Sam Bankman-Fried asked FTX attorney to 'come up' with legal argument for $8B hole
Sam Bankman-Fried instructed FTX's former general counsel Can Sun to "come up" with any legal explanation for the $8 billion hole in Alameda Research's books, according to Sun's testimony in court on Oct. 19.
Sun flew from Japan to testify in the ongoing trial as part of his non-prosecution agreement with the U.S. Department of Justice. During his testimony, Sun revealed that he learned of the billion-dollar hole between the two companies on Nov. 7 after receiving a spreadsheet indicating the debt. "I was shocked," he told jurors.
Asset manager Apollo Capital was intended to receive the spreadsheet as FTX attempted to raise new funding during the "liquidity crunch" of early November. In response to Apollo's inquiry about the $8 billion hole, Bankman-Fried asked Sun to "come up with a legal justification."
As Sun admitted in his testimony, he had considered some legal options. Among them were dormancy fees and collateral liquidations during the market downturn, but the missing amounts were too large to ignore. Also, FTX's Terms of Service were clear that funds belonged solely to users:
Bankman-Fried "wasn't surprised at all" with the circumstances, Sun noted, while Nishad Singh, former director of engineering, "was gray, like his soul was taken from him."
Later that same day, Sun learned from Singh about Alameda's $65 billion line of credit with FTX. He resigned the next day, over a year after joining the exchange.
During his time at the company, Sun relied on Bankman-Fried assurance that funds were segregated to produce legal documents for FTX and answer inquiries from regulators, he told jurors. "I'd never approve anything like that."
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