On the morning of November 6, Nishad Singh, a top executive at cryptocurrency exchange FTX, sent a message to a group chat with two senior colleagues. Customers were rushing to withdraw funds from the exchange, he wrote. Within the last day, they had attempted to transfer $1.25 billion from the platform, and there were $120 million withdrawal requests in the last hour.
Caroline Ellison, who runs FTX’s sister hedge fund, Alameda Research, replied with an image of a sad face. FTX founder Sam Bankman-Fried responded with one word: “Oops.”
Less than a year later, Mr. Bankman-Fried, 31, is on trial in federal court in Manhattan, fighting criminal charges that he stole more than $8 billion from FTX clients. The company has gone bankrupt, and Mr Singh and Ms Ellison, both 28, have pleaded guilty to fraud and testified in court against their one-time friend.
At trial, prosecutors have used that testimony as the basis for a candid look inside FTX’s rapid unraveling — a frantic week in November that culminated in one of the largest corporate collapses in recent history. Over dozens of hours, the government built the most comprehensive picture yet of FTX’s final days, based on witness accounts, texts and other communications. Prosecutors also have put together a November calendar to help jurors follow the fast-paced sequence of events.
While the broad outlines of FTX’s failure are publicly known, the trial has opened a window into the high-stakes conversations that unfolded in secret at Mr. Bankman-Fried’s headquarters in the Bahamas. Witness accounts of the behind-the-scenes discussions have revealed some of the trial’s most emotional moments.
In her testimony, Ms. Ellison fought back tears, describing the collapse of FTX as “the worst week of my life.” Mr Singh was in such “severe emotional distress” that he even committed suicide, he said, because there was “a crazy allegation” going on around him.
Along with Ms. Ellison and Mr. Singh, FTX’s third top executive, Gary Wang, pleaded guilty and testified for the prosecution. Mr Bankman-Fried has pleaded not guilty to seven counts of fraud and conspiracy, and if convicted he could face life in prison. A spokesman for his legal team, Mark Botnick, declined to comment.
FTX began its bullish rise over the first weekend of November when Changpeng Zhao, founder of giant crypto exchange Binance, said, announced He was selling large amounts of the digital currency created by Mr. Bankman-Fried that served as a kind of proxy for FTX stock. Mr Zhao cited an article on crypto news site CoinDesk that showed problems with Alameda’s finances. Their pledge to sell FTX’s in-house currency, FTT, was a sign of this The exchange was in deep trouble,
Ms Ellison was on holiday in Japan when the crisis began. She immediately became concerned, she said on the witness stand. For years, Alameda had borrowed billions of dollars from FTX customers for huge expenses, leading to huge deficits in the exchange’s accounts.
Within FTX, top executives debated how to respond to Mr. Zhao, a longtime rival. Company leaders considered posting a message on Twitter accusing Mr. Zhao of spreading unfounded rumors, or “fear, uncertainty and doubt” in crypto parlance. But an early draft written by Mr. Bankman-Fried — “Hey, I see *someone* is really trying to scam us this month” — seemed clearly ghostwritten, to Ms. Ellison. Testified.
This post did nothing to ease the growing panic. On the morning of November 6, Mr. Singh messaged Ms. Ellison and Mr. Bankman-Fried about the increasing withdrawals in a group chat, which prosecutors presented to the jury. He warned that “FTX’s processing is not fast enough, even if it has the funds.”
That night, Mr. Singh knocked on the door of Mr. Wang’s bedroom at the penthouse they shared in The Albany, a luxury apartment complex on the Bahamian island of New Providence. They discussed withdrawals from FTX, Mr. Wang testified. Mr Wang said he had done some calculations – and was pleasantly surprised to find that FTX had enough funds to pay its customers.
But when he shared the news with Mr. Bankman-Fried, he recalls, the FTX founder prompted him to look more closely, asking, “Are you including our Korean friend?”
Mr Bankman-Fried was pointing to a mysteriously labeled account on FTX where he transferred Alameda’s outstanding loans to clients. Mr Wang testified that the accounts showed that $8 billion was missing.
On the morning of November 8, Mr. Bankman-Fried announced a rescue plan for FTX: Binance was going to acquire the exchange. At the Alameda office in Hong Kong, Christian Drapery, a software engineer, heard the news from a co-worker who uttered profanities.
“I was completely stunned,” Mr. Drapery testified as a prosecution witness.
The deal with Binance collapsed the next day. Behind the scenes, more than a dozen top FTX executives — including Mr. Singh, Mr. Wang, Ms. Ellison and Mr. Bankman-Fried’s father, Joe Bankman — exchanged frantic texts in a thread on the messaging app Signal, One type of digital war room is titled “small group chat”.
There were occasional moments of lightness, according to screenshots shown in court by prosecutors. Ryan Salame, an executive at FTX, posted a link to a Twitter post from an account called MoonOverlord, which hoped that customers who refused to withdraw their savings from FTX would receive free money as a reward.
“Lol,” Mr Salame wrote. Mr Bankman-Fried immediately retweeted Moonoverlord’s message.
As withdrawals increased, Mr. Bankman-Fried looked for other sources of funding to keep FTX running. On a Google document shown in court by prosecutors, he outlined a list of potential backers, which included Facebook co-founder Dustin Moskovitz, high-frequency trading firm Jane Street and Saudi Arabia’s Public Investment Fund.
But it was too late.
As panic grew, Ken Sun, one of FTX’s in-house lawyers, reviewed a spreadsheet that showed the exchange would be unable to complete customer withdrawals. On the witness stand, Mr Sun asked Mr Bankman-Fried and Mr Singh to explain the elements of the spreadsheet. Mr. Singh’s face was pale, Mr. Sun recalled, and he “looked as if his entire soul had been taken from him.”
“No one was responding,” Mr. Sun testified.
That evening, Mr. Sun accompanied Mr. Bankman-Fried for a walk in Albany. Mr Bankman-Fried wanted to know whether Alameda could provide any legal justification for borrowing FTX client funds. Mr. Sun considered some theoretical options, but nothing was supported “by the facts,” he testified.
“Sam basically said something like, ‘Got it,'” Mr. Sun said. “He wasn’t surprised at all.”
A few nights later, Ms. Ellison called a staff meeting at the Alameda office in Hong Kong, where she had set up shop after her vacation. According to Mr. Drapery’s testimony, he gathered about 15 Alameda employees in a circle. Sitting on a beanbag, she laughed nervously as she described how FTX had collapsed.
Since FTX was founded, Alameda had invested in the exchange’s customer deposits to finance all types of expenses, he said. These comments were captured in an audio recording, which prosecutors played in court.
“Who decided to use user deposits?” an Alameda employee asked.
“Umm,” Ms. Ellison replied. “Sam, I think.”
Back in the Bahamas, Mr Singh struggled to cope. In a message to Mr. Bankman-Fried, presented in court by prosecutors, he said that FTX executives were becoming angry with him and the rest of the company’s leadership.
Mr. Bankman-Fried responded, “FWIW I don’t hate the idea that they would be mad at me.” “This may help them move forward.”
By the time FTX filed for bankruptcy on November 11, most of Mr. Bankman-Fried’s colleagues had left him. Mr Singh flew to his family in the San Francisco Bay Area. Ms. Ellison moved to a family home in the northeastern United States, where she was living with her boyfriend, when the Federal Bureau of Investigation arrived with a search warrant in mid-November.
Mr Wang was the last member of Mr Bankman-Fried’s inner circle to leave the Bahamas, flying back to the United States on November 16.
The next day, Mr. Wang said, he met with prosecutors.
J. Edward Moreno Contributed to the reporting.