Alameda had a $65B line of credit and 'unlimited withdrawals'


Robert Boroujerdi, managing director at Third Point, testified on Thursday at Sam Bankman-Fried’s trial in assistance with the government’s case to try and find the defendant guilty on seven counts related to fraud and money laundering.

Boroujerdi formerly served as the head of global securities research at Goldman Sachs. He testified that while he got access to FTX’s “data room,” which is digital documents that consisted of strategic decks, organizational charts and financial statements, they weren’t made aware of the interrelationships between FTX and its sister company Alameda.

Third Point is an institutional alternative asset manager that serves pension funds, endowments and high-net-worth individuals. The hedge fund was founded in 1995 by billionaire Daniel Loeb. Boroujerdi’s job is to look for investment opportunities for the firm and as a result, he learned about FTX.

In the late first quarter to early second quarter of 2021, Boroujerdi first emailed with Bankman-Fried and other related parties as a first step to potentially invest in the crypto exchange. By mid-March of that year, the witness had a Zoom call with Bankman-Fried and Third Point investment team members. He testified that on the call, Bankman-Fried mainly led the conversation and talked about FTX’s growth, strategic plans, financial aspects and so on.

Third Point relied on the financial data provided by FTX to invest and was not told of other expenses not shown in the data room, Boroujerdi testified. Everything should be shown, whether it’s “good or bad,” he added.

They had a second Zoom call meeting several weeks later.

Boroujerdi said Alameda came up on the call and Bankman-Fried spoke of it as something he co-founded, but called its relationship with FTX an “arm’s length business” and that it “operated independently and had its own self-interests.” He added that Bankman-Fried shared that he had equity in Alameda, but it wasn’t impacting the relationship.

Third Point was under the impression Alameda was treated like every other trading firm that used the exchange. “There should be no preferential treatment on an exchange,” Boroujerdi said. If the firm knew Alameda had special privileges and that it could withdraw customer funds from FTX, Third Point would not have invested, he added.

But, Boroujerdi and Third Point were in the dark at the time and the firm went ahead with initially investing $35 million in FTX’s $900 million Series B capital raise in July 2021. That round had over 60 investors, including VC firm Sequoia Capital, SoftBank Group Corp and British billionaire hedge fund manager Alan Howard. At the time, FTX’s valuation rose to $18 billion (it hit a $32 billion valuation at its peak.)

Boroujerdi recalled being told by FTX that the capital would be used to expand the team, increase market share and for strategy, among other things. He testified he was not aware that the money was being transferred to Alameda and had he known that, again, Third Point wouldn’t have invested.

But the firm didn’t know — and Third Point provided more capital for additional funding rounds, marking its total investment in FTX to $60 million, Boroujerdi testified.

When asked by prosecutors what was the value of the firm’s investment in FTX, Boroujerdi responded stiffly, “Zero.” But the firm seems to be doing all right — Loeb wrote in Third Point’s Q2 2023 investor letter that it still sees a “healthy upside in the valuations of [its] portfolio.”

In a similar tune, Matt Huang, co-founder and managing partner of crypto investment firm Paradigm, testified during Bankman-Fried’s trial earlier this month that the red flags in FTX would have affected his firm’s decision on investing in the exchange — especially if they knew FTX used customer funds to prop up Alameda.

Over two funding rounds between 2021 and 2022, Paradigm invested $278 million into FTX. When prosecutors asked what Paradigm estimates the current value of that investment to be, Huang replied, “We have marked it to zero.”

Both testimonies point to the damage that FTX’s and Alameda’s collapse have caused to investors. These witnesses may also strengthen the government’s case against Bankman-Fried in regards to whether he committed the alleged fraud.

While the trial will be on recess until October 26, the government shared that its final three potential witnesses will consist of an FBI agent, an investor and a customer.

After that, Bankman-Fried’s main lawyer, Mark Cohen, shared that “if there’s a defense case, it’ll be one week or less.” It was not clarified whether Bankman-Fried will testify during that time.


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