The trial of former FTX CEO Sam Bankman-Fried continued on October 5, with Adam Yedidia, Bankman-Fried’s college roommate and an early employee of FTX, testifying for the prosecution. Yedidia, who worked as a trader for Alameda Research and later as a software developer for FTX, explained that when Alameda Research traded on FTX, the ultimate beneficiaries of the profits were Bankman-Fried and another co-founder, Gary Wang.
Yedidia revealed that he was involved in writing the code to automate customer deposits and withdrawals from FTX. Initially, he believed that customer deposits were going to an FTX bank account, but later discovered that they were actually being sent to an account controlled by Alameda Research called North Dimension Inc. Customers were unaware of this arrangement. In late 2021, FTX managed to open a bank account, allowing customers to send funds directly to “FTX Digital Markets.” However, Yedidia noted that some deposits still went to the Alameda Research-controlled account even after this change.
Yedidia also addressed a bug in the automation code that he helped develop. The bug caused customer withdrawals to lower the liability recorded in the “Fiat at FTX.com” account, but it did not decrease the liability of Alameda Research to FTX as it should have. Yedidia reported the bug to Bankman-Fried, who instructed him to fix it. After the bug was fixed in mid-June 2022, the Alameda Research liability was reduced from $16 billion to $8 billion.
During his testimony, Yedidia expressed concern about the large remaining liability, to which Bankman-Fried reassured him that the company was “bulletproof.” Yedidia understood this to mean that the company was financially stable. Yedidia also mentioned that the “People of the House,” a group of individuals who shared an apartment in the Bahamas, used the Signal messaging app to communicate. He used Signal to deliver documentation of the bug fix to Bankman-Fried, as the app automatically deleted messages after a certain time. Bankman-Fried explained that retaining messages posed a risk if regulators were to find something unfavorable.
The trial shed light on the inner workings of FTX and its relationship with Alameda Research. Yedidia’s testimony provided insights into the handling of customer deposits and withdrawals, as well as the bug in the automation code. Bankman-Fried’s reassurance to Yedidia about the company’s financial stability also played a significant role in the trial. As the trial continues, more details are expected to emerge regarding the allegations against Bankman-Fried and the impact on FTX as a leading cryptocurrency exchange.
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