SBF Trial, From the Courthouse: The 'Allow_Negative' Explanation
27 Oct 2023 · 4:19
Laura Shin reports from the courthouse during a lunch break in the SBF trial, summarising his testimony that morning. He said he believed his trading firm's borrowing from FTX came from users who had signed up for margin trading, and that a lagging risk engine was triggering far more liquidations than needed. He asked Gary and another colleague to fix the problem and now believes the allow negative setting was their solution, while Gary had testified that Sam told him to implement it. The defense also raised a 2019 tweet on conflicts of interest, and Shin notes that some jurors could find it possible that he did not know.
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hey y I'm going to make this super fast because we only have 1 hour for lunch in the security line just to even get our phones coming out was super long so going back in it's going to be super long uh so I'm just going to take my time to eat and nothing super eventful happened but I will tell you the two main things so first of all um he said that he thought Alam when it was borrowing from FTX that it was coming from people who had signed up for margin trading and um he said that like people who borrowed um as as long as you know they put a collateral then they could do anything they want from like buying muffins to you know whatever okay so then the other thing is that there was this um time he said where basically the
risk engine um because like trades were happening um faster than or there or there was more usage on it than they had expected at a certain point in their growth that essentially um the database uh like would or not the database but the yeah the engine the software would um there would be a delay and so like these trades would happen automatically but the um the renion itself wouldn't like log all of them until after like many of them had happened and he said this was causing the exchange to like uh you know trigger many more liquidations than it actually needed to simply because the software Wick wasn't wasn't reading the data base fast enough and um
he said that this was um cre those Auto Del leverages and then eventually um he asked Gary and the Sha to fix this problem and the system that they put in place um he now believes was um allow negative so that is his explanation so I wrote in my notes it came down to what he said he said right because Gary said that um Sam had told him to implement that and now Sam is saying that he said he gave a general instruction fix this problem and that then um that is what they imp or he now believes they implemented that based on his instruction um so yeah that that was interesting oh and then one other thing was that the defense brought up the
famous tweet from July 31st 2019 where someone had asked him what are you going to do about this conflict of interest you have Alita it's also trading on the exchange and um he and he said that he interpreted the question to be just about front running and you know said that that was why um you know he had answered the way he had answer assertive as saying that Alam was just like any other account and um because he then also testified that he um you know didn't he didn't know uh what allow negative was at the time but just told him to fix this problem and then now believes that allow negative was their solution he basically was saying like I didn't know that they were you know um doing that when I was tweening that on
the same day on the last little bit is like it's basically um just like like we were saying in the elevator like it's a little bit like crypto 101 he's just explaining a lot of terms like you know Market maker know your customer like just all kinds of stuff like that um but I'm not going to lie I did also write in my notes a little bit uh more of a note um but just like oh like uh I could potentially see some jury member feeling like oh now honestly it's possible that he didn't know um and that he really thought that everything was on the up and up so anyway those are my quick notes I'm going to have to eat really really really fast in order to have enough time for the security line and to um make it back in there for what I
imagine will be you know I'm we're still in the direct um testimony but um potentially it's it looks like we could potentially get to the Cross maybe this afternoon I don't know because right before lunch um Mark Cohen the defense attorney said to the judge something like oh this might be a good time for lunch it was 12:30 at the time and judge Klan said oh I don't know I could keep going um but then he finally uh said like okay yeah we'll take our lunch break um so the point is that in my head like it maybe seems like maren is going to rest soon I don't know um but yeah so I will upload this now eat really fast get back in the line and report back after the rest of the testimony today
see you