Technology

Sam Bankman-Fried’s Closest Pals Change into His Foes in Courtroom Conflict

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When Sam Bankman-Fried’s cryptocurrency alternate collapsed in November, one among his oldest pals despatched him a message of assist.

“I like you, Sam,” stated Adam Yedidia, a school classmate of Mr. Bankman-Fried’s who went on to work for him on the alternate, FTX. “I’m not going anyplace. Don’t fear.”

Inside days, Mr. Yedidia had resigned from FTX. And final week, at Mr. Bankman-Fried’s fraud trial in federal courtroom in Manhattan, Mr. Yedidia confirmed as much as testify for the prosecution, and recounted the dialog to the jury.

Mr. Bankman-Fried’s trial has provided a vivid window into one of the vital dramatic company collapses in current historical past, a $10 billion implosion that touched the worlds of Washington politics, Wall Avenue finance and Silicon Valley investing. However the case additionally has a deeply private undercurrent: the fast unraveling of a detailed social group that has ended up pitting good friend in opposition to good friend.

At FTX’s headquarters within the Bahamas, Mr. Bankman-Fried lived and labored with an interior circle of greater than half a dozen pals, together with a former lover, a confidant from highschool math camp and a childhood buddy of his youthful brother. Not less than 4 of these allies have turned in opposition to him and agreed to cooperate with the federal government, after both pleading responsible or receiving immunity from prosecution.

Within the courtroom, the non-public dynamics between Mr. Bankman-Fried and his pals have grow to be an important element of the case. Prosecutors have proven images of Mr. Bankman-Fried socializing with Mr. Yedidia and different onetime confidants, looking for to attract out testimony in regards to the relationships on the coronary heart of FTX. On the witness stand, Mr. Bankman-Fried’s outdated allies have principally averted him.

“You may anticipate that at closing, this is among the issues that america goes to harp on: These have been individuals who have been shut private pals of S.B.F.,” stated Daniel Silva, a former federal prosecutor. “It instantly establishes their credibility as somebody who was there when it occurred.”

Mr. Bankman-Fried, 31, is charged with orchestrating an enormous conspiracy to siphon as a lot as $10 billion from FTX’s buyer accounts to finance political contributions, actual property purchases and different lavish spending. He has pleaded not responsible to seven counts of fraud, conspiracy and cash laundering, and faces what would quantity to a life sentence if convicted.

To this point, three members of his interior circle — Mr. Yedidia, the FTX co-founder Gary Wang and Mr. Bankman-Fried’s former girlfriend, Caroline Ellison — have testified in opposition to him. Not less than one different ally — the FTX government Nishad Singh, a childhood good friend of Mr. Bankman-Fried’s youthful brother, Gabe — is slated to testify.

Mr. Bankman-Fried is hardly the primary defendant to have shut associates activate him. However hardly ever has a gaggle as tightknit as FTX’s management dissolved so rapidly, and the sheer variety of pals turned foes stands out, authorized specialists stated.

Former associates usually play a key position in organized-crime circumstances, however “to have these sorts of shut relationships — former girlfriend, a former finest good friend — will not be as typical,” stated Paul Tuchmann, an ex-prosecutor who now works in personal apply.

By most accounts, Mr. Bankman-Fried by no means had many pals, even earlier than FTX’s fall turned him into a world pariah. However as an undergraduate on the Massachusetts Institute of Know-how, he grew to become connected to a few of his roommates in a gaggle home for Epsilon Theta, a fraternity that attracted a nerdy set of scholars, together with Mr. Yedidia and Mr. Wang.

Mr. Bankman-Fried ultimately employed Mr. Yedidia to work as a developer at FTX. They lived collectively in a five-bedroom penthouse within the Bahamas, the place Mr. Yedidia was joined by his fiancée, Andrea Lincoln, whom Mr. Bankman-Fried additionally employed.

Throughout Mr. Yedidia’s testimony, prosecutors confirmed the jury {a photograph} of him and Mr. Bankman-Fried consuming collectively. They have been shut sufficient that Mr. Bankman-Fried confided in Mr. Yedidia about his on-and-off relationship with Ms. Ellison, who was chief government of FTX’s sister hedge fund, Alameda Analysis.

“The defendant instructed me that he and Caroline had had intercourse and requested if it was a good suggestion for them to this point,” Mr. Yedidia testified. “I stated no.”

Mr. Yedidia stated he had resigned from FTX after a colleague instructed him that Alameda had used FTX buyer funds to repay its collectors. He began working with the federal government as early as December, and acquired immunity from prosecution in alternate for his testimony.

He was not the final to leap ship.

On Wednesday, Ms. Ellison testified that she had begun cooperating with federal prosecutors after the Federal Bureau of Investigation raided her dad and mom’ residence, seizing digital gadgets and her journal. She has pleaded responsible to fraud and conspiracy.

Over eight hours on the witness stand this week, Ms. Ellison recounted intimate particulars of her relationship with Mr. Bankman-Fried. They began sleeping collectively within the fall of 2018, she stated, after which dated formally for elements of 2020, 2021 and 2022. Throughout tense durations, they exchanged lengthy Google paperwork discussing facets of their turbulent relationship.

“I kind of wished extra,” Ms. Ellison testified, “however usually felt like he was distant or not listening to me.”

Partly due to her proximity to Mr. Bankman-Fried, she stated, she internalized a few of his attitudes about threat, and have become snug mendacity to enterprise companions and the general public, regardless that she knew it was incorrect.

Mr. Wang, who met Mr. Bankman-Fried at a math camp in highschool, has additionally pleaded responsible. He testified that the FTX founder had instructed him and Mr. Singh to create a secret backdoor within the alternate’s code that allowed just about limitless quantities of buyer cash to be transferred to Alameda.

Mr. Wang additionally recounted conversations during which he questioned Mr. Bankman-Fried in regards to the cash Alameda was borrowing.

“I wasn’t positive which interpretation was right, and I trusted his judgment,” Mr. Wang stated.

His testimony reached an emotional climax when prosecutors introduced {a photograph} of him posing with Mr. Bankman-Fried at M.I.T. The picture exhibits Mr. Wang smiling, with Mr. Bankman-Fried subsequent to him in a navy blue Epsilon Theta T-shirt.

The image was projected to the gallery, the place Mr. Bankman-Fried’s dad and mom have sat on daily basis of his trial. When she noticed the picture, his mom, Barbara Fried, put her head in her fingers and stifled a sob.

Matthew Goldstein contributed reporting.