia said. “I answered in the negative. »
Mr. Yedidia said he resigned from FTX after a colleague told him that Alameda had used FTX customer funds to pay off creditors. He began working with the government in December and received immunity in exchange for his testimony.
He was not the last to leave the ship.
On Wednesday, Ms. Ellison said she began cooperating with federal prosecutors after the FBI raided her parents’ home and seized electronic devices and her diary. She pleaded guilty to fraud and conspiracy charges.
Wang, who met Bankman-Fried at a high school math camp, also pleaded guilty. He said FTX’s founder asked him and Singh to create a secret backdoor in the exchange’s code that allowed virtually unlimited amounts of customer money to be transferred to Alameda.
Wang also recounted conversations in which he questioned Bankman-Fried about the money Alameda was borrowing.
“I wasn’t sure which interpretation was correct, and I trusted his judgment,” Mr. Wang said.
His testimony reached an emotional climax when prosecutors presented a photograph of him posing with Bankman-Fried at MIT. The image shows Wang smiling, with Bankman-Fried next to him in a navy Epsilon Theta T-shirt.
The image was projected into the gallery, where Bankman-Fried’s parents sat each day of the trial. When she saw the image, her mother, Barbara Fried, put her head in her hands and choked back a sob.
