Four of Sam Bankman-Fried’s closest friends have testified against him in his criminal trial.
Over the better part of four weeks, U.S. prosecutors have brought out witness after witness describing the various financial crimes that occurred at the collapsed multibillion-dollar cryptocurrency exchange FTX under the direction of the 31-year-old co-founder and CEO.
Bankman-Fried took the stand to mount his own formal defense on Friday (Oct. 27), spending the better part of the day trying to undo the damning and at-times personal testimony of people he has known for much of his life and most of his career.
He stands accused of orchestrating one of the greatest financial frauds in American history.
“Did you defraud anyone?” Bankman-Fried’s defense lawyer, Mark Cohen, asked him.
“No,” the currently jailed former face of crypto replied.
“Did you take customer funds?” the defense asked.
“No,” said Bankman-Fried.
But the fact is that billions of dollars have disappeared. And the over one million FTX customers that the money belonged to still don’t have possession of it.
Under questioning by his own defense team, Bankman-Fried told the court that he was “very surprised” to learn that Alameda Research, a trading firm intricately and allegedly criminally affiliated with FTX, owed $8 billion to the crypto exchange.
In his words, he learned of the debt in October 2022, just weeks before FTX went bankrupt.
In the words of his colleagues and coconspirators, Bankman-Fried was aware of the hole going back to at least June 2022.
His testimony, which ran out the clock today without room for cross-examination by the prosecution, is the last thing that the 12 jurors will have heard before going on break for two days.
During yesterday’s dry run, in advance of Friday’s juried hearing, Bankman-Fried’s testimony left observers mostly unimpressed.
Today he did a little better — maybe because the former FTX CEO spent his time doing something familiar to him: placing the blame on Alameda CEO Caroline Ellison, his ex-girlfriend.
Bankman-Fried testified that he repeatedly asked Ellison and other Alameda executives to hedge the firm’s risks, but that despite checking in on them periodically they failed to do so — leaving the firm highly exposed in June 2022 when crypto entered a bear market.
“Let’s talk about ‘Things Sam is Freaking Out About.’ Were you freaking out?” Bankman-Fried’s defense team asked their client, referring to a piece of evidenced consisting of Ellison’s personal writings.
“I don’t tend to much freaking-out-about… But I did start thinking about shutting down Alameda, there might not be the right management in place,” Bankman-Fried replied.
Regarding their failed romantic entanglement, Bankman-Fried told the court that, “[Ellison] wanted more from it than I was able to give.”
Ironically, Ellison’s Alameda not having enough to give Bankman-Fried’s FTX would be what later sunk both firms, and their CEOs.
Bankman-Fried told the court that his largest mistake was not having a dedicated risk management team and a chief risk manager at FTX, but maintained that the large amounts of money FTX and Alameda spent on investments and marketing was money it was allowed to spend, not misappropriated customer funds.
“I did not want FTX to be known as the Kansas City Royals of crypto exchanges,” he testified about the exchange’s 9-figure sponsorship deal with a stadium in Miami, where the NBA’s Heat play.
This goes against the testimony of the government’s three cooperating insider witnesses, who repeatedly said Bankman-Fried directed them to engage in a crime by misappropriating FTX customer money and hiding it, for example from lenders.
Bankman-Fried also claimed that he was “too busy” to run both FTX and Alameda at once, citing long hours and thousands of unread emails.
At times, the judge grew frustrated with Bankman-Fried’s long and often meandering replies.
“We would all get finished with this more quickly if you focused on answering the question better,” the Judge Lewis Kaplan said.
But getting finished quickly would open Bankman-Fried up to cross-examination. By killing time today and ending the hearing with their own last word, the defense team gets to leave the jury with nothing but Bankman-Fried’s own story for the next two days.
On Monday (Oct. 30), Bankman-Fried is expected to be cross-examined by federal prosecutors, who will try to mine any and all of his past comments and actions for inconsistencies and criminal liabilities.