The FTX legal officer told the jury on Thursday that he did not authorise the contentious transfer of customer funds to Alameda Research, FTX sister company.
Can Sun, former general counsel for the FTX exchange, testified on Thursday that Sam Bankman-Fried asked him for legal justifications for misuse and commingling of customers’ assets.
Can Sun drops the bomb
The FTX legal officer told the jury on Thursday that he did not authorise the contentious transfer of customer funds to Alameda Research, FTX sister company.
Can Sun, who was at FTX from August 2021 to November 2022 noted that he was a strong believer in the segregation of client funds and his testimony reveals a big gap in communication and friction in the operation of the exchange.
Sun explained that when the exchange was at the brink of collapse, Bankman-Fried thought the exchange could raise money from investment firm Apollo. Apollo wanted to know how there was a $7B shortfall on the exchange account records and they had to cook up lies.
He explained that SBF had told him to cook up legal justifications to explain the missing funds. He said he remembered telling SBF that there were no legal justifications that supported the facts.
“There were no legal justifications for the money being taken,” Sun said.
With Assistant US Attorney Danielle Sasson at the wheel, Sun dissected the FTX’s terms of service which he had helped Bankman-Fried update in May 2022. The terms explicitly stated that the exchange couldn’t touch customer assets as they were “ring fenced.”
For the duration of his employment at FTX, Sun stated that he thought “that all customer assets of FTX were safeguarded, segregated and protected.”
Prosecutors questioned Sun about whether he ever gave his approval for FTX to use client assets. He answered, “no, absolutely not,” adding that he had been informed that the customer funds were kept apart from FTX’s own funds and that he was unaware that Alameda was receiving deposits from FTX.
Read more: Caroline Ellison takes the stand: SBF told me to commit crimes, I sent fake balance sheets
Received loans from the company
Sun confirmed that during his time as general counsel, he had received and facilitated loans to FTX insiders to the tune of 30 to 40 transactions amounting to about $2B.
He said that he received a $2.3M loan as part of a management incentive program which he used to purchase a home and relocate to the country. He also received a $3.5M bonus pay.
“I had no idea that customer funds were being misused,” Sun said. “Everything was unequivocally [that] FTX protects customer funds—100%.”
The Yale law school grad narrated that there were no explanations that fit the facts of FTX position at the time. Alameda had borrowed more from FTX than had ever been offered by its margin lending system.
Sun said he quit the following morning after he spoke to Nishad Singh, FTX engineering chief, who explained to him that the exchange had syphoned customers’ funds.
Few days later, FTX filed for bankruptcy.
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