Federal prosecutors rested their case against accused financial fraudster Sam Bankman-Fried on Thursday (Oct. 26).
Now, nearly a full calendar year since his multibillion-dollar crypto trading empire collapsed under accusations of financial fraud and misappropriation of customer funds, the 31-year-old behind the cryptocurrency platform FTX, and founder of since-imploded Alameda Research, is doing what many legal observers believe a defendant should almost never do: taking the stand and testifying on behalf of himself in court.
“The defense calls Mr. Samuel Bankman-Fried,” Mark Cohen, the accused’s lawyer, announced to the court after lunch on Thursday as Bankman-Fried took the stand wearing a gray suit and a lavender tie.
Only the Manhattan courthouse, by then, was relatively empty.
That’s because Judge Lewis Kaplan, the Manhattan federal judge overseeing the case, had sent the 12-member jury home. Bankman-Fried’s first words in his own defense were to be a dry run.
“There are areas of testimony that the government contends the jury should not hear,” Kaplan said, explaining that there were potential areas of testimony that are in dispute and that he needed to determine whether that testimony could be repeated to the jurors.
The trial to-date has been riddled with shouts of “objection!” from both the defense team and the prosecutors, and Kaplan added that he wanted to minimize those disruptions in advance of Bankman-Fried’s potential juried testimony.
If Bankman-Fried’s testimony, as told to the jury-less court on Thursday, is to be believed, he doesn’t remember much from his time at FTX or Alameda, and what he does remember, FTX lawyer Dan Friedberg was primarily responsible for.
Under mock cross-examination by federal prosecutors, the jailed crypto founder frequently gave vague answers and claimed that he “wasn’t sure” or “didn’t recall” various events and items.
“Listen to the question, and answer the question directly,” Kaplan directed the defendant at one point.
The judge later said that “part of the problem is that the witness has an interesting way of responding to questions.”
“Part of the problem is this type of hearing,” Cohen replied.
“If you want to put this defense on, it’s through this hearing or not at all,” responded Kaplan.
And as Bankman-Fried continued his testimony, it became less clear that the defense’s legal team would ultimately want to put their client on the stand.
At one point, when asked by the prosecution, “did you believe you should not embezzle customer assets?” Bankman-Fried’s legal team objected, which was sustained.
But Bankman-Fried answered anyway.
“No, I did not believe I should do that,” he said.
“You don’t have to answer after sustained. Haven’t you been here for four weeks?” Kaplan said.
More than a dozen times, Bankman-Fried invoked FTX lawyer Friedberg’s name as the ultimate decider on various actions under discussion.
Still, despite their client’s many invocations of “Dan Friedberg did,” Bankman-Fried’s legal team told Kaplan that they would not be “advancing the formal advice of counsel defense.”
When asked during his testimony whether he believed that Alameda’s borrowing from FTX was in accordance with the terms of service, Bankman-Fried replied “yes, under many circumstances.”
And that appears to be the line that the defense plans to take.
“When did you believe Alameda was permitted to borrow funds from FTX?” the prosecution asked Bankman-Fried.
“I believed it was permissible to borrow from assets held as collateral for margin positions,” he replied, adding that it included withdrawing assets off the exchange with “risk analysis.”
Speaking to the two teams after Bankman-Fried’s turn at the witness stand, Kaplan asked Cohen, “Let’s assume someone robs a bank…and gets a chunk of money. Do we agree that engaging in a transaction to conceal the source of the money is money laundering? Now he gets legal advice about how to buy a condo with the money. The defendant is charged with money laundering. The defense is, I had a lawyer, I didn’t have a criminal intent. How is that different from what you’re trying to do, in principle?”
“Robbing a bank is illegal. Our position is that the source of fund was not illegal,” Cohen replied. “That’s what we’re fighting over in this case…our client did not believe it was improper.”
“I’m dubious, but I understand your position,” Kaplan said.
Bankman-Fried is expected to testify before the jury when the trial resumes Friday morning (Oct. 27).