2.Robert Boroujerdi — Direct/Cross
302 linesDIRECT EXAMINATION BY MR. REHN:
MR. REHN: Mr. Boroujerdi, I'd like to direct your attention to 2021. Where were you working at that time?
ROBERT BOROUJERDI: Third Point.
ROBERT BOROUJERDI: It's an institutional alternative asset manager.
ROBERT BOROUJERDI: We invest across a broad spectrum of different types of securities, both public and private companies, in different asset classes, and we serve everything from pension funds, endowments, foundations, and high-net-worth individuals as clients.
ROBERT BOROUJERDI: Yes.
ROBERT BOROUJERDI: We look for opportunities where we think that what we would invest in would appreciate in value over time.
ROBERT BOROUJERDI: New York City.
ROBERT BOROUJERDI: Hudson Yards.
ROBERT BOROUJERDI: I was a managing director. I led our markets business and strategy. I invested and helped manage portions of the firm.
ROBERT BOROUJERDI: Yes.
ROBERT BOROUJERDI: I did.
ROBERT BOROUJERDI: Equity markets, interest rate markets, digital asset markets, credit from time to time.
ROBERT BOROUJERDI: It does.
ROBERT BOROUJERDI: Yes.
ROBERT BOROUJERDI: Yes.
ROBERT BOROUJERDI: That would be late 2020, early 2021.
ROBERT BOROUJERDI: Yes.
ROBERT BOROUJERDI: That would be late Q1 of '21, early Q2 of 2021.
ROBERT BOROUJERDI: Sure. Take a calendar year and break it up into quarters. So January, February, March would be quarter 1, and then so on for quarter 2.
ROBERT BOROUJERDI: A gentleman who was a salesperson at one of our brokers made an introductory email to myself and a CIO of the firm to individuals at FTX.
ROBERT BOROUJERDI: Yes, I do.
ROBERT BOROUJERDI: This is an email exchange, and I assume if we go down a couple pages you'll see more of it, but email exchange where there's an introduction made to myself and a colleague of mine to Sam, and we were working to set up an introductory phone call.
ROBERT BOROUJERDI: Sam Bankman-Fried.
MR. REHN: Did you have an understanding of who Sam Bankman-Fried was when you received this email?
ROBERT BOROUJERDI: Yes.
ROBERT BOROUJERDI: He was the CEO and founder of FTX.
JUDGE KAPLAN: Received.
(Government's Exhibit 523 received in evidence)
MR. LISNER: No objection.
MR. REHN: And Mr. Imperato, could we go to the third page of this exhibit. And bring it up for the jury.
And if you could expand the email that's in the middle of this page.
BY MR. REHN:
MR. REHN: Mr. Boroujerdi, you mentioned that you were introduced to FTX in the first quarter of 2021. Is this the email you were referring to?
ROBERT BOROUJERDI: Yes, it is.
(Continued on next page)
MR. REHN: After you got this introductory email, did you have some email exchanges with Sam Bankman-Fried?
ROBERT BOROUJERDI: Yes. There was logistic based, trying to set up a call.
MR. REHN: We can bring that down, Mr. Imperato, and go up to the next page.
If we could expand the email in the middle from Sunday, March 14 of 2021.
MR. REHN: Mr. Boroujerdi, can I ask you to read the email that was sent by the defendant on March 14, 2021.
ROBERT BOROUJERDI: Hey, would love to jump on a call and feel free to share the data room with them as well.
ROBERT BOROUJERDI: Sure. In the investment world, when you are looking at potential investments, a lot of documents can come across the chasm, be it a strategic deck, set of financial statements, org chart, kind of name it.
What happens is, you can set up a virtual room where you're permissioned by your email or a user name, and the company that you made or other investors would be looking at were just one access in one place. It allows the company to track who is looking at their stuff, but it also gives them a degree of control. But it, by and large, has information, as you begin to evaluate an investment or you're evaluating it, to give you background and color.
ROBERT BOROUJERDI: Yes.
ROBERT BOROUJERDI: Best of my recollection, there was certainly a strategic deck where it laid out kind of the goals and background of not only the crypto industry, the exchanges that were in it, things like market share and then what FTX wanted to do from a strategic perspective, there was also an org chart of business organization and a set of financial statements.
ROBERT BOROUJERDI: Imagine if you wanted to just go in your bank account on the Internet, you would log into that Internet and then your account would pop up and you would look at it. Rather than seeing the balance of your account, assume that there is a Power Point presentation or Microsoft Word document. Effectively, they are digital documents that you can click on, view, and, if given permission, you can download them as well.
MR. REHN: I think you mentioned that one of the things that was in that data room was some financial data?
ROBERT BOROUJERDI: Yes.
ROBERT BOROUJERDI: It was actual data. My recollection, this was financial statement data that showed things like revenue and profit and market share and growth over time.
ROBERT BOROUJERDI: Yes.
ROBERT BOROUJERDI: Yes, that would be correct.
MR. REHN: In deciding whether to invest in FTX, did Third Point rely on the financial data it received from the company?
ROBERT BOROUJERDI: Yes.
MR. REHN: Did you expect that the numbers that FTX provided you were an accurate depiction of its revenues and costs?
ROBERT BOROUJERDI: We did.
MR. REHN: Did anyone ever tell you that certain expenses were not included in the revenue and cost numbers that FTX was reporting to you?
MR. REHN: If you had been told that, would you have taken that into account in deciding whether to invest in the company?
MR. LISNER: Objection.
JUDGE KAPLAN: Overruled.
ROBERT BOROUJERDI: Yes.
ROBERT BOROUJERDI: When you receive financial statements from a corporate or an investment, you believe that that representation is accurate, and all flow of information should be reflected there, good or bad.
MR. REHN: Mr. Imperato, we can bring this part down and go up to the first page of this document.
If you could expand the top two emails.
ROBERT BOROUJERDI: Specifically, yes. It was a Zoom call, not a phone call.
ROBERT BOROUJERDI: It was in the middle of March of 2021, middle to late March of 2021.
ROBERT BOROUJERDI: Myself and members of the investment team at Third Point, half a dozen or so of us were on that, and then Sam was on it from the FTX side. I don't recall if there were other people from FTX on the call.
ROBERT BOROUJERDI: Outside of us asking questions or more notation of answers, Sam led and drove the entirety of the call.
ROBERT BOROUJERDI: Yes, we did. After that initial call, we continued our process as a team and spoke to him several weeks later, again on a Zoom call.
ROBERT BOROUJERDI: Keep in mind at the time FTX was located in Hong Kong, so this was at night. I was in my New York City apartment.
ROBERT BOROUJERDI: We discussed the state of the crypto industry broadly, we spoke about FTX's competitive positioning, growth drivers, strategic plans, and what that opportunity said could be for the business.
ROBERT BOROUJERDI: Yes. We spent quite a bit of time talking about what we would call a risk engine, which was a technology process inside FTX that was different than what we had been used to. It was an automated process which took out a degree of humanity and effectively treated every client the same.
ROBERT BOROUJERDI: He stated that this technology had been built to effectively take out human emotion, so people were treated fairly and equitably, and it would also improve speed and transparency.
MR. REHN: Was this conversation in the context of Third Point considering whether to make an investment in FTX?
ROBERT BOROUJERDI: So exchanges, by and large, are interesting business models and things we had looked at from an investing perspective through time. You can think of the New York Stock Exchange or you can think of eBay. These are auctions and marketplaces. That means you match buyers and sellers. And if someone should build a better mousetrap, quote/unquote, you could tend to garner more share and more trust and more use.
MR. REHN: What in particular does the risk engine do to contribute to the success of the business?
ROBERT BOROUJERDI: When you think about -- when you buy assets, you sometimes don't put all the money down that you need to buy that asset, and it creates margin. And what this did was ensure that you would either post the amount of margin that was required for that position automatically or that position would be sold out if you did not post that.
ROBERT BOROUJERDI: Can you repeat the question or rephrase it, please.
MR. LISNER: Objection.
JUDGE KAPLAN: Overruled.
ROBERT BOROUJERDI: It would -- from our perspective, it would make -- it would have less human interaction. It would be a speedier, more potentially effective exchange.
MR. REHN: Now, on those Zoom calls with the defendant, did a company called Alameda Research ever come up?
ROBERT BOROUJERDI: Yes, it did.
ROBERT BOROUJERDI: He spoke to Alameda Research as a hedge fund that he had founded and started. The frustration at Alameda was about trading on exchanges and that led to the birth of FTX. Beyond that, we discussed the relationship of ownership and it was conveyed to us that these -- this was an arm's length business, that they operated independently, and served their own self-interest.
MR. REHN: You used the term arm's length business. What, if anything, did you understand that to mean?
ROBERT BOROUJERDI: These were independent businesses and, again, they operate under their own self-interest. We understood that Alameda could trade on the FTX exchange if needed, but these were separate entities that Sam did control both from an equity perspective, but that was the extent of it.
MR. REHN: In this conversation did the defendant ever say that Alameda was exempt from the FTX risk engine?
MR. REHN: Were you ever told by anyone at FTX that Alameda was exempt from the exchange's risk engine?
MR. LISNER: Objection. Form.
JUDGE KAPLAN: Sustained. Leading.
MR. REHN: Prior to investing in FTX, did you have an understanding as to whether Alameda was exempt from the exchange's risk engine?
ROBERT BOROUJERDI: Can you ask the question again. Pardon me.
MR. REHN: Prior to investing in FTX, did you have any understanding as to whether Alameda Research was exempt from the exchange's risk engine?
ROBERT BOROUJERDI: We understood that Alameda was nonexempt.
MR. REHN: And if you had been told that Alameda was exempt, would that have been something you took into account before deciding whether to invest?
MR. LISNER: Objection.
JUDGE KAPLAN: Overruled.
ROBERT BOROUJERDI: There should be no preferential treatment on an exchange. That would undermine the integrity of the exchange, upset clients, and hurt the business model and thus the value, in our view, of the asset over time.
MR. REHN: And if you had been told that Alameda was exempt from that risk engine that was described to you, would you have invested in FTX?
MR. REHN: In your Zoom calls with the defendant prior to investing, did the subject of FTX custody of customer funds ever come up?
ROBERT BOROUJERDI: That they used a combination of hot and cold wallets, largely hot wallets, that they worked with select banks to shift -- to allow for people to move from one custodian to another, themselves included, and individuals could hold assets on the exchange and trade there.
MR. REHN: Did the defendant ever say that Alameda Research could withdraw customer funds from the exchange?
ROBERT BOROUJERDI: No, that was never said.
MR. REHN: If you had been told that Alameda could withdraw customer funds from the exchange, would you have still invested in FTX?
MR. LISNER: Objection.
JUDGE KAPLAN: Overruled.
ROBERT BOROUJERDI: Yes, I do.
ROBERT BOROUJERDI: This is an announcement from Sam's Twitter account speaking about a capital raise that occurred with a handful of investors back in July of 2021.
ROBERT BOROUJERDI: It is.
ROBERT BOROUJERDI: July 20, 2021.
ROBERT BOROUJERDI: 35 million.
ROBERT BOROUJERDI: It was to hire staff, grow strategic initiatives, increase market share, and look at new business lines that they could potentially add.
MR. REHN: Were you told that FTX was taking money raised from this investment round and transferring that money to Alameda Research?
MR. REHN: If you had been told that FTX would transfer the money rates from investors to Alameda, would that have affected your investment decision?
MR. LISNER: Objection.
JUDGE KAPLAN: Overruled.
ROBERT BOROUJERDI: These are two separate entities. This capital was for the growth of FTX. It was not for any related party in transactions or businesses.
MR. REHN: Mr. Boroujerdi, after Third Point made its initial investment in July of 2021, did you continue to pay attention to FTX's business?
ROBERT BOROUJERDI: Well, as a steward of capital you are looking to obviously watch that investment grow and improve. You try to provide feedback. It's an important portion of the process.
ROBERT BOROUJERDI: That was later in 2021, that I recall.
ROBERT BOROUJERDI: In FTX international, $60 million.
ROBERT BOROUJERDI: I met him at a Bitcoin Miami conference, large industry conference, in June of '21; I met him in an Equinox Hotel event in Hudson Yards in New York City in September of 2021; as well as an FTX Bahamas event in 2022 in the middle of the year.
MR. REHN: With reference to the Equinox Hotel event you mentioned, what was the purpose of that event?
ROBERT BOROUJERDI: That was an event that was cohosted by a company called Circle, a Blockchain technology company called Solana, and FTX. The three of them were providing some of their leadership to speak to customers, speak to investors, and industry participants to get to know each other, talk a little bit about what the strategic outlook was, areas of focus, and time to spend.
MR. REHN: Aside from that event hosted by the FTX and other companies at the Equinox Hotel, were there any other times where you saw the defendant in New York City?
ROBERT BOROUJERDI: Yes. JP Morgan had a conference in December of 2021. Sam was on the dais with the host and key speaker. They did a fireside chat at that time.
ROBERT BOROUJERDI: That was in JP Morgan's, I believe, headquarters -- corporate office that JP Morgan owns or leases in midtown Manhattan.
ROBERT BOROUJERDI: Their head of product, who also dealt with investors, his name was Ramnik Arora, and Ramnik reached out to keep us up -- to ask us about interest.
ROBERT BOROUJERDI: I don't recall, and I don't know if others at Third Point did.
MR. REHN: In your conversations with Ramnik Arora, were you ever told that FTX was raising funds because there was a hole in FTX's balance sheet?
MR. LISNER: Objection. Form.
JUDGE KAPLAN: Sustained. Leading.
MR. REHN: What, if anything, did Mr. Arora tell you about the reason FTX was continuing to raise funds in 2022?
ROBERT BOROUJERDI: It was largely about growth, some increased marketing, and potential acquisitions.
MR. LISNER: Could we get a time period in 2022.
ROBERT BOROUJERDI: They were towards the middle to later part of the summer into the early fall.
MR. REHN: Going forward in time to November 2022, did there come a time when you became aware that FTX was encountering financial difficulties?
MR. LISNER: Objection. Form.
JUDGE KAPLAN: Overruled.
ROBERT BOROUJERDI: I became aware. One of the industry trade publications had published what they had stated was the balance sheet of FTX in a news article, and that found its way onto social media, and Twitter in particular, and that's when it started to become more prevalent.
ROBERT BOROUJERDI: I was not, but others at Third Point were.
MR. REHN: And did you instruct others at Third Point to keep you updated on what the defendant was saying?
ROBERT BOROUJERDI: Yes. And to be clear, I did check his Twitter feed. I did not -- I was not subscribed, but others were.
MR. REHN: If we could bring up for the witness Government Exhibit 529.
If we could expand this for the witness.
ROBERT BOROUJERDI: Yes, I do.
ROBERT BOROUJERDI: This is a member of the investment team who had worked and looked at FTX as well who had sent over an email with a set of deleted tweets from Sam Bankman-Fried.
MR. LISNER: No objection.
JUDGE KAPLAN: Received.
(Government Exhibit 529 received in evidence)
MR. REHN: This one seems to be a little hard to read, but are you able to read the tweet that was sent to you on November 9 of 2022?
ROBERT BOROUJERDI: Is that the top one?
ROBERT BOROUJERDI: FTX has enough to cover all client holdings. We don't invest client assets, even in treasuries.
MR. REHN: Is this description of how FTX treats client assets consistent with what you were told about FTX treatment of client assets when Third Point made its investment?
MR. LISNER: Objection. Documents speak for themselves.
JUDGE KAPLAN: Sustained.
MR. REHN: Is this description consistent with what your understanding was of how FTX treated client assets?
ROBERT BOROUJERDI: That is -- yes, it is consistent with the terms of service and agreement as well.
ROBERT BOROUJERDI: Zero.
JUDGE KAPLAN: Thank you.
Cross-examination.
CROSS-EXAMINATION BY MR. LISNER:
MR. LISNER: Good afternoon. I know we are on the cusp of lunch, so I will be brief.
You testified, Mr. Boroujerdi, that after the initial investment you continued to pay attention to FTX, is that right?
MR. LISNER: Do you recall reviewing audited financials for FTX after your investment?
ROBERT BOROUJERDI: We looked at both unaudited and audited financials.
MR. LISNER: And do you recall if the audited financial -- let me rephrase.
Do you recall learning, from your review of FTX's audited financials, that FTX relied on related parties or currency and treasury management activities?
JUDGE KAPLAN: Ground.
JUDGE KAPLAN: Sustained.
MR. LISNER: Did you have an understanding that FTX relied on related parties for currency and treasury management activities?
JUDGE KAPLAN: Overruled.
ROBERT BOROUJERDI: We understood that there were fiat on-ramps and off-ramps and partners that would work with them on specific pieces. Whether it was in the audited financials or not, it was part of the diligence process.
MR. LISNER: Did you have an understanding of whether related parties to FTX served as conduits of fiat or crypto transactions for FTX?
ROBERT BOROUJERDI: We understood that partners like Signature Bank and others could move fiat and USDC, which is a digital version of cash, to and from FTX and other exchanges.
MR. LISNER: My question was whether you are aware that related parties had that relationship. Was Signature Bank a related party?
ROBERT BOROUJERDI: I would be unaware from a technical definition if that's true.
MR. LISNER: Were you aware of any related parties that performed that function?
ROBERT BOROUJERDI: I do not know.
MR. LISNER: Can we put up for the witness only Defendant's Exhibit 683.
MR. LISNER: Would it refresh your recollection to review the document on the screen?
JUDGE KAPLAN: As to what?
MR. LISNER: I just asked --
JUDGE KAPLAN: I was here. I remember. I even have it in writing in front of me.
MR. LISNER: Do you recall knowing whether related parties served as conduits of fiat or crypto transactions for FTX?
JUDGE KAPLAN: Sustained.
MR. LISNER: No further questions. Enjoy lunch, everybody.
JUDGE KAPLAN: Thank you.
Anything else, Mr. Rehn?
JUDGE KAPLAN: You are excused, sir. Thank you.
(Witness excused)
JUDGE KAPLAN: Anything else today?
MS. SASSOON: No.
JUDGE KAPLAN: Members of the jury, here comes your intermission until next Thursday. Enjoy.
Do not do any research. Do not talk about this case. Do not read anything. You understand that. With a big gap I thought I had to say it again, but I know you know it.
See you at 9:30 next Thursday.
(Jury not present)
JUDGE KAPLAN: Anything else?
MS. SASSOON: Very quickly, your Honor.
We just wanted to put on the record that since our discussion in the robing room, no issues have been raised with us, and we are aware of none. It's our understanding that everything with respect to that has been proceeding smoothly.
JUDGE KAPLAN: Thank you for doing that. I had meant to, but I didn't remember.
Mr. Cohen, we have no problems on that front, right?
MR. COHEN: Your Honor, my client has been receiving the extended-release medication that your Honor helped us to obtain.
JUDGE KAPLAN: Since when?
MR. COHEN: Since yesterday.
JUDGE KAPLAN: OK.
MR. ROOS: Judge, one other thing.
Apparently, the record from yesterday, after speaking with Andy, says Government Exhibit 1027. I had intended to say 1027, which includes the subparts A and B. So I just want to put that on the transcript so that we have the right exhibit. There is no 1027. It's 1027A and B.
JUDGE KAPLAN: Any problem with that, Mr. Cohen?
MR. COHEN: It's an outrage, your Honor.
JUDGE KAPLAN: I'm assuming that is consented to having the necessary correction made.
I'll see you all next week.
(Adjourned to October 26, 2023, at 9:30 a.m.)