FTX Trial: The Adults Are Tanking ‘Cool Kid’ Bankman-Fried’s Defense

It is the end of the third week of Sam Bankman-Fried’s multibillion-dollar criminal fraud trial.

The trial itself is approaching halftime, with the prosecution expected to rest its case next Thursday (Oct. 26), after a six-day break starting Friday (Oct. 20).

The defense team for the accused is expected to present their case after lunch on Oct. 26.

So far, three of Bankman-Fried’s closest childhood friends and professional colleagues, Gary Wang, the FTX co-founder and CTO; Alameda CEO Caroline Ellison; and FTX engineering director Nishad Singh have each delivered knife-twist witness testimony against the 31-year-old accused fraudster, attacking his personal character and each telling the jury it was Bankman-Fried who directed them to commit the crimes they’ve all individually pleaded guilty to.

And now, after hearing from the “cool kids,” the federal prosecution team is bringing the adults into the courtroom.

This, as on day 11 of the trial (Oct. 18), University of Notre Dame Professor Peter Easton, a forensic accountant, unequivocally told the jury that the financial statements of Alameda Research and FTX showed the misuse of billions of dollars of customer funds.

On the 12th day of the trial, Thursday (Oct. 19), Can Sun, who was the general counsel at FTX from August 2021 to the time of the exchange’s collapse in November 2022, took the witness stand at the prosecution’s behest.

The former legal chief of the once-sprawling FTX crypto empire testified that, based on numerous conversations he had during his tenure with Bankman-Fried, he believed that FTX customers’ funds were kept segregated from the company’s own funds.

When asked by federal prosecutors whether he ever signed off on Alameda Research’s use of FTX customer funds, Sun replied “absolutely not.”

The one-time FTX general counsel flew in from Japan to testify and earlier reached a non-prosecution agreement with the government.

Read also: From Star-Crossed Lovers to Star Witness: Caroline Ellison Says Bankman-Fried Called All the Shots

Little Faith Left in Bankman-Fried’s Good Faith

Sun testified Thursday that as the walls were closing in on FTX, Bankman-Fried asked him to come up with various legal justifications for why the company was missing billions in customer funds.

At the time, Bankman-Fried was scrambling for rescue financing to cover up the $7-9 billion hole in its books and was in talks with lenders including private equity and insurance giant Apollo.

When Apollo requested financial statements from FTX, that was when Bankman-Fried turned to Sun, the lawyer testified.

All the available financial statements, of course, showed that the cryptocurrency exchange was billions of dollars shy of being able to meet its customer withdrawals, and that it had loaned out more misappropriated billions to its sister trading firm, Alameda, through an allegedly illicit backdoor.

This was just four days before FTX declared bankruptcy. Sun would resign the next day.

“I was shocked,” the former general counsel testified. “It basically confirmed my suspicion that had been rising all day that FTX did not have the funds to satisfy customer withdrawals, and that they had been misappropriated by Alameda.”

Read more: Gary Wang Details FTX’s 3-Year Journey From Trusted to Busted

Sun told the court that after learning of the disastrous shortfall, he spoke with both Bankman-Fried and former FTX engineering director Nishad Singh, another government witness, about the situation.

“It looked like [Singh’s] soul had been plucked away from him,” Sun said to the jury.

For his part, Singh wrapped his own testimony earlier this week on Monday (Oct. 16) and Tuesday (Oct. 17).

As for Bankman-Fried, Sun testified that he could not get a straight answer from the former FTX CEO, and that the company founder was “typing away on his computer” — something that the 31-year-old, who stands accused of seven criminal counts, has been doing quite a lot of during his own trial.

Throughout his testimony, Sun repeatedly emphasized that he did not know customer funds were involved FTX and Alameda’s operations.

Asked by prosecutors what he was saying to regulators in his role as general counsel, Sun replied that “customer assets were protected.” During his tenure at FTX, Sun helped the crypto exchange receive licenses in various geographies.

He testified that FTX’s own documents claimed that customer funds were supposed to be “ring-fenced” from FTX’s own funds.

The lawyers witness testimony could throw a wrench in Bankman-Fried’s ability to prove to the jury that he had a good-faith belief that Alameda’s use of FTX’s customer money was appropriate, as well as the argument that the involvement of FTX’s own lawyers means Bankman-Fried acted without criminal intent.