Robert Boroujerdi, managing director at Third Point, testified on Thursday at Sam Bankman-Fried’s trial in help with the federal government’s case to attempt to discover the defendant responsible on seven counts associated to fraud and cash laundering.
Boroujerdi previously served as the pinnacle of worldwide securities analysis at Goldman Sachs. He testified that whereas he obtained entry to FTX’s “data room,” which is digital paperwork that consisted of strategic decks, organizational charts and monetary statements, they weren’t made conscious of the interrelationships between FTX and its sister firm Alameda.
Third Point is an institutional various asset supervisor that serves pension funds, endowments and high-net-worth people. The hedge fund was based in 1995 by billionaire Daniel Loeb. Boroujerdi’s job is to search for funding alternatives for the agency and consequently, he discovered about FTX.
In the late first quarter to early second quarter of 2021, Boroujerdi first emailed with Bankman-Fried and different associated events as a primary step to probably make investments in the crypto change. By mid-March of that yr, the witness had a Zoom name with Bankman-Fried and Third Point funding staff members. He testified that on the decision, Bankman-Fried primarily led the dialog and talked about FTX’s progress, strategic plans, monetary elements and so on.
Third Point relied on the monetary information offered by FTX to speculate and was not instructed of different bills not proven in the info room, Boroujerdi testified. Everything ought to be proven, whether or not it’s “good or bad,” he added.
They had a second Zoom name assembly a number of weeks later.
Boroujerdi stated Alameda got here up on the decision and Bankman-Fried spoke of it as one thing he co-founded, however known as 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 fairness in Alameda, but it surely wasn’t impacting the connection.
Third Point was below the impression Alameda was handled like each different buying and selling agency that used the change. “There should be no preferential treatment on an exchange,” Boroujerdi stated. If the agency knew Alameda had particular privileges and that it may withdraw buyer funds from FTX, Third Point wouldn’t have invested, he added.
But, Boroujerdi and Third Point have been in the darkish on the time and the agency went forward with initially investing $35 million in FTX’s $900 million Series B capital elevate in July 2021. That spherical had over 60 traders, together with VC agency Sequoia Capital, SoftBank Group Corp and British billionaire hedge fund supervisor Alan Howard. At the time, FTX’s valuation rose to $18 billion (it hit a $32 billion valuation at its peak.)
Boroujerdi recalled being instructed by FTX that the capital could be used to develop the staff, improve market share and for technique, amongst different issues. He testified he was not conscious that the cash was being transferred to Alameda and had he recognized that, once more, Third Point wouldn’t have invested.
But the agency didn’t know — and Third Point offered extra capital for extra funding rounds, marking its whole funding in FTX to $60 million, Boroujerdi testified.
When requested by prosecutors what was the worth of the agency’s funding in FTX, Boroujerdi responded stiffly, “Zero.” But the agency appears to be doing all proper — Loeb wrote in Third Point’s Q2 2023 investor letter that it nonetheless sees a “healthy upside in the valuations of [its] portfolio.”
In an identical tune, Matt Huang, co-founder and managing accomplice of crypto funding agency Paradigm, testified throughout Bankman-Fried’s trial earlier this month that the pink flags in FTX would have affected his agency’s choice on investing in the change — particularly in the event that they knew FTX used buyer funds to prop up Alameda.
Over two funding rounds between 2021 and 2022, Paradigm invested $278 million into FTX. When prosecutors requested what Paradigm estimates the present worth of that funding to be, Huang replied, “We have marked it to zero.”
Both testimonies level to the harm that FTX’s and Alameda’s collapse have brought on to traders. These witnesses may additionally strengthen the federal government’s case in opposition to Bankman-Fried in regards as to whether he dedicated the alleged fraud.
While the trial shall be on recess till October 26, the federal government shared that its remaining three potential witnesses will include an FBI agent, an investor and a buyer.
After that, Bankman-Fried’s essential lawyer, Mark Cohen, shared that “if there’s a defense case, it’ll be one week or less.” It was not clarified whether or not Bankman-Fried will testify throughout that point.