FTX former general counsel Can Sun: Resigned from the company after discovering a huge gap in the balance sheet

ChainCatcher news, according to The Block, former FTX General Counsel Can Sun testified in the criminal trial of Sam Bankman-Fried (SBF), stating that in November 2022, the asset management company Apollo Global Management expressed interest in investing in FTX and requested copies of financial statements. When the copies were prepared, Can Sun discovered a $7 billion gap related to Alameda on FTX's balance sheet. Subsequently, Can Sun resigned from the company. Can Sun previously worked at Fenwick and West and joined FTX in August 2021.

Can Sun also stated that as General Counsel, he was initially unaware of the serious flaws in FTX, which allowed the sister trading company Alameda Research to borrow user funds without consent. Shortly after joining FTX, he realized that Alameda was not actually subject to automatic liquidation, and its balance on FTX could potentially become negative. Therefore, he discussed the matter of removing that feature with FTX's leadership.

In discussions with SBF, engineering head Nishad Singh, and FTX Chief Regulatory Officer Dan Friedberg, Can Sun stated that he urged for changes and received a commitment: Alameda would receive "delayed liquidation" instead of not being automatically liquidated, and other institutional market makers on FTX would also be able to use the same feature. However, these changes were never implemented.

Can Sun was also responsible for documenting the loans that Alameda issued to SBF, Gary Wang, and Nishad Singh so they could purchase equity in FTX. However, Can Sun stated that he was unaware that these funds actually came from FTX user deposits. Additionally, Can Sun himself received a $2.3 million loan from Alameda to buy a house in the Bahamas. Later, out of caution, Can Sun requested government protection.