Consumer Inflation Sentiment October 2023

Bankman-Fried: I Trusted FTX’s Lawyers to Guide Company

FTX founder Sam Bankman-Fried says the company’s ex-attorneys were central to its collapse last year.

That testimony came Thursday (Oct. 26) afternoon during Bankman-Fried’s criminal trial, but outside of the jury’s hearing, Reuters reported.

As the report noted, the one-time cryptocurrency wunderkind’s testimony is in keeping with the defense’s case that Bankman-Fried operated in good faith at the helm of FTX, which went bankrupt last year following a liquidity crisis.

Bankman-Fried, 31, is charged with multiple counts of fraud and money laundering tied to his role in the downfall of the company, which had been among the largest and most well-respected crypto exchanges in the world at the time of its collapse.

Prosecutors allege that he used the customer funds as his own, using that money to purchase real estate, make political contributions and land celebrity endorsement deals.

According to Reuters, U.S. District Judge Lewis Kaplan wanted Bankman-Fried to initially testify without the jury present to allow the judge to determine what parts of the testimony could be used in evidence.

The prosecution has argued that Bankman-Fried should not be permitted to make the case that the presence of lawyers in the company’s downfall indicates a lack of criminal intent on his part.

The report said Bankman-Fried spoke in “a confident tone,” and offered lengthy responses to questions from defense attorney Mark Cohen. 

Bankman-Fried testified that FTX’s lawyers were involved in creating its document retention policies and putting together the loans that Bankman-Fried and other executives took from Alameda Research, FTX’s sister firm.

Prosecutors allege Bankman-Fried encouraged staff to use encrypted messaging platforms and auto-delete their communications to cover their tracks, and contend the loans from Alameda, which in turn borrowed from FTX, were a key way that customer funds were stolen.

“Did you take comfort from the fact that the lawyers had structured the loans?” Cohen asked.

“Yeah, of course,” Bankman-Fried replied.

The jury is due back in court Friday (Oct. 27) morning, the report said. Cohen said Bankman-Fried’s testimony could last five hours, and that’s before prosecutors begin their cross-examination.

The Reuters report said legal experts believe Bankman-Fried doesn’t have much to lose by going against the conventional wisdom that defendants should stay off the stand, as the prosecution has spent weeks using testimony from former friends and colleagues to paint him as a liar and thief.

Defense attorneys argue these witnesses designed their testimony to implicate Bankman-Fried and avoid lengthy prison terms of their own. Bankman-Fried maintains he made mistakes running FTX, but never intended to steal customer funds.