SBF Trial Witness: Glitch at FTX Overstated Alameda’s Debts by $8B

NEW YORK – A software bug that resulted from the unusual way FTX handled customer deposits overstated how much its sister company Alameda owed the exchange’s customers by $8 billion, a witness in Sam Bankman-Fried’s trial said Wednesday.

A key piece of the relationship was banking. In the early days of FTX, its customers deposited fiat by wiring money to Alameda rather than FTX directly, former FTX developer Adam Yedidia told the court. This unusual relationship complicated how the companies tracked debts owed to customers. Yedidia said there was a bug in the accounting software that by June 2022 showed Alameda owed far more money than it actually did.

Prosecutors zoomed in on a conversation that Yedidia and Bankman-Fried had on a tennis court. Yedidia had just patched the accounting bug in mid-June, he said, which incorrectly said Alameda owed FTX customers $16 billion. In doing so, he discovered there was still an $8 billion debt, and “was concerned.” Bankman-Fried told him “we were bulletproof last year, but we’re not bulletproof this year.”

The bug fix occurred shortly after Bankman-Fried met with Nishad Singh, Gary Wang and Caroline Ellisson – three former FTX or Alameda executives who are expected to testify during this trial – to discuss getting a full accounting of FTX and Alameda, said Yedidia, who is testifying under a grant of immunity.

Yedidia took the stand again on day three of Bankman-Fried’s trial. The onetime FTX chief faces fraud and conspiracy charges stemming from the collapse of his crypto empire, which prosecutors said was a “house of cards” during opening arguments on Tuesday.

Yedidia told the jury on Tuesday that he resigned from FTX after learning that Alameda was using customer funds to repay creditors, a statement he echoed on Wednesday.

“I learned that Alameda Research had used customer – FTX customer deposits to pay back its loan to creditors,” he said. Asked what he did then, he responded: “I resigned.”

Inside the Courtroom

Bankman-Fried walked in just before 9:30 a.m. nodding at people in the gallery, seemingly greeting them with a shy smile before searching for his parents, who were seated on the right side in the second row.

He fidgeted during the testimony, though he worked on his laptop for much of the trial as he has in previous days.

Joseph Bankman, Bankman-Fried’s father, took notes the entire time, passing them to Bankman-Fried’s mother, Barbara Fried. Fried held a pen in her hand but seemed more focused on listening to the testimony.

One juror fell asleep while Yedidia explained how deposits at FTX worked.

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