On the morning of Nov. 6, Nishad Singh, a top executive at the cryptocurrency exchange FTX, sent a message in a group chat with two senior colleagues. Customers were rushing to withdraw funds from the exchange, he wrote. Within the last day, they had tried to move $1.25 billion off the platform, and $120 million in withdrawal requests had come in over the last hour.
Caroline Ellison, who ran FTX’s sister hedge fund, Alameda Research, replied with an image of a sad face. Sam Bankman-Fried, FTX’s founder, responded with a single word: “Oof.”
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 customers. The company is bankrupt, and Mr. Singh and Ms. Ellison, both 28, have pleaded guilty to fraud and testified in court against their onetime friend.
At the trial, prosecutors have used that testimony as the basis for an unvarnished look inside FTX’s rapid unraveling — a frantic week in November that ended in one of the largest corporate collapses in recent history. Over dozens of hours, the government has built the most comprehensive picture to date of FTX’s final days, drawing on witness accounts, texts and other communications. The prosecutors have even put up a November calendar to help jurors follow the fast-paced sequence of events.
Read the exchange among FTX and Alameda executives
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While the broad contours of FTX’s failure are publicly known, the trial has opened a window into high-stakes conversations that unfolded in secret at Mr. Bankman-Fried’s headquarters in the Bahamas. Witness accounts of those behind-the-scenes discussions have elicited some of the trial’s most emotional moments.
In her testimony, Ms. Ellison fought back tears as she called FTX’s collapse “the worst week of my life.” Mr. Singh was under such “severe emotional distress,” he said, that he became suicidal, as “a crazy blame game” raged around him.
Along with Ms. Ellison and Mr. Singh, a third top FTX executive, Gary Wang, pleaded guilty and has testified for the prosecution. Mr. Bankman-Fried has pleaded not guilty to seven counts of fraud and conspiracy, and faces what could amount to a life sentence if convicted. A spokesman for his legal team, Mark Botnick, declined to comment.
FTX started to spiral the first weekend in November when Changpeng Zhao, the founder of the giant crypto exchange Binance, announced that he was selling a large quantity of a digital currency created by Mr. Bankman-Fried that served as a kind of proxy for FTX stock. Mr. Zhao cited an article on the crypto news site CoinDesk that showed problems with Alameda’s finances. His pledge to sell FTX’s in-house currency, FTT, was a sign that the exchange was in deep trouble.
Ms. Ellison was on vacation in Japan when the crisis began. She was immediately concerned, she said on the witness stand. For years, Alameda had borrowed billions of dollars from FTX customers to fund lavish spending, leaving a gaping hole in the exchange’s accounts.
Within FTX, top executives debated how to respond to Mr. Zhao, a longtime rival. The firm’s leaders considered posting a message on Twitter accusing Mr. Zhao of spreading unfounded rumors, or “fear, uncertainty and doubt” in crypto parlance. But an initial draft written by Mr. Bankman-Fried — “Heh I see that *someone* is really trying to FUD us this month” — seemed too obviously ghostwritten, Ms. Ellison testified.
After a few rounds of revisions, she published a Twitter post in her own voice defending Alameda, then followed it up with a pledge to buy the FTT back from Mr. Zhao.
The post did little to quell a growing panic. On the morning of Nov. 6, Mr. Singh texted Ms. Ellison and Mr. Bankman-Fried about the mounting withdrawals in a group chat that prosecutors presented to the jury. He warned that “ftx’s processing isnt fast enough even if it did have the funds.”
That night, Mr. Singh knocked on Mr. Wang’s bedroom door in the penthouse they shared at the Albany, a luxury apartment complex on the Bahamian island of New Providence. They discussed the withdrawals from FTX, Mr. Wang testified. Mr. Wang said he had performed a few calculations — and had been pleasantly surprised to find that FTX had enough funds to repay its customers.
But when he shared the news with Mr. Bankman-Fried, he recalled, the FTX founder prodded him to look more closely, asking, “Are you including our Korean friend?”
Mr. Bankman-Fried was alluding to a mysteriously labeled account on FTX where he had transferred the debt that Alameda owed to customers. The account showed that $8 billion was missing, Mr. Wang testified.
On the morning of Nov. 8, Mr. Bankman-Fried announced a rescue plan for FTX: Binance was going to take over the exchange. At an Alameda office in Hong Kong, Christian Drappi, a software engineer, heard the news from a colleague, who let out an expletive.
“I was utterly shocked,” Mr. Drappi testified, as a witness for the prosecution.
The deal with Binance collapsed the next day. Behind the scenes, more than a dozen top FTX officials — 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, a kind of digital war room titled “small group chat.”
There were occasional moments of levity, according to screenshots that prosecutors displayed in court. Ryan Salame, an FTX executive, posted a link to a Twitter post from an account called MoonOverlord, which expressed hope that customers who refused to withdraw their savings from FTX would receive free money as a reward.
“Lol,” Mr. Salame wrote. Mr. Bankman-Fried promptly retweeted MoonOverlord’s message.
Read the transcript of FTX executives’ text exchanges
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As the withdrawals increased, Mr. Bankman-Fried looked for other sources of funding to keep FTX afloat. On a Google document that prosecutors showed in court, he compiled a list of potential backers, including the Facebook co-founder Dustin Moskovitz, the high-frequency trading firm Jane Street and Saudi Arabia’s Public Investment Fund.
But it was too late.
With panic mounting, one of FTX’s in-house lawyers, Can Sun, reviewed a spreadsheet showing that the exchange would be unable to meet customer withdrawals. On the witness stand, Mr. Sun recalled asking Mr. Bankman-Fried and Mr. Singh to explain elements of the spreadsheet. Mr. Singh’s face was pale, Mr. Sun recalled, and he “looked like his entire soul had been plucked away from him.”
“No one was responding,” Mr. Sun testified.
That evening, Mr. Sun went on a walk with Mr. Bankman-Fried at the Albany. Mr. Bankman-Fried wanted to know whether Alameda could come up with any legal justifications for borrowing FTX customer funds. Mr. Sun ran through a few 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 couple of nights later, Ms. Ellison convened a staff meeting at Alameda’s office in Hong Kong, where she had set up shop after her vacation. She gathered about 15 Alameda employees in a circle, according to Mr. Drappi’s testimony. Sitting on a beanbag, she laughed nervously as she explained how FTX had collapsed.
Read the transcript of text among FTX executives
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Beginning when FTX was founded, she said, Alameda had dipped into the exchange’s customer deposits to finance all manner of spending. The remarks were captured on an audio recording that prosecutors played in court.
“Who made the decision on using user deposits?” one Alameda employee asked.
“Umm,” Ms. Ellison responded. “Sam, I guess.”
Back in the Bahamas, Mr. Singh struggled to cope. In a message to Mr. Bankman-Fried that prosecutors presented in court, he said FTX executives were growing increasingly angry with him and the rest of the firm’s leadership.
“FWIW I don’t hate the idea of them being pissed at me,” Mr. Bankman-Fried responded. “It might help them move on.”
By the time FTX filed for bankruptcy on Nov. 11, most of Mr. Bankman-Fried’s allies had abandoned him. Mr. Singh flew to his family in the San Francisco Bay Area. Ms. Ellison retreated to a family home in the Northeastern United States, where she was staying with her boyfriend when the Federal Bureau of Investigation showed up 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 Nov. 16.
The next day, Mr. Wang said, he met with prosecutors.
J. Edward Moreno contributed reporting.
