SBF Trial: Accounting Error Reveals Alameda Research’s $8 Billion Debt in FTX Trial

The post SBF Trial: Accounting Error Reveals Alameda Research’s $8 Billion Debt in FTX Trial appeared first on Coinpedia Fintech News

Testimony in the criminal trial of Sam Bankman-Fried revealed a software bug led FTX’s system to show its sister firm, Alameda Research, owed billions more to customers than it did.

Former FTX developer Adam Yedidia told the court on Wednesday that an accounting bug inflated Alameda’s apparent debts by $8 billion due to the unusual way customer deposits were handled.

Early FTX customers wired funds to Alameda rather than FTX directly. This complicated tracking of debts between the closely tied companies

Yedidia said he discovered the $8 billion true debt while fixing the bug in June 2022, calling it “concerning.” He informed Bankman-Fried, who said FTX was no longer “bulletproof.”

The accounting issue was fixed shortly after a meeting between Bankman-Fried and executives about clarity on FTX and Alameda’s finances.

Prosecutors allege FTX operated as a fraudulent scheme

Prosecutors allege FTX operated as a fraudulent scheme, with customer funds improperly funneled to Alameda. Yedidia resigned after learning Alameda used client deposits to repay loans.

The software bug revelation provides insight into questionable financial ties between FTX and Alameda. However, the $8 billion debt was still massive and highlighted issues predating FTX’s November collapse.

Bankman-Fried faces charges of fraud and conspiracy, which he has pleaded not guilty to. His defense team began cross-examining Yedidia, who is testifying under immunity but was admonished for repeated questions.

The software bug is a notable point prosecutors will leverage to outline financial mismanagement they allege was fraudulent. Yedidia’s testimony offers a glimpse into poor accounting, obscuring the true state of FTX’s business.