Friday, November 3, 2023

FTX Trial

Molly White (via Nick Heer):

We got our first glance at the FTX codebase on Friday. The prosecution brought out Github screenshots as they questioned cooperating witness Gary Wang, the former CTO of FTX who at various times was responsible for the codebases powering both FTX and Alameda Research. Wang has pleaded guilty to four charges.


Much of the conversation revolved around the allow_negative flag that was introduced to the FTX codebase on August 1, 2019. Wang testified that Sam Bankman-Fried had asked him and Nishad Singh (former FTX engineering director, who has also pleaded guilty) to add the flag. Github screenshots show Singh making a code change to add the column in the database, and adding logic to exempt accounts with the flag from checks that would otherwise determine if they had sufficient funds to withdraw.


Code snippets shown to the jury demonstrated how Nishad Singh wrote some code that would update the insurance fund amount by adding to it the daily trading volume, multiplied by a randomish number around 7,500, and dividing it by a billion, thus making it appear as though the website was referencing a real account balance that was fluctuating as the exchange added funds or withdrew from it to cover losses. In reality, it was all made up.

Elizabeth Lopatto (Hacker News):

Bankman-Fried claimed to have been “not involved as a general principle in day to day trading,” but this turned out to depend highly on how one defines trading. Sassoon quickly introduced the “Vertex” Signal groupchat for discussing Alameda’s trading. In it, we saw messages where Bankman-Fried asked the group how much of two tokens, OXY and MAPS, the group had bought. He then suggested Alameda should buy $1 million to $2 million of each over the next few days. (Bankman-Fried denied that this was him giving instructions, which depends highly on how one defines giving instructions.)

David Yaffe-Bellany, Matthew Goldstein, and J. Edward Moreno (Hacker News):

Sam Bankman-Fried, the tousle-haired mogul who founded the FTX cryptocurrency exchange, was convicted on Thursday of all seven charges of fraud and conspiracy after a monthlong trial that laid bare the hubris and risk-taking across the crypto industry. These charges carry a maximum sentence of 110 years.

MacKenzie Sigalos (via John Gruber):

Most of the defense’s case was built on the testimony of Bankman-Fried himself, who told the court that he didn’t commit fraud or steal customer money, but just made some business mistakes.


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The solution to opaque bank shenanigans and corruption used in corrupt scam once more.

How do they do it?

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