Sam Bankman-Fried Asked FTX Attorney to ‘Come Up’ with Legal Argument for $8B Hole
In a startling revelation that has sent shockwaves through the cryptocurrency world, former FTX CEO Sam Bankman-Fried has been accused of instructing the former general counsel of the exchange, Can Sun, to devise a legal explanation for an astounding $8 billion hole in the books of Alameda Research. Can Sun made this explosive claim during his testimony in court on October 19, shedding light on a web of financial intrigue that has left the crypto community in disbelief.
Can Sun’s testimony was a pivotal moment in an ongoing trial, and it came as part of his nonprosecution agreement with the United States Department of Justice. Sun, who flew from Japan to testify, revealed that he first became aware of the gaping billion-dollar hole between the two companies on November 7. His shock was palpable as he described receiving a spreadsheet that indicated the staggering debt. “I was shocked,” Sun told jurors, his testimony a window into the behind-the-scenes drama unfolding in the world of crypto finance.
The $8 billion hole came to light when asset manager Apollo Capital was expecting to receive a spreadsheet from FTX as the exchange was trying to secure new funding during what is being referred to as the “liquidity crunch” of early November. In response to Apollo Capital’s inquiry about the alarming hole in Alameda’s finances, Sam Bankman-Fried allegedly made a shocking request to Can Sun. According to Sun’s testimony, Bankman-Fried asked him to “come up with a legal justification.”
Can Sun admitted during his testimony that he did consider various legal options to explain the situation. Among these were dormancy fees and collateral liquidations during a market downturn. However, the missing amounts were so substantial that these explanations proved inadequate. FTX’s own terms of service were clear in stating that user funds were separate and belonged solely to the users, a fact that further complicated any legal justifications.
“None of the Digital Assets in your account are the property of, or shall or may be loaned to, FTX Trading; FTX Trading does not represent or treat Digital Assets in user’s accounts as belonging to FTX Trading,” the terms of service explicitly stated, making it clear that user funds were sacrosanct.
Surprisingly, Bankman-Fried seemed unfazed by the unfolding financial crisis, with Can Sun claiming, “Bankman-Fried wasn’t surprised at all.” In stark contrast, former engineering director Nishad Singh appeared visibly shaken, as if “his soul was taken from him.”
On that fateful day, Sun also learned of Alameda’s jaw-dropping $65 billion line of credit with FTX. The magnitude of the debt and the unfolding situation proved to be too much for Sun, leading him to resign the following day, just over a year after joining the exchange.
Throughout his tenure at FTX, Can Sun had relied on Bankman-Fried’s assurances that user funds were segregated and used these assurances to produce legal documents for FTX while addressing inquiries from regulators. Sun emphasized, “I’d never approve anything like that,” underscoring the gravity of the financial irregularities that had transpired.
The courtroom drama continues to captivate the cryptocurrency industry, leaving many questioning the ethics and transparency of some of its prominent players. The consequences of these revelations remain uncertain, but they have undeniably cast a shadow over the reputation of Sam Bankman-Fried and the FTX exchange. As the trial unfolds, the world watches with bated breath, waiting to see how this incredible story of financial intrigue will ultimately be resolved.
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