The inner circle of FTX was a web of close friends. Sam Bankman-Fried met Gary Wang, FTX’s chief technology officer, at math camp when they were growing up, and engineering chief Nishad Singh was close friends with Bankman-Fried’s brother.
Prosecutors have exploited that intimacy in their criminal case against Bankman-Fried, which began on Tuesday with jury selection. After calling a French cocoa trader and FTX victim as its first witness, the government turned to one of Bankman-Fried’s closest acquaintances as its second: Adam Yedidia, a former senior developer for FTX and Bankman-Fried’s housemate at MIT.
When Yedidia’s testimony began on Wednesday, with Bankman-Fried just feet away at a table flanked by his lawyers, it was the first time the two men had seen each other since November, when FTX collapsed and Yedidia resigned after finding out the exchange had misappropriated customer assets. Prosecutors asked if his friend and former boss was in the room. When Yedidia pointed at Bankman-Fried, the slumping crypto founder straightened in his chair.
The padel court
Bankman-Fried and Yedidia met when they were undergraduate students at MIT, living at the college’s nerdy version of a dorm, Epsilon Theta, where housemates would play board games and host square dances.
As Bankman-Fried’s fortunes rose along with his budding crypto empire, he recruited Yedidia twice: first at his trading firm, Alameda Research, and then, after Yedidia left to complete a Ph.D., as a core developer at FTX. Yedidia followed Bankman-Fried from Hong Kong to the Bahamas, living with the founder and eight others at the soon-to-be-infamous $30 million penthouse at the Albany luxury resort. Yedidia enjoyed other benefits as well, including over $10 million in bonuses in the form of cash and stock options.
On Thursday, in his second day of testimony, Yedidia detailed the crucial role he played for FTX: He helped develop an automated system for customer deposits and withdrawals to be processed from bank transfers.
The government’s criminal case against Bankman-Fried hinges on the trading firm, Alameda, using customer deposits from the exchange FTX for its own purposes. On Thursday, Yedidia explained how he learned that customer deposits were not actually being sent to FTX, but instead to an Alameda-controlled account called North Dimension at Silvergate Bank.
While Yedidia said he was not initially concerned about Alameda’s growing debt to FTX in the form of customer deposits, that changed as the figure grew to $8 billion. Under direct examination by Department of Justice prosecutor Danielle Sassoon, Yedidia described a fateful meeting he had with Bankman-Fried in the middle of a game of padel tennis at their Albany home in June 2022, just a few months before FTX collapsed.
“Are things okay?” Yedidia recalls asking Bankman-Fried.
“We were bulletproof last year,” Bankman-Fried replied, according to Yedidia. “We’re not bulletproof this year.” Bankman-Fried then told Yedidia it could take six months to three years to rectify that.
‘I love you, Sam’
While Bankman-Fried later told Yedidia that he was trying to raise money from Saudi Arabia and the United Arab Emirates to bolster the exchange’s cash reserves, his efforts were unsuccessful, according to Yedidia.
After CoinDesk published a balance sheet for Alameda in November, spurring a series of rapid events that saw customers rush to withdraw their deposits from FTX, the exchange could not make its users whole. It declared bankruptcy in a matter of days.
As FTX teetered on the edge, Yedidia said that he still trusted Bankman-Fried to manage the crisis. As employees quit, he sent his longtime friend a message over Signal.
“I love you, Sam,” Yedidia recalled writing. “I’m not going anywhere, don’t worry.”
That changed after Yedidia learned that Alameda had been using FTX customer deposits to repay loans to creditors. He said that he quit right after, leaving the Bahamas and later agreeing to cooperate with prosecutors under immunity, meaning he would not be prosecuted for his testimony.
Wearing a suit that seemed to dwarf his small frame, Yedidia spoke in carefully measured words as he described what he learned about how his former MIT housemate had used customer funds.
“It was,” Yedidia said, “a flagrantly wrong thing to have done.”
