SBF Trial, Day 8: Former BlockFi CEO Adds Credibility to Fraud Charges

Transcript

[Music] hi everyone Laura here with the Unchained recap for day eight of the SPF criminal trial the second week of CM bigman Freed's criminal trial came to a close with former blog fight CEO Zack Prince serving as a credible witness for the prosecution particularly regarding the charge of defrauding Alama researches lenders he described the transparency of his lending business which likely served to the jury as a St contrast when compared to fx's secrecy about its lending to Alam his story also showed that blockfi had an increasing level of comfort with Sam Pikman freed and his companies which resulted in blockfi giving a series of loans to Alam and entering into an agreement with FTX

us for a line of credit and future acquisition he capped off his taale by saying that the FTX and Alam bankruptcies created a$1 billion hole in blockfi that resulted in its own bankruptcy all this may have painted him as a sympathetic figure to the jury forther underscoring that point was a moment when Prince twice corrected bman Freed's defense team over what he felt was a misrepresentation of the loans blockfi had extended to Elam leading to a moment of tension in the courtroom the prosecution spent a bit of time on how unlike FTX blockly was public about the fact that it was lending out customer money then it elicited details about the company's decision-making process for loans walking through how it stress test the quarter 3 2022 Alam balance sheet to

see what would happen if various numbers changed at one point the prosecution asked whether blockfi would have approved the loan if the loan number was double what was represented on the balance sheet in September that year Ellison testified that Alam had taken $14 billion in loans from FTX Prince responded quote we probably wouldn't have lent to them at all because if they had twice as many loans as what's represented here they might be insolvent through a series of questions prosecutors were able to get across that if blockfi had known about other aspects of ftxs and alam's finances such as loans to SPF and other Executives or knowledge that alam's assets were less liquid than the balance sheet represented he said it would depend on various factors but that those

issues would change the calculus then when asked quote did you ever know that Alam was using if at all customer money he responded no absolutely not when asked how that would have affected their decision to lend he said quote I think we wouldn't have worked with them because that's not something that's appropriate Prince said while Alam paid back about1 $50 million in the summer of 2022 at the time of its bankruptcy filing in November 2022 Alam still owed blockfi about $650 million moreover he showed that FTX still held about $350 million of block F funds on the exchange once blockfi realized it could not access its funds on FTX and that alamina could not repay its loans back blocki

filed for bankruptcy in its cross the defense tried lines of questioning that seemed to try to pin the blame for blockv bankruptcy on its own Executives but neither seemed effective it first introduced a couple August of 2021 blockfi credit memos that analyzed the risks involved in alam's requests to increase its borrowing at this time blockfi had lent $114 million to Alam and crypto currencies such as usdc eth and Bitcoin while Alam put down roughly $179 million in collateral in coins such as FDT and Saul perhaps to advance the notion that blockfi wo stemmed from its management ignoring its own employees the defense noted that Block's credit team did not recommend approving alam's

request in 2021 to increase their borrowing up to $730 million Prince testified that blockfi did not make this loan because of the proposed collateralization ratio of 110% however right after the defense pressed him about the fact that blockfi had made additional loans asking about times when Block's executive committee might make a different decision from the credit team's recommendations the defense said and that's what happened here Prince responded no I already told you what happened here what happened here is this credit Momo is for a loan that was not made then when Cohen said but later loans were made correct Prince responded Yes but this you know you're showing me a credit Momo where they're saying we recommend not making this loan

and I'm telling you we did not make this loan this raised the question of why defense attorney Mark Cohen had presented this particular document rather than one pertaining to the loans he was asking Prince about then as the defense hoped to imply that Block's bankruptcy would have happened regardless of FTX and alam's bankruptcies Cohen asked about Block's own financial status in the summer of 2022 that July it had made a deal with FTX us for a $400 million line of credit as well as future acquisition the defense asked Prince if he was concerned at the time that blockfi would go bankrupt Prince responded quote I think that the range of my concerns as CEO of blockfi pretty much always included everything from you know complete

failure to extreme success when asked again if he had a specific concern about going bankrupt at that time Prince said that it had a lot of capable professionals and that the business remained solvent and operational throughout that time the defense asked again but you felt the need to take in this Capital correct Prince responded I don't know that I would use the word need but we decided that it was better for the business to do this transaction than for the business not to do the transaction Prince ended his testimony by saying blockfi likely would not have filed for bankruptcy if Alam repaid its $650 million in loans and if blockfi had access to its $350 million on FTX the prosecutors are expecting to rest their case around the 26th upcoming Witnesses

include nashad Singh romik aora two FDX customers an FBI agent and more the trial will pick up next Monday at 9:30 a.m. ET for real-time updates from the courthouse be sure to check out my Twitter feed at Laura Shin where I post video updates twice each day cour is in session thanks for [Music] listening