3.Christian Drappi — Direct/Cross
545 linesDIRECT EXAMINATION BY MS. KUDLA:
MS. KUDLA: Good afternoon, Mr. Drappi.
CHRISTIAN DRAPPI: Good afternoon.
MS. KUDLA: Where did you work a year ago?
CHRISTIAN DRAPPI: Alameda Research.
MS. KUDLA: When did you start working at Alameda?
CHRISTIAN DRAPPI: May 31, 2021.
MS. KUDLA: What Alameda office locations did you work at?
CHRISTIAN DRAPPI: Hong Kong, the Bahamas, and San Francisco.
MS. KUDLA: What was your job there?
CHRISTIAN DRAPPI: I was a software engineer.
MS. KUDLA: What do you do as a software engineer?
CHRISTIAN DRAPPI: Write code to support Alameda's trading.
MS. KUDLA: Now, who owned Alameda?
CHRISTIAN DRAPPI: For the most part, Sam Bankman-Fried, he owned the majority.
MS. KUDLA: What were the main categories of Alameda employees, Mr. Drappi?
CHRISTIAN DRAPPI: There were software engineers, like myself, there were traders, and then there were settlers and operations people.
MS. KUDLA: So you told us what software engineers do. Just briefly, what do traders do?
CHRISTIAN DRAPPI: Traders are there to monitor Alameda's trading activity and to set the models for how we would trade different cryptocurrencies.
MS. KUDLA: What did settlers do?
CHRISTIAN DRAPPI: They were responsible for moving around capital.
MS. KUDLA: Now, as a software engineer, did you have any communications with Alameda traders?
CHRISTIAN DRAPPI: Yes. Every day.
MS. KUDLA: And why did you need to communicate with traders frequently?
CHRISTIAN DRAPPI: They helped decide what I should be working on.
MS. KUDLA: So let's focus for a moment on how you communicated with your Alameda colleagues. What were the most common forms of communication amongst Alameda employees?
CHRISTIAN DRAPPI: For one, a lot of it was face to face; second, there was a teleconferencing that existed between the Hong Kong office and the Bahamas office; third, we all used Slack; and, fourth, we all used Signal.
MS. KUDLA: Now, when you first started at Alameda in late May 2021, what was the defendant's title there?
CHRISTIAN DRAPPI: CEO of Alameda Research and CEO of FTX.
MS. KUDLA: Did the defendant's title at Alameda Research ever change?
CHRISTIAN DRAPPI: Yes.
MS. KUDLA: Approximately when did that occur?
CHRISTIAN DRAPPI: This is in the third quarter of 2021.
MS. KUDLA: And who, if anyone, was appointed CEO of Alameda at that time?
CHRISTIAN DRAPPI: Caroline Ellison and John Samuel Trabucco were appointed co-CEOs of Alameda Research.
MS. KUDLA: Mr. Drappi, did the defendant announce these co-CEO appointments publicly?
CHRISTIAN DRAPPI: Yes.
MS. KUDLA: The government offers Government Exhibit 828, pursuant to the stipulation 2001.
JUDGE KAPLAN: Received.
(Government Exhibit 828 received in evidence)
MR. EVERDELL: No objection.
JUDGE KAPLAN: Did you say objection?
MR. EVERDELL: I said no objection, your Honor.
JUDGE KAPLAN: Thank you.
MS. KUDLA: Your Honor, may we publish to the jury?
JUDGE KAPLAN: Yes.
MS. KUDLA: Mr. Drappi, who tweeted this message?
CHRISTIAN DRAPPI: Sam Bankman-Fried.
MS. KUDLA: What is the date of this message?
CHRISTIAN DRAPPI: August 3, 2021.
MS. KUDLA: The tweet reads: 1. Long overdue, and bringing titles in line with what reality has been for a while. Congraulations to some of the most impressive people I know: @alamedatrabucco. and carolinecapital, the CEOs of @AlamedaResearch, and nateparke its CTO.
Who is @carolinecapital?
CHRISTIAN DRAPPI: Caroline Ellison.
MS. KUDLA: Who is @alamedatrabucco?
CHRISTIAN DRAPPI: John Samuel Trabucco.
MS. KUDLA: Who is Nate Parke?
CHRISTIAN DRAPPI: Nathaniel Parke is my boss.
MS. KUDLA: Who did Ms. Ellison and Mr. Trabucco report to?
CHRISTIAN DRAPPI: Sam Bankman-Fried.
MR. EVERDELL: Your Honor, can we get a time frame.
MS. KUDLA: After they were appointed co-CEOs, who did Ms. Ellison and Mr. Trabucco report to?
MR. EVERDELL: Objection. Foundation.
JUDGE KAPLAN: Sustained.
MS. KUDLA: Mr. Drappi, do you have any knowledge of who Ms. Ellison and Mr. Trabucco reported to after they were appointed co-CEOS of Alameda?
CHRISTIAN DRAPPI: Yes.
MR. EVERDELL: Objection.
JUDGE KAPLAN: I'm sorry. I couldn't hear you.
MR. EVERDELL: I said objection.
JUDGE KAPLAN: Overruled.
MS. KUDLA: You said that you did have knowledge.
Mr. Drappi, who did they report to?
CHRISTIAN DRAPPI: Sam Bankman-Fried.
JUDGE KAPLAN: Sir, the next question is, how did you gain whatever knowledge you have?
CHRISTIAN DRAPPI: This was common knowledge in the firm, often conversations I would just hear about this.
MR. EVERDELL: Objection.
JUDGE KAPLAN: I am going to strike the witness' answer: Sam Bankman-Fried.
Counsel, tempus fugit. I don't know why we are doing this.
MS. KUDLA: The government offers at this time Government Exhibit 849, pursuant to stipulation 2001.
JUDGE KAPLAN: Received.
(Government Exhibit 849 received in evidence)
MS. KUDLA: May we publish to the jury?
JUDGE KAPLAN: Yes.
MS. KUDLA: Mr. Drappi, do you see the middle tweet with someone with the user name bennetttomlin@mstdnsocial?
CHRISTIAN DRAPPI: Yes.
MS. KUDLA: Mr. bennetttomlin@mstdnsocial states: Hey, @SBF_FTX, I just wanted to inform you that your hedge fund seems to be invested in a scheme that is transparently going to falter again --
Do you see that tweet?
MR. EVERDELL: Your Honor, if we could clarify that these comments are not being offered for the truth.
JUDGE KAPLAN: Yes, that's correct.
The jury is not to consider the statement by Mr. Tomlin for the truth, just for the fact that it was said in order to set up the reply.
MS. KUDLA: Did the defendant ever reply to that tweet?
CHRISTIAN DRAPPI: Yes.
MS. KUDLA: What's the date of his response?
CHRISTIAN DRAPPI: May 28, 2022.
MS. KUDLA: Mr. Drappi, what was the defendant's response in May 2022 in point 1?
CHRISTIAN DRAPPI: I don't run Alameda anymore, you should ask them.
MS. KUDLA: Now, at that point in time how long had you been working at Alameda?
CHRISTIAN DRAPPI: Had been about a year.
MS. KUDLA: Based on your employment at Alameda in your communication with Alameda employees, was that statement that Mr. Bankman-Fried didn't run Alameda anymore true?
CHRISTIAN DRAPPI: Yes.
MR. EVERDELL: Objection.
JUDGE KAPLAN: Sustained, at least in that form.
MS. KUDLA: Mr. Drappi, in the course of your employment, did you observe interactions with Alameda employees?
CHRISTIAN DRAPPI: Yes.
MS. KUDLA: Did you ever observe Mr. Bankman-Fried personally while you were working at Alameda?
CHRISTIAN DRAPPI: Yes.
MS. KUDLA: And did he ever work in the same office location as you?
CHRISTIAN DRAPPI: Yes.
MS. KUDLA: And what office locations were those?
CHRISTIAN DRAPPI: In Hong Kong we shared the same exact office. He in fact worked maybe 40 feet from where I was for a period of one to two months. In the Bahamas, Alameda -- most of my time in the Bahamas, Alameda was in one small building and directly across the street was FTX's main office.
MS. KUDLA: Outside of work did you ever interact with Mr. Bankman-Fried?
CHRISTIAN DRAPPI: Yes.
MS. KUDLA: How?
CHRISTIAN DRAPPI: Various social events. We spent a lot of time in particular on the paddle courts, which is a game like tennis.
MS. KUDLA: Based on your employment at Alameda and your day-to-day interactions and then also your knowledge of Mr. Bankman-Fried in social activities outside of the work, in what ways, looking at this tweet, I don't run Alameda, in what ways, if any, was that not true?
MR. EVERDELL: Objection. It's also cumulative, your Honor.
JUDGE KAPLAN: It's cumulative why?
MR. EVERDELL: It is getting to the point your Honor made before, which is --
JUDGE KAPLAN: I am not going to say it in front of the jury.
MR. EVERDELL: I will say it's a foundation objection to start with.
JUDGE KAPLAN: Counsel, come here.
(Continued on next page)
(At sidebar)
JUDGE KAPLAN: You both get A plus in evidence law, but this is a colossal waste of time. There is absolutely no doubt he owned the company. Ellison, the ostensible co-CEO or CEO, runs all these decisions through him. He was obviously the boss. What are we wasting this time for?
MS. KUDLA: Your Honor, the employee is a low-level employee, and even from his level of employment he could see, based on this day-to-day --
JUDGE KAPLAN: So what. So what.
MS. SASSOON: Your Honor, this is a misrep. The tweet is him saying --
JUDGE KAPLAN: Of course it is. It's a misrep, no matter what this guy says.
MS. SASSOON: They don't seem to be conceding that these are misreps.
MR. EVERDELL: I don't concede that this witness has the basis to be able to make this statement. That's all, your Honor.
JUDGE KAPLAN: If you want to play this out this way, fine. I will let you run evidence for introducing introductory trial lawyers, but this is a joke.
MR. EVERDELL: I understand, your Honor. I am not trying to waste time.
MS. KUDLA: Your Honor, we are only making very limited points here that even in his low-level position, the minimal things that he saw that he observed with Sam Bankman-Fried providing direction.
JUDGE KAPLAN: Why don't you ask him that.
MS. KUDLA: I am getting to that point. It will only take about ten minutes.
JUDGE KAPLAN: Some people don't have ten minutes left to live.
MS. KUDLA: Fair.
MS. SASSOON: Your Honor, we can't assume that the jury credits everything a cooperating witness says. It's appropriate to corroborate the cooperator and to establish --
JUDGE KAPLAN: If your case rises and falls on whether this guy believed that Sam Bankman-Fried was running the show, you've got troubles. Could we move along. There doubtless are things he saw perhaps. I say doubtless. I wasn't there.
MS. KUDLA: That's fine, your Honor.
(Continued on next page)
(In open court)
MS. KUDLA: We can take Government Exhibit 849 down for a moment.
MS. KUDLA: Mr. Drappi, I want to focus on your employment. During your employment at Alameda, including your interactions with the defendant, were there any ever any ways that the defendant remained involved in Alameda's management and operation after he had stepped down as CEO?
CHRISTIAN DRAPPI: Yes.
MS. KUDLA: And what are some of the general categories that you observed in your employment?
CHRISTIAN DRAPPI: He maintained direct communication with Alameda employees, he weighed in on a number of large trades, and he still had access to Alameda data.
MS. KUDLA: Let's take those one at a time. You said that he remained in communication with Alameda employees. How did he do that?
CHRISTIAN DRAPPI: Mainly through Signal chats.
MS. KUDLA: And then the next category of information that you had mentioned was that he had access to Alameda trading data. What type of Alameda trading data did the defendant have access to?
CHRISTIAN DRAPPI: He had access to both Alameda's internal user interface that all traders would use, and he also had access to back-end data as well.
MS. KUDLA: When you say Alameda's internal user interface, was there a name for that?
CHRISTIAN DRAPPI: Yes. It was called pointer.
MS. KUDLA: How did you know that the defendant had access to pointer?
CHRISTIAN DRAPPI: So there was one moment where the defendant asked me to regrant him access after an office IP address changed.
MS. KUDLA: Did pointer have any type of log-in credentials?
CHRISTIAN DRAPPI: Yes.
MS. KUDLA: As a software engineer, did you have the ability to view what Alameda employees had log-in privileges?
CHRISTIAN DRAPPI: Yes.
MS. KUDLA: During the course of your employment from 2021 until later, did the defendant always have access to Alameda pointer?
CHRISTIAN DRAPPI: Yes.
MS. KUDLA: Did FTX employees have access to Alameda pointer data?
CHRISTIAN DRAPPI: Very few of them did.
MS. KUDLA: Now, you also mentioned that Mr. Drappi, the third example was that he provided direction on Alameda trading decisions. Did I hear you correctly?
CHRISTIAN DRAPPI: Yes.
MS. KUDLA: So you were a software engineer. How do you know that the defendant provided Alameda trading direction?
CHRISTIAN DRAPPI: Every single day I spoke to Alameda traders.
MS. KUDLA: And were these the Alameda traders that were responsible in the scope of their duty for executing trades?
CHRISTIAN DRAPPI: Yes.
MS. KUDLA: So focusing on 2022 as the time period, did you ever learn that there were trades taken as a result of the defendant's direction?
CHRISTIAN DRAPPI: Yes.
MS. KUDLA: And what is an example of a trade that you learned was taken at the direction of the defendant?
CHRISTIAN DRAPPI: There was one trade that was posted about in Alameda's Slack channel that involved selling Japanese bonds and buying the currency. I might have reversed the directions. It was posted about and afterwards it became clear -- I talked to the author, the poster.
MR. EVERDELL: Objection. Hearsay.
JUDGE KAPLAN: Ms. Kudla.
(Continued on next page)
BY MS. KUDLA:
MS. KUDLA: Mr. Drappi, who did you talk to about this specific trade?
CHRISTIAN DRAPPI: Ben Xie.
MS. KUDLA: And who is Ben Xie?
CHRISTIAN DRAPPI: Ben Xie was a senior trader at Alameda Research.
MS. KUDLA: And did you ever ask Mr. Xie about this Japanese bond trade?
CHRISTIAN DRAPPI: I believe in the comments of the post or in real life. I can't remember which. But we had talked about it.
MS. KUDLA: What, if anything, did Mr. Xie say with respect to why Alameda was executing this trade?
MR. EVERDELL: Objection.
JUDGE KAPLAN: Overruled.
CHRISTIAN DRAPPI: He said it was——Sam wanted to do it.
MS. KUDLA: Was there ever any other occasion in 2022 when you learned that a Alameda trade was taken at the defendant's direction?
CHRISTIAN DRAPPI: Yes, there was one other.
MS. KUDLA: And what was that at the time?
CHRISTIAN DRAPPI: There was a moment where Alameda wanted to sell a bunch of their NASDAQ——the NASDAQ index, and the idea behind that was to hedge its exposure to crypto.
MS. KUDLA: And Mr. Drappi, how did you learn about this NASDAQ trade?
CHRISTIAN DRAPPI: Ben Xie was the one who led the trading, and also Ben Xie was the person who said that Sam was the one who wanted to do this.
MS. KUDLA: Now, Mr. Drappi, let's move forward now to November 2022. Did there come a time in November 2022 when you learned about an increase in customer withdrawals at FTX?
CHRISTIAN DRAPPI: Yes.
MS. KUDLA: And what Alameda office location were you working at at that time?
CHRISTIAN DRAPPI: I was in the new Hong Kong office in Wan Chai.
MS. KUDLA: During this time period how, if at all, were you working to respond to these increased customer withdrawals?
CHRISTIAN DRAPPI: I was working on modifying some of our code to send more capital in an automated way to FTX, helping our settlement team to sell.
MS. KUDLA: Did there ever come a point in time where you stopped making these efforts to assist processing withdrawals?
CHRISTIAN DRAPPI: Yes, there did.
MS. KUDLA: And where were you when that happened?
CHRISTIAN DRAPPI: I was in the Hong Kong office, seated at my desk.
MS. KUDLA: Was this in the daytime or in the evening?
CHRISTIAN DRAPPI: It was around 11 p.m. Hong Kong time, night.
MS. KUDLA: Was anyone else present with you at the office?
CHRISTIAN DRAPPI: Yes. Tony Qian was an Alameda trader seated directly behind me; Caroline Ellison was present, she was seated to Tony's right; and David Nyeste, also another trader who was there as well.
MR. EVERDELL: Your Honor, do we have a date for this?
JUDGE KAPLAN: November of 2022.
MR. EVERDELL: Any more specific?
CHRISTIAN DRAPPI: November 8th. I believe it's 11 p.m.
JUDGE KAPLAN: Can counsel agree on what time and date that was in the Bahamas?
MS. KUDLA: Your Honor, I believe the witness has said he was in the Hong Kong office. And I'll clarify date and time.
JUDGE KAPLAN: Yes, I know he was in the Hong Kong office. That's exactly why I made the request.
MS. KUDLA: Oh.
BY MS. KUDLA:
MS. KUDLA: Mr. Drappi, do you know what time that was in the Bahamas? And if you don't know, that's okay.
JUDGE KAPLAN: And what date.
MS. KUDLA: And what date.
CHRISTIAN DRAPPI: I'm certain it was a Tuesday. I'm pretty sure that Tuesday was November 8th. Bahamas is a 12-hour or 13-hour time difference. I think it was 12. But we can look at calendars, I guess.
JUDGE KAPLAN: So was it November 8th in Hong Kong or November 8th in the Bahamas?
CHRISTIAN DRAPPI: It was November 8th both, or both times, or both——
JUDGE KAPLAN: Both places.
CHRISTIAN DRAPPI: Yeah.
BY MS. KUDLA:
MS. KUDLA: And to be clear, Mr. Drappi, where were you?
CHRISTIAN DRAPPI: I was in Hong Kong.
MS. KUDLA: And to orient us, you had just mentioned a number of names of the people who were at the Hong Kong office with you. Did this include all Alameda employees or just a handful?
CHRISTIAN DRAPPI: No, just the people that worked nights.
MS. KUDLA: Now what was the first thing that caused you to stop working, Mr. Drappi, that night?
CHRISTIAN DRAPPI: Tony kind of said something that was along the lines of like, What's this? Are you seeing this? You know, some expletive, kind of, you know——
MS. KUDLA: And what did Mr. Qian refer to when he said, Are you seeing this?
CHRISTIAN DRAPPI: He referred to a post on Twitter.
MS. KUDLA: And what did that Twitter post say?
CHRISTIAN DRAPPI: Twitter was a post by Sam Bankman-Fried saying something like——
MR. EVERDELL: Objection. Hearsay.
MS. KUDLA: Your Honor, it's being offered for the effect on the listener.
JUDGE KAPLAN: All right. On that limited basis.
MS. KUDLA: What did the tweet say?
CHRISTIAN DRAPPI: Our first investors are now our last, and Binance is buying FTX, with maybe another sentence in there.
MS. KUDLA: What was your reaction that Binance was being——was purchasing FTX, as tweeted by Mr. Bankman-Fried?
CHRISTIAN DRAPPI: I was utterly shocked.
MS. KUDLA: What happened at the Hong Kong office that night after this news was announced?
CHRISTIAN DRAPPI: Well, when Tony said that, he said it out loud, but he also really said it as a question to Caroline, to be like, what, what's going on? And she replied that there was——
MR. EVERDELL: Objection, hearsay.
MS. KUDLA: Your Honor, this goes to the exact arguments that we had made before. It's being offered under 801(d)(2)(D) and also 801(d)(2)(E) and 801(d)(1)(B) as a prior consistent statement.
JUDGE KAPLAN: Run through the numerical soup for me, please.
MS. KUDLA: Yes, your Honor. First, under 801(d)(1)(B).
JUDGE KAPLAN: B as in banana?
MS. KUDLA: Correct. Prior consistent statement with a declarant's testimony——
JUDGE KAPLAN: That's (d) as in some other kind of fruit.
MS. KUDLA: No. 801(d) as in dog, not a fruit. And then B as in——
JUDGE KAPLAN: All right. (d)(1)(B). Is that what you said?
MS. KUDLA: Correct. As a prior consistent statement.
JUDGE KAPLAN: And this is a statement by Ms. Ellison?
MS. KUDLA: Correct. And there also are alternative bases under 801(d)(2)——
JUDGE KAPLAN: I will take it, and if there's a request for a limiting instruction, I'll consider it later.
BY MS. KUDLA:
MS. KUDLA: At that time, Mr. Drappi, what did Ms. Ellison say?
CHRISTIAN DRAPPI: She said that FTX had a shortfall of user funds and that this was caused by Alameda borrowing user funds from FTX to repay its prior loans, and it had used those prior loans to make illiquid investments in various different ventures and just companies, basically.
MS. KUDLA: Prior to Ms. Ellison's statement that night——
JUDGE KAPLAN: Okay. Now I'm ready to give the limiting instruction right now.
MR. EVERDELL: Thank you, your Honor.
MS. KUDLA: Your Honor?
JUDGE KAPLAN: Yes.
MS. KUDLA: May we be heard at sidebar regarding a limiting instruction?
JUDGE KAPLAN: All right.
(At the sidebar)
JUDGE KAPLAN: Okay.
MS. KUDLA: Your Honor, the government does not believe that a limiting instruction is necessary. Under the 2014 amendments, this rule was modified as a prior consistent statement to be added as substantive evidence, and therefore, it's also under the nonhearsay, so it should be admitted for all purposes without a limiting instruction.
JUDGE KAPLAN: Here's the instruction I'm going to give, from the Third Circuit model instructions.
I perhaps was ill advised in using the word "limiting."
MS. KUDLA: Yes.
MR. EVERDELL: Thank you.
(Continued on next page)
(In open court)
JUDGE KAPLAN: Okay. Folks, you have just heard evidence that Ms. Ellison, long before this trial and, according to her testimony, before she had any awareness of any government investigation, if indeed there was any, on November the 8th of 2022, made statements that were the same or similar to what she said here on the witness stand. You may consider evidence of that statement in deciding the facts of this case.
In addition, the evidence may help you decide whether you believe Ms. Ellison's testimony. If she said essentially the same thing before trial and before awareness of anything that would give her a motive to give a false account, that may be reason for you to believe her trial testimony on the same subject.
Now this is going to come up this afternoon and maybe tomorrow morning repeatedly, with Ms. Ellison and maybe others, so on those occasions I may give you a very shorthand reference to what I've just said, and we will all know what I'm talking about, I trust. And if counsel disagree, at that time we all know that they will quickly let me know that they disagree.
So we'll go on.
BY MS. KUDLA:
MS. KUDLA: Mr. Drappi, going back to the night of November 8th at the Hong Kong office, prior to that evening and Ms. Ellison's statement that Alameda had borrowed FTX customer deposits to repay its loan, had you had any knowledge of that before?
MS. KUDLA: And what was your reaction to learning this information?
CHRISTIAN DRAPPI: I was utterly shocked.
MS. KUDLA: Now that evening, Mr. Drappi, did Ms. Ellison say who did have prior knowledge about Alameda's borrowing?
CHRISTIAN DRAPPI: Not that evening.
MS. KUDLA: Did there come another time when Ms. Ellison addressed all Alameda employees about this issue?
CHRISTIAN DRAPPI: There did, yes.
MS. KUDLA: And when did that occur?
CHRISTIAN DRAPPI: The very next night, about exactly 24 hours later.
MS. KUDLA: And to be specific then, the very next night would be what date?
CHRISTIAN DRAPPI: Wednesday, November 9th, around 11 p.m.
MS. KUDLA: And is this Hong Kong time?
CHRISTIAN DRAPPI: Hong Kong time, yes.
MS. KUDLA: All right. Now where——how did she address all Alameda employees?
CHRISTIAN DRAPPI: We had what was called an all hands meeting that just so happened to be scheduled every other Wednesday, and this was every other Wednesday. And we all sat in a circle. She sat on a beanbag that was kind of on one edge of the circle, and, you know, most of us were on a couch that was like in a half-circle shape couch.
MS. KUDLA: How many people were there?
CHRISTIAN DRAPPI: About 15 people that were physically present in the Hong Kong office.
MS. KUDLA: And Mr. Drappi, who, if anyone, led that meeting?
CHRISTIAN DRAPPI: Caroline Ellison led the meeting.
MS. KUDLA: And did anyone ask questions during the meeting?
CHRISTIAN DRAPPI: Yes, several.
MS. KUDLA: And who, if anyone, was responding to those questions?
CHRISTIAN DRAPPI: Caroline.
MS. KUDLA: And where were you in relationship to Ms. Ellison during the meeting?
CHRISTIAN DRAPPI: I was seated fairly, fairly close to her; like I could see her completely. I was, you know——to my left there was one person and then to that person's left was her.
MS. KUDLA: Were you in a position that allowed you to see Ms. Ellison as she spoke?
CHRISTIAN DRAPPI: Yes.
MS. KUDLA: And were you also in a position that allowed you to see others who were present?
CHRISTIAN DRAPPI: I could see every person that was in the meeting.
MS. KUDLA: Now during this all hands meeting did Ms. Ellison say who knew Alameda used FTX customer deposits to repay its loans?
CHRISTIAN DRAPPI: She did say that, yes.
MS. KUDLA: Who did she say knew?
CHRISTIAN DRAPPI: Sam Bankman-Fried, Gary Wang, Nishad Singh, and herself.
MS. KUDLA: Mr. Drappi, was this all hands meeting audio recorded?
CHRISTIAN DRAPPI: It was.
MS. KUDLA: And who recorded the meeting?
CHRISTIAN DRAPPI: Rick Best.
MS. KUDLA: And who's Rick Best?
CHRISTIAN DRAPPI: He's an Alameda trader that joined three days prior to this all going down.
MS. KUDLA: Were you aware that Mr. Best was recording?
CHRISTIAN DRAPPI: I was not aware.
MS. KUDLA: And did Mr. Best announce during the meeting that he was recording it?
CHRISTIAN DRAPPI: He did not.
MS. KUDLA: During the meeting where was Mr. Best located in relationship to Ms. Ellison?
CHRISTIAN DRAPPI: He was directly to Ms. Ellison's right, which is also to my left.
MS. KUDLA: And Mr. Drappi, did you ever obtain a copy of this recording?
CHRISTIAN DRAPPI: I did.
MS. KUDLA: And how did you get that copy?
CHRISTIAN DRAPPI: Rick sent it to me.
MS. KUDLA: Did you provide the recording to the government through your attorney?
CHRISTIAN DRAPPI: Yes.
MS. KUDLA: And Mr. Drappi, in front of you there should be a binder, and if you open that binder, in the inside jacket there should be a CD. Do you see that?
CHRISTIAN DRAPPI: Yes.
MS. KUDLA: And that CD, it's marked Government Exhibits 433A through F. Do you see that?
CHRISTIAN DRAPPI: Mm-hmm.
MS. KUDLA: Okay. And prior to your testimony here today have you reviewed Government Exhibit's 433A through F?
CHRISTIAN DRAPPI: Yes.
MS. KUDLA: What are they?
CHRISTIAN DRAPPI: They are audio clips of this all hands meeting.
MS. KUDLA: And are they accurate audio clips?
CHRISTIAN DRAPPI: Yes.
MS. KUDLA: Now also in that same binder——
MS. KUDLA: Well, the government offers Government Exhibits 433A through F at this time.
JUDGE KAPLAN: Received.
(Government's Exhibits 433A through 433F received in evidence)
JUDGE KAPLAN: And——well, we'll get to it later. Go ahead.
BY MS. KUDLA:
MS. KUDLA: And Mr. Drappi, in front of you there's a binder with exhibits labeled 433-T with subparts A through F. Do you see those?
CHRISTIAN DRAPPI: Yes.
MS. KUDLA: What are those?
CHRISTIAN DRAPPI: These are transcripts of the exact audio.
MS. KUDLA: And have you reviewed these transcripts prior to your testimony here today?
CHRISTIAN DRAPPI: Yes, I have.
MS. KUDLA: And do these transcripts accurately transcribe the audio recordings in Government Exhibits 433A through F?
CHRISTIAN DRAPPI: Yes, they do.
MS. KUDLA: Now, your Honor, the jurors have under their seat a binder containing the transcripts of Government Exhibits 433-T-A through F. So with your Honor's permission, they may read along.
JUDGE KAPLAN: You're offering them?
MS. KUDLA: Yes, we are, your Honor.
JUDGE KAPLAN: Received.
(Government's Exhibits 433A-T through 433F-T received in evidence)
JUDGE KAPLAN: Now, members of the jury, the evidence of what was said at the meeting in part are the recordings, the excerpted recordings, the sound. The transcripts are simply as aides to your following the audio. And in the event that your hearing of the sound leads you to believe that what was actually said is at some variance with the transcript, it's the sound recording that counts, not the transcript. You consider the sound recording. This, of course, comes up all the time in cases in which tons of evidence are in foreign languages where there are translations, but the instruction is appropriate here as well.
Further, I will instruct you that these excerpts contain recordings of things that Ms. Ellison said, which are all subject to the instruction I just gave you a few minutes ago about what happened on the night of November 8th, and in some cases, you will hear other voices saying things or asking questions. Those other voices are evidence of what those people said but not for the truth of what they said. It's so that you can understand what Ms. Ellison said as a result of whatever was said to her.
Okay. Let's go.
MS. KUDLA: All right. Your Honor, may we please publish Government Exhibit 433A to the jury, and it's Tab 433A-T.
(Audio played)
BY MS. KUDLA:
MS. KUDLA: So Mr. Drappi, let's start with the basics. Who was speaking on that recording?
CHRISTIAN DRAPPI: Caroline Ellison.
MS. KUDLA: And when Ms. Ellison said that there was "FUD" about the FTX shortfall caused by Alameda borrowing using FTX user deposits, what does the term "FUD" mean?
CHRISTIAN DRAPPI: It's an acronym that stands for fear, uncertainty, and doubt, and it's often used in the crypto world when, you know, people are saying that about you.
MS. KUDLA: Now how would you describe Ms. Ellison's demeanor as she addressed the group?
CHRISTIAN DRAPPI: She was sunken, you know, kind of slouching, you know, did not display confident body language.
MS. KUDLA: After Ms. Ellison's initial remarks to the group did anyone ask questions?
CHRISTIAN DRAPPI: Yes.
MS. KUDLA: Can we please now publish Government Exhibit 433-B.
(Audio played)
MS. KUDLA: Who asked Ms. Ellison whether there was a plan for Alameda to pay back FTX customers?
CHRISTIAN DRAPPI: I did.
MS. KUDLA: And did Ms. Ellison's response that FTX was trying to raise money from investors to fill this hole caused by borrowing concern you in any way?
CHRISTIAN DRAPPI: Yes.
MS. KUDLA: Why did that concern you?
CHRISTIAN DRAPPI: Generally when a company raises money, it's about, you know, an exciting, you know, future growth and not to fill a hole in a balance sheet.
MS. KUDLA: At this time, Mr. Drappi——
MS. KUDLA: Well, can we please play, publish Government Exhibit 433C.
(Audio played)
MS. KUDLA: Who asked Ms. Ellison if Alameda's loan on FTX was collateralized through the spot margin book?
CHRISTIAN DRAPPI: I did.
MS. KUDLA: And is there any difference, Mr. Drappi, between a spot margin book and the borrow/lend program?
CHRISTIAN DRAPPI: No, they're synonyms.
MS. KUDLA: So when Ms. Ellison responded that it was not through the normal spot margin, you replied, "That seems pretty bad." What did you mean by that?
MR. EVERDELL: Objection.
JUDGE KAPLAN: Sustained.
MS. KUDLA: You responded to Ms. Ellison. What did you respond?
CHRISTIAN DRAPPI: I said, oh——
MR. EVERDELL: Objection. The transcript speaks for itself, your Honor.
JUDGE KAPLAN: Sustained.
MS. KUDLA: Mr. Drappi, did you have any concerns when Ms. Ellison said that it was not through the spot margin——
MR. EVERDELL: Objection, relevance.
JUDGE KAPLAN: Sustained.
MS. KUDLA: Can we please publish Government Exhibit 433D now.
(Audio played)
MS. KUDLA: In Government Exhibit 433D, Ms. Ellison had laughed. Did Ms. Ellison appear to be having a good time at the meeting, based on your observation?
MR. EVERDELL: Objection.
JUDGE KAPLAN: Overruled.
CHRISTIAN DRAPPI: No. I would characterize that as nervous laughter.
MS. KUDLA: At this point in time how long had you known Ms. Ellison?
CHRISTIAN DRAPPI: About a year and a half.
MS. KUDLA: How frequently had you been able to observe Ms. Ellison over that year and a half?
CHRISTIAN DRAPPI: On average, six days out of seven per week.
MS. KUDLA: And was it common——you characterize it as a nervous laugh. Was that something common to Ms. Ellison, based on your relationship?
CHRISTIAN DRAPPI: Yeah, that was quite often.
MS. KUDLA: Can we please publish Government Exhibit 433E.
(Audio played)
MS. KUDLA: Mr. Drappi, when you first asked Ms. Ellison who was aware about this issue, did she identify any names?
CHRISTIAN DRAPPI: No. She dodged the question the first time.
MS. KUDLA: You then used the term "YOLO" when you asked again who was explicitly aware about this. What does the term "YOLO" mean?
CHRISTIAN DRAPPI: It's an acronym for "you only live once."
MS. KUDLA: What did you mean when you said, "I'm sure this wasn't like a YOLO thing"?
CHRISTIAN DRAPPI: When you do a YOLO thing, it's something that's spontaneous and not premeditated, and I wanted to have Ms. Ellison confirm that indeed, you know, they had meetings about this and there was a deliberate decision, as I suspected it would be.
MS. KUDLA: Now can we please publish Government Exhibit 433F.
(Audio played)
MS. KUDLA: Who asked Ms. Ellison whose decision it was to use FTX user deposits?
CHRISTIAN DRAPPI: Diana Ma.
MS. KUDLA: And is there a reason that that question is so faint on the audio recording?
CHRISTIAN DRAPPI: Yes. There are two. Most importantly, she was seated pretty far away from the recording; and second, she's just a naturally very soft-spoken person.
MS. KUDLA: When Ms. Ellison said that FTX had always allowed Alameda and only Alameda to borrow FTX user funds, who owned FTX, Mr. Drappi?
CHRISTIAN DRAPPI: Sam Bankman-Fried owned FTX.
MS. KUDLA: After the all hands meeting did you continue to work for Alameda?
CHRISTIAN DRAPPI: No. I resigned within 24 hours.
MS. KUDLA: Your Honor, no further questions.
JUDGE KAPLAN: Mr. Everdell?
CROSS EXAMINATION BY MR. EVERDELL:
MR. EVERDELL: Good afternoon, Mr. Drappi.
CHRISTIAN DRAPPI: Good afternoon.
MR. EVERDELL: You were asked a few questions on your direct examination about the pointer system, correct?
CHRISTIAN DRAPPI: Correct.
MR. EVERDELL: Okay. I think you testified that that is Alameda's database?
CHRISTIAN DRAPPI: It's Alameda's internal tool for a lot of things.
MR. EVERDELL: Okay. Well, there's a lot of data that's on pointer; is that right?
CHRISTIAN DRAPPI: Yes.
MR. EVERDELL: Okay. For example, data about Alameda's trades, right?
MS. KUDLA: Objection.
JUDGE KAPLAN: Ground?
MS. KUDLA: It goes beyond the scope.
JUDGE KAPLAN: Not so far. Overruled.
CHRISTIAN DRAPPI: Could you repeat the question.
MR. EVERDELL: It had, for example, data about Alameda's trades that it was making?
CHRISTIAN DRAPPI: Yes.
MR. EVERDELL: It had data about transfers that Alameda makes from one exchange to another?
CHRISTIAN DRAPPI: Yes.
MR. EVERDELL: And you said that Sam Bankman-Fried had access to this database, right?
CHRISTIAN DRAPPI: Yes.
MR. EVERDELL: But you, sitting here today, don't know the data that he was accessing, right?
MR. EVERDELL: Okay. You said that others——
JUDGE KAPLAN: No, it's not right or no, he didn't have access, he didn't access it, or nobody accessed it?
CHRISTIAN DRAPPI: I know he requested access. For me, I wasn't watching him when he accessed it.
MR. EVERDELL: Right. So you know he requested access, but you don't know what data he was looking at.
MR. EVERDELL: Okay. You also requested——or you also I believe testified that there were others at FTX who had access to the pointer system, correct?
MS. KUDLA: Objection. Mischaracterizes his testimony.
JUDGE KAPLAN: Sustained.
MR. EVERDELL: I believe that you said he wasn't the only one, Sam wasn't the only one that had access to the pointer system?
MS. KUDLA: Objection, vague.
JUDGE KAPLAN: Well, there's nothing vague about it.
Answer the question if you can, Mr. Drappi.
MS. KUDLA: Objection, your Honor. He has not identified what entity, FTX or Alameda.
MR. EVERDELL: I believe you testified, Mr. ——
JUDGE KAPLAN: Fair point. Fair point. Sustained. Try again.
MR. EVERDELL: I believe you testified, Mr. Drappi, that Sam was not the only one at FTX who had access to the pointer data system.
MS. KUDLA: Objection. Mischaracterizes his testimony.
JUDGE KAPLAN: Do you remember, Mr. Drappi, saying that, in this courtroom this afternoon?
CHRISTIAN DRAPPI: To me?
JUDGE KAPLAN: Yes.
CHRISTIAN DRAPPI: Oh, yeah. I could just resay what I said before. Yeah, there were very few people at FTX. I think I could even list you who I think had access.
BY MR. EVERDELL:
MR. EVERDELL: Okay. There were others who had access. So who else had access?
CHRISTIAN DRAPPI: To my knowledge, Gary Wang, Nishad Singh, and potentially Ryan Salame.
MR. EVERDELL: Okay. Now let me ask you a little bit just about the November time frame that we were discussing, okay?
All right. I believe you testified a bit about prior to the all hands meeting there was an occurrence on November 8th, 11 p.m. time, Hong Kong time, right?
CHRISTIAN DRAPPI: Yes.
MR. EVERDELL: Okay. And you were in the Alameda offices in Hong Kong at that time?
CHRISTIAN DRAPPI: Yes.
MR. EVERDELL: All right. And you said Caroline was there as well, right?
CHRISTIAN DRAPPI: She was, yes.
MR. EVERDELL: Okay. And this is when she came out——this is the day that it was announced that Binance was going to be acquiring FTX, right?
CHRISTIAN DRAPPI: Yes.
MR. EVERDELL: Okay. And you said that she made a statement, or she came out and made a statement to the people that were there, right?
CHRISTIAN DRAPPI: Yes.
MR. EVERDELL: Okay. So you were there, you said. Who else was there?
CHRISTIAN DRAPPI: Tony Qian, David Nyeste, Caroline, and then there might have been a few people on the settlement team, but they were on a different row and so they weren't in my direct eyesight.
MR. EVERDELL: So Caroline, David Nyeste, and Tony, right? Yourself? That's four. Did I get that right? And then the settlement team, how many of those were there?
CHRISTIAN DRAPPI: They weren't in direct eyesight so I don't actually——I couldn't actually tell you who was there, who wasn't.
MR. EVERDELL: Okay. But did Ms. Ellison make her comments addressed to the whole floor?
CHRISTIAN DRAPPI: Really just to us. Like, Alameda had its own row, and it was clearly meant for the people in Alameda's row to hear.
MR. EVERDELL: Okay. It was meant for you all to hear, right?
CHRISTIAN DRAPPI: Yes, she addressed us.
MR. EVERDELL: Okay. And you said that this came as a shock to you, right?
CHRISTIAN DRAPPI: Yes.
MR. EVERDELL: Okay. The fact that Binance was going to be buying FTX.
CHRISTIAN DRAPPI: Absolutely, yeah.
MR. EVERDELL: Okay. Why did that come as a shock to you?
CHRISTIAN DRAPPI: In the, you know, first sense, it was a shock to me that FTX was going to be acquired by anyone; and on top of that, Binance being the acquirer was like the least, you know——the thing I'd expect the least. This was essentially a rival.
MR. EVERDELL: It was——I'm sorry. I didn't mean to interrupt. It was FTX's main competitor, wasn't it?
CHRISTIAN DRAPPI: I think there were a few other competitors out there, but Binance was certainly the leader in cryptocurrency exchanges.
MR. EVERDELL: Okay. One moment.
Okay. Now let me just jump ahead to the next day, all right? So this is now November 9th, correct?
CHRISTIAN DRAPPI: Yes, that's the next day.
MR. EVERDELL: And this is when you said there was an all hands meeting, right?
CHRISTIAN DRAPPI: Yes.
MR. EVERDELL: Okay. And you were still in the Hong Kong office, right?
CHRISTIAN DRAPPI: Yes.
MR. EVERDELL: This was a regularly scheduled meeting?
CHRISTIAN DRAPPI: Every other Wednesday, and this happened to be that every other Wednesday.
MR. EVERDELL: Okay. And you said that Ms. Ellison came out and gave her comments about what was happening, right?
CHRISTIAN DRAPPI: Yeah.
MR. EVERDELL: And that's some of the recordings we heard, right?
CHRISTIAN DRAPPI: Yes.
MR. EVERDELL: All right. I think you said that there were approximately 15 people present; is that right?
CHRISTIAN DRAPPI: Yeah, approximately.
MR. EVERDELL: Okay. Were those just the people that were physically present in the room?
CHRISTIAN DRAPPI: Yes, that was just physically present in the room. We had also teleconferenced in maybe any teammate who could join.
MR. EVERDELL: Okay. So others were joining remotely.
CHRISTIAN DRAPPI: Yes.
MR. EVERDELL: And about how many people were joining remotely?
CHRISTIAN DRAPPI: I——I couldn't see on the laptop, but I do know the screen was basically filled out, so I would approximate at 10. I mean, the company really only had 30, so you have a maximum there.
MR. EVERDELL: Okay. So close to the 30 employees that were——or roughly 30 that were employed by Alameda were there.
CHRISTIAN DRAPPI: Yeah, close to it.
MR. EVERDELL: Okay. All right. And you had commented on Ms. Ellison's demeanor as she delivered her remarks?
CHRISTIAN DRAPPI: Yes.
MR. EVERDELL: Now isn't it true that you thought she was speaking matter-of-factly when she delivered the remarks?
CHRISTIAN DRAPPI: Yeah, for the majority of it, I think she was speaking matter-of-factly.
MR. EVERDELL: Okay. Now after Ms. Ellison spoke——well, no. I'll take this——we heard a number of clips of the audio from that meeting, right?
CHRISTIAN DRAPPI: Yes.
MR. EVERDELL: They were played here. Okay. And I just want to play one more clip for you, Mr. Drappi, all right?
MR. EVERDELL: If we could cue up Defense Exhibit 415A and——sorry. B. I take it back. 415B. And the transcript associated with that is 415B-T. And we could put that——we offer those in evidence, your Honor.
MS. KUDLA: No objection.
JUDGE KAPLAN: They are received on the same basis that I received the other recording and transcripts, and I take it counsel have agreed that this was recorded on the same occasion, later than the ones you heard earlier; is that right?
MS. KUDLA: Agreed, your Honor.
JUDGE KAPLAN: Mr. Everdell, it's agreed that this was recorded on the same occasion only later than the others, yes?
MR. EVERDELL: That's correct, your Honor. Same occasion, later in the meeting.
(Defendant's Exhibits 415B and 415B-T received in evidence)
MR. EVERDELL: All right. Go ahead and play it.
(Audio played)
MR. EVERDELL: All right. I have no further questions, your Honor.
JUDGE KAPLAN: Thank you.
Anything else, Ms. Kudla?
MS. KUDLA: No, your Honor.
JUDGE KAPLAN: Okay. Thank you.
Mr. Drappi, you are through and excused.
(Witness excused)
JUDGE KAPLAN: Do we have another witness? And if so, are we ready to go on that?
JUDGE KAPLAN: Okay.
(Witness sworn)
COURT CLERK: Thank you. Please be seated.
Please state your name and spell your first and last names for the record.
CHRISTIAN DRAPPI: Sure. My name is Zac Prince. Z-A-C, P-R-I-N-C-E.
JUDGE KAPLAN: You may proceed, Mr. Roos.