October 20, 2023 at 09:49 GMTModified date: October 20, 2023 at 09:50 GMT
October 20, 2023 at 09:49 GMT

FTX general counsel “never approved” customer funds for lending

Day 12 of Sam Bankman-Fried’s fraud trial saw FTX’s general counsel, Can Sun, taking the stand.

FTX general counsel “never approved” customer funds for lending

Day 12 of Sam Bankman-Fried’s fraud trial saw FTX’s general counsel, Can Sun, taking the stand. He told the court that he “never approved” approved loans of customer funds when working at the now-defunct crypto exchange.

Sun held the position of the general counsel at FTX from August 2021 to November 2022, when the exchange collapsed. He testified under a non-prosecution agreement (NPA), which is a contractual arrangement between a US government agency and a company or an individual facing a criminal or civil investigation. Under the NPA, the agency refrains from filing charges to allow the company to demonstrate its good conduct. It generally requires the company or individual to agree to things like paying a fine, waiving the statute of limitations or cooperating with the government.

When asked on Thursday whether he had signed off on Alameda’s use of FTX customer funds, he said “absolutely not”.

According to his testimony, he believed that FTX customers’ funds were kept apart and away from the company’s own funds. He based this stance on the conversations he’d had with Bankman-Fried.

Assistant US Attorney Danielle Sassoon showed Sun FTX’s terms of service and other public statements which supported the Department of Justice’s (DoJ) thesis that FTX misappropriated and embezzled customer funds.

However, Sun stated that various documents rather mentioned that FTX customer funds were supposed to be “ring-fenced” from FTX’s own funds.

The former FTX executive also described tracking loans to FTX and Alameda executives. However, his record of the loans did not match the document that the DoJ showed him.

Sun was involved in a brief cross-examination on Thursday, after which he concluded his testimony early in the morning itself. Throughout his time at the stand, he reiterated that he did not know customer funds were involved in those loans.

The court also heard from the director at Third Point, Robert Boroujerdi, on the same day. In his brief testimony, he said that his company had invested $60million in FTX.

According to him, Third Point had seen both audited and unaudited financials. However, now the investment is worth $0, said Boroujerdi, who is a veteran of Wall Street investment banking colossus Goldman Sachs.

The much-followed fraud trial of the former cryptocurrency mogul had started on 3 October. SBF faces multiple federal charges, including wire fraud, securities fraud, and money laundering, following FTX’s collapse, which affected thousands of customers.

Previous testimonies given by the former CEO of Alameda Research and his ex-girlfriend, Caroline Ellison, shed light on the misuse of billions in customer funds by FTX, with SBF allegedly orchestrating these actions. She accused SBF of directing fraudulent activities, including using FTX customer funds for Alameda’s investments and personal loans.

These claims were further corroborated when former FTX engineer, Nishad Singh, took the stand. He revealed an $8bn discrepancy in FTX’s finances and testified about approving transactions funded by customer deposits.

Wednesday’s court hearing this week also saw University of Notre Dame accounting professor, Peter Easton, being called to the stand. He was hired by the DoJ to trace billions of dollars of Alameda and FTX funds. When asked whether FTX ever spent user deposits, he replied: “Oh, yes.” Amongst other things, these deposits were used to buy back Binance’s shares in FTX. “Over a billion dollars came from customer funds from FTX exchange”, testified Easton.

The trial has now wrapped up its third week and is scheduled to resume next Thursday, 26 October, with the DoJ’s final witnesses. The day will witness the defence presenting its case, if it chooses to do so. There has been no clarity on whether or not Bankman-Fried will testify in his defence.