Sam Bankman-Fried sought ‘justifications’ for missing funds, lawyer testifies

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NEW YORK :Cryptocurrency exchange FTX’s former top lawyer testified on Thursday that its founder Sam Bankman-Fried asked him to come up with “legal justifications” for why it was missing $7 billion in customer funds four days before the company declared bankruptcy. Can Sun, FTX’s former general counsel, testified at Bankman-Fried’s fraud trial that the company on Nov. 7, 2022, was engaged in talks with investment fund Apollo for emergency capital to cover a wave of customer withdrawals. After Apollo asked to see FTX’s financial statements, Sun testified, either Bankman-Fried or another executive sent him a spreadsheet indicating the cryptocurrency exchange was billions of dollars short of being able to satisfy customer withdrawals and that it also was owed billions of dollars by Bankman-Fried’s crypto-focused hedge fund Alameda Research. “I was shocked,” said Sun, who testified under a non-prosecution agreement in the third week of the trial in Manhattan federal court. Sun told the jury that after FTX shared the spreadsheet with Apollo, Bankman-Fried pulled him aside at the Bahamas luxury apartment complex where the 31-year-old former billionaire lived and told him Apollo had asked for a legal justification for the missing funds. “He asked me to come up with legal justifications,” Sun 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.” Sun said he told Bankman-Fried later that day that he could not identify any legal justifications. FTX declared bankruptcy on Nov. 11, 2022, leaving customers with billions of dollars of losses. Apollo on Thursday did not immediately respond to a request for comment. Sun’s testimony could complicate Bankman-Fried’s defense that he had a good-faith belief that Alameda’s use of FTX customer funds was appropriate. He has pleaded not guilty to two counts of fraud and five counts of conspiracy and could spend decades in prison if convicted. His lawyers were expected to cross-examine Sun later on Thursday. They have said Bankman-Fried is considering testifying in his own defense after the prosecution rests its case on Oct. 26. Sun testified earlier on Thursday that Bankman-Fried told him that the company had kept its customer funds safe and separate from its own assets, and that he never approved the lending of FTX customer funds to Alameda Research. “Absolutely not,” Sun said, when asked by prosecutor Danielle Sassoon if he had ever approved such loans. That testimony similarly could undercut the Bankman-Fried’s argument that he had a good-faith belief that FTX’s lawyers were involved in many of his key decisions at issue in the trial.

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