Former FTX CEO Sam Bankman-Fried finds himself at the center of a courtroom drama as his former general counsel, Can Sun, testified about Bankman-Fried allegedly instructing him to come up with a legal explanation for an astounding $8 billion hole in Alameda Research's financial records. Sun's shocking testimony revealed the inner workings of the cryptocurrency exchange during a liquidity crisis, leading to his resignation and providing critical evidence in Bankman-Fried's trial, where he faces seven counts of fraud and conspiracy. If found guilty, the former CEO could potentially face a maximum of 115 years in jail.
Meanwhile, FTX users have fallen victim to a phishing scam that targets individuals eager to withdraw their assets amidst the ongoing legal disputes involving the exchange's former CEO. A prominent FTX creditor advocate, Sunil, issued a warning regarding deceptive emails falsely claiming to offer exclusive, expedited withdrawal opportunities. These fraudulent messages promise to bypass waiting periods and legal proceedings. While FTX creditors recently announced a potential resolution to customer property disputes, this scam underscores the need for users to exercise caution and verify the authenticity of all withdrawal-related communications, as the proposal awaits approval from a bankruptcy court.
Former FTX CEO Faces Allegations in Alameda Research's $8 Billion Scandal
In a stunning turn of events, the ongoing trial of former FTX CEO Sam Bankman-Fried has taken a dramatic twist as former general counsel Can Sun provided a shocking revelation during his testimony on 19 October 2023. Sun disclosed that Bankman-Fried had allegedly instructed him to find a "legal explanation" for an astonishing $8 billion hole in Alameda Research's books, shedding light on the complex web of financial intrigue that led to the downfall of FTX.
Can Sun, who flew from Japan to testify, is participating in the trial as part of a non prosecution agreement with the United States Department of Justice. His testimony unveiled a series of events that began to unravel in November of last year.
Sun, recounting his experience on the stand, revealed that he first became aware of the staggering billion-dollar deficit between Alameda Research and FTX on 7 November 2022. This revelation came to him in the form of a spreadsheet indicating the massive debt, which left him "shocked." The disclosure was intended for asset manager Apollo Capital as FTX sought to secure additional funding during the liquidity crunch that gripped the market.
Allegedly, when Apollo Capital inquired about the mysterious $8 billion hole, Bankman-Fried's response was to instruct Sun to "come up with a legal justification." As Sun detailed in his testimony, he explored various legal options, including the possibility of dormancy fees and collateral liquidations in response to the market downturn. However, the scale of the missing funds made it impossible to sweep under the rug. FTX's terms of service further complicated matters by clearly stating that user funds were not the property of FTX Trading.
"None of the Digital Assets in your account are the property of, or shall or may be loaned to, FTX Trading; FTX Trading does not represent or treat Digital Assets in users' accounts as belonging to FTX Trading," the terms stated.
Sun's revelations did not stop at the request for a legal explanation. He claimed that Bankman-Fried appeared unfazed by the dire financial situation, stating that he "wasn't surprised at all." In stark contrast, former engineering director Nishad Singh was described as being in a state of despair, as if "his soul was taken from him."
The shocking disclosures continued to unfold as Sun learned from Singh that Alameda Research had an astonishing $65 billion line of credit with FTX. Faced with these astonishing revelations and a deteriorating situation, Sun made the difficult decision to resign from his position at FTX just one day later, marking the end of his more than a year-long tenure at the cryptocurrency exchange.
Throughout his testimony, Sun asserted that he had relied on Bankman-Fried's assurances that user funds were segregated. These assurances had allowed him to produce legal documents for FTX and address inquiries from regulatory bodies. Sun unequivocally stated, "I'd never approve anything like that," referring to the financial discrepancies and the alleged attempts to cover them up.
Can Sun's shocking testimony marked a pivotal moment in Bankman-Fried's ongoing trial, which had already seen nine witnesses provide details about the tumultuous months leading up to the collapse of FTX. Prosecutors are expected to rest their case on 26 October 2023, following the testimony of two final witnesses. However, it remains uncertain whether Bankman-Fried's defense will present a case.
Sam Bankman-Fried is currently facing seven counts of fraud and conspiracy to commit fraud against FTX customers and investors. If found guilty, he could potentially face a maximum of 115 years in jail, making this trial a high-stakes legal battle with significant implications for the world of cryptocurrency and finance.
FTX Users Warned of Phishing Scam Targeting Withdrawals Amidst Legal Turmoil
In related news, FTX users are finding themselves in the crosshairs of an alarming withdrawal scam, as reports of phishing attempts have been on the rise. The online warning came from a prominent X (formerly Twitter) user and FTX creditor advocate known as Sunil, who urged FTX account holders to exercise caution and avoid clicking on any suspicious links. Sunil's public service announcement underscores the ever-evolving tactics employed by online scammers to exploit vulnerable individuals in the cryptocurrency space.
Several FTX users have come forward, sharing their experiences of receiving deceptive emails that claim to originate from FTX Trading, West Realm Shires Services, and FTX EU. These fraudulent emails promise FTX creditors an exclusive opportunity for immediate asset withdrawals, purportedly bypassing the waiting periods and legal proceedings typically associated with such actions.
An excerpt from one of these bogus emails reads as follows:
"We are excited to offer the valued priority clients of FTX Trading Ltd., West Realm Shires Services Inc., and FTX EU Ltd., a special opportunity starting today, Oct. 20, 2023. As a priority client, you can now undergo the withdrawal process for your assets on the FTX platform and deposit them directly into your wallet, eliminating any waiting period and court outcomes."
The fraudulent emails specifically target FTX users who are eager to retrieve their assets, particularly in light of ongoing legal disputes involving Bankman-Fried.
This disconcerting scam has emerged on the heels of a significant development in the ongoing saga surrounding FTX. Creditors of the exchange recently achieved a noteworthy milestone by announcing the resolution of customer property disputes.
However, it is crucial to emphasize that this proposal is still pending approval from a bankruptcy court. If approved, it promises substantial relief for FTX's global customer base, with customers expected to recover more than 90% of the distributable value.
The convergence of these events paints a complex picture of the FTX ecosystem, marked by legal battles, creditor advocacy, and now, phishing scams preying on users' eagerness to access their assets.
For now, FTX users are advised to exercise vigilance and skepticism when dealing with unsolicited emails or communications related to withdrawals, especially those promising shortcuts to asset recovery. It is essential to verify the authenticity of any such messages through official FTX channels and refrain from clicking on any links that appear suspicious or dubious in nature.
As the FTX saga unfolds, users and investors must remain cautious, stay informed about ongoing developments, and rely on trusted sources for information and updates regarding their assets and the exchange's future.
Despite the ongoing trial against FTX’s former CEO, data from CoinStats indicated that FTX’s native token, FTT, was able to print a gain over the past 24 hours. At press time, the cryptocurrency price tracking website showed that the altcoin was up 1.5% - elevating its price to $1.09 as a result.
Price chart for FTT (Source: CoinStats)
Notably, FTT was also trading closer to its 24-hour high of $1.1, while its low for the same period sat at $1.04. FTT was, however, not able to display the same strength against Bitcoin (BTC) as it had against the dollar over the past 24 hours. At press time, FTT was down 9.93% against BTC and was valued at 0.00003173 BTC.