Chelsea Jia Feng/InsiderThank you for reading this post, don't forget to subscribe!
- Cain Sun, a prominent lawyer at FTX, provided testimony on Thursday during the trial of Sam Bankman-Fried.
- While Sam Bankman-Fried remained unsurprised, Cain Sun expressed his “surprise” at the $7 billion discrepancy in FTX.
- SBF inquired about a potential “legal basis” for utilizing client funds, however, Sun stated that none existed.
The corporate lawyer for FTX testified in a Manhattan federal court on Thursday against his former employer, Sam Bankman-Fried, and disclosed details about the company’s bankruptcy in November 2022.
Cain Sun expressed his astonishment upon discovering that FTX’s hedge fund subsidiary, Alameda Research, possessed special privileges over all other clients on the cryptocurrency exchange, and that the two companies owned by Bankman-Fried intermingled funds obtained from clients without their consent.
“I was shocked,” testified Sun, who had traveled from Japan to take the witness stand. “I consistently informed our investors that FTX and Alameda are two completely independent and separate entities.”
Prosecutors have charged Bankman-Fried with seven financial offenses related to defrauding investors and customers. Several former members of his executive team have pleaded guilty to financial crimes and provided testimonies against Bankman-Fried during his trial.
Sun revealed that on November 7, 2022 – four days prior to FTX declaring bankruptcy – Bankman-Fried had a conversation with a potential investor who raised concerns about FTX’s financial situation and asked Sun to call a client. FTX was requested to “create a legal rationale” for utilizing the funds.
Prior to the call with the investor, Bankman-Fried took Sun aside for a walk, Sun stated. He informed the jury that he made it explicitly clear that there was no justification for FTX to access clients’ funds without their consent, and that the only arguments put forth were purely theoretical and unsupported by facts.
“Yeah, yeah,” replied Bankman-Fried, according to Sun’s testimony. “got it.”
“I was expecting a significant reaction, but it was rather subdued,” Sun described his former boss. “He showed no surprise whatsoever.”
Shortly before leaving with Bankman-Fried, Sun also encountered a visibly anxious Nishad Singh in the Bahamas office. Singh, a former engineering director at FTX, pleaded guilty to financial crimes earlier this year and testified last week that the bankruptcy made him feel “suicidal.”
“Nishad was sitting there. His complexion turned pale and ashen,” Sun testified. “It seemed as though his spirit had been drained from him.”
Singh asked Sun about his “personal liability” regarding the loan he received from Alameda, confessing that he had become aware of the irregularities in FTX’s finances several months earlier. Sun testified that Singh told him he didn’t care when Bankman-Fried discussed the shortfall with the CEO.
Bankman-Fried conveyed the following to Sun: “It is what it is. There’s nothing to do except grow the company and fill the gap,” testified Sun.
WATCH NOW: Insider Inc’s trending videos.