The FTX Testimony Unveiled
Adam Yedidia, a former college mate of Sam Bankman-Fried, the renowned entrepreneur, and a noteworthy early team member at FTX, continued to eloquently share his testimony on the 5th of October during the trial of ex-FTX CEO Bankman-Fried in the bustling city of New York. Yedidia, under the deft and meticulous questioning by the astute Assistant U.S. Attorney Danielle Sassoon, meticulously detailed his enthralling professional journey - an odyssey that commenced with his tenure as a keen trader at Alameda Research and ultimately led him to don the hat of a skillful software developer at FTX, a tenure that spanned from the auspicious start of January 2021 to the transitional phase of November 2022, when he gracefully resigned from his role, marking the end of this intriguing chapter. During his sojourn in the exotic Bahamas, Yedidia found himself among the privileged few, known colloquially as the "household" at the opulent Albany Resort, where camaraderie and aspiration danced in harmony. He spoke of being dutifully aligned with Nishad Singh, the esteemed former FTX engineering director, and also maintained an informal rapport with FTX co-founder Gary Wang and the central figure of this trial, Bankman-Fried.
In this riveting narrative, Yedidia shed luminous light on the intricate tapestry of trading dynamics between the formidable forces of Alameda Research and the towering bastion of FTX. He unequivocally emphasized that the ultimate beneficiaries of the profits reaped from Alameda Research's trades on the FTX platform were none other than the discerning Bankman-Fried and the illustrious Wang, whose astuteness in the realm of cryptocurrency trading was lauded far and wide.
Amidst this enthralling courtroom drama, he proceeded to unveil his pivotal role in crafting the intricate code that mechanized customer transactions at FTX, a technological feat that left an indelible mark on the workings of the platform. However, the initial narrative woven in his mind was one of a simplistic trajectory, envisioning customer deposits finding their way into a designated FTX bank account. Yet, reality had a more complex narrative in store, revealing that these financial tributaries were, in fact, channeled into an account bearing the name of North Dimension Inc., a vessel firmly under the purview of Alameda Research, a result of the banking conundrum that FTX faced during that time.
As the calendar pages turned, making their way into late 2021, a new chapter emerged for FTX as the team achieved a significant milestone - securing a dedicated bank account christened "FTX Digital Markets," offering customers a more direct route to deposit their funds. However, intriguingly, Yedidia noted that despite this advancement, a stream of deposits continued to be drawn toward the Alameda Research-controlled account, a fascinating observation that added layers to the evolving tale of finance and technology.
Customer deposits, akin to constellations in the vast expanse of the financial cosmos, were meticulously tracked within an internal FTX database, housed under the cryptic moniker of "Fiat at FTX.com," a repository not of tangible funds but of precious informational fragments. The delicate balance dictated that the cumulative sum of customer deposits mirrored the corresponding liability recorded in "Fiat at FTX.com," a harmonious relationship that underscored the financial choreography within the platform.
Within this labyrinthine narrative, Yedidia courageously surfaced a bug within the code, an unintended glitch in the very fabric of automation he had so diligently coaxed into existence. This coding anomaly bore unintended consequences, skewing the accurate recording of Alameda Research's liabilities, inflating it by a staggering $500 million over the course of six months. A significant issue indeed, but one that, fortunately, was rectified around June 2022, a testament to the resilience and adaptability inherent in the ever-evolving realm of technology.
In the wake of this revelation, the tale meandered to a pivotal juncture where Bankman-Fried, the visionary leader of FTX, imparted his wisdom and directives. Yedidia recounted how Bankman-Fried, in tandem with former Alameda Research CEO Caroline Ellison, Wang, and Singh, convened a seminal meeting, delving into the profound financial intricacies of both FTX and Alameda Research. This gathering marked a turning point, urging Yedidia to embark on the journey to fix the bug, a journey that held the promise of restoring equilibrium to the financial cosmos that FTX inhabited.
Upon successfully navigating the complexities of this coding challenge, the once-inflated liability under Alameda Research, as reflected in the "Fiat at FTX.com" account, stood corrected, dramatically reduced from its prior towering perch of $16 billion to a more modest $8 billion. This transformation, akin to a celestial alignment, became visible to discerning eyes within the company, a reminder of the intricate interplay between technology and finance.
Yedidia's narrative also unveiled the undercurrents of concern that rippled through him in the wake of this revelation, a concern that he openly shared with Bankman-Fried. The magnitude of the remaining liability loomed large, an ever-present concern that gnawed at the edges of financial stability. Bankman-Fried, displaying characteristic reassurance and fortitude, calmly allayed Yedidia's apprehensions, assuring him that the company had weathered storms before and would emerge 'bulletproof' once again within the span of the next six months to three years.
In a tangential disclosure, Yedidia illuminated a facet of communication within the "household" - the utilization of the Signal messaging app, a modern-day medium for discreet exchanges. He revealed how he leveraged this very app to relay critical documentation regarding the bug fix to Bankman-Fried, appreciating the ephemeral nature of the messages, which vanished into digital oblivion after a predetermined duration.
The courtroom brimmed with an aura of intrigue as Yedidia pivoted to discuss Bankman-Fried's perspective on message preservation. A subtle dance of caution and foresight, Bankman-Fried, according to Yedidia's recollection, advocated for message ephemerality, citing the potential pitfalls of regulatory scrutiny. In the tapestry of legal intricacies, this perspective revealed the delicate balance between corporate strategy and regulatory prudence.