On Monday, Sam Bankman-Fried, the founder of FTX, resumed his testimony in his criminal trial that is drawing near to its conclusion. During his first day on the stand on Friday, Bankman-Fried informed the jury that he was not guilty of fraud, and had thought the external payments were amassed from the firm's profit. He pled not guilty to charges of fraud, and spent the greater part of his second day on the stand pointing the finger at his former leading subordinates for the downfall of his crypto domain.
On Monday, Sam Bankman-Fried continued providing testimony at his criminal fraud trial. The 31-year-old FTX founder used his time on the stand to suggest that individuals other than himself were responsible for the crypto exchange's downfall. He is facing a possible life sentence if convicted of fraud charges.
Mark Cohen, Bankman-Fried's attorney, had his client focus on Caroline Ellison, one of his ex-girlfriends and the former manager of Alameda Research. During conversations between June and September 2022, Bankman-Fried expressed concern about Alameda's net asset value dropping from $40 billion to $10 billion due to crypto prices falling by 70%. He feared that if the market dropped another 50%, the firm would be insolvent. He then described Ellison's response to the situation as crying and agreeing.
Bankman-Fried further testified that Ellison had claimed some venture investments shouldn't have been made. She offered to step down but he commented that it wasn't about blame or failures; rather, Alameda needed to urgently put on hedges. He checked in again in September if any hedging activity had taken place and Ellison confirmed that it had. He questioned the scale of the trades and said his instinct was that they should have been twice the size. Ellison apparently agreed and carried out the suggestion.
On Monday, Bankman-Fried will take the stand again after having done so at the close of last week when he claimed to be innocent of any fraud and stated his belief that the outside expenditures of the crypto exchange such as the purchase of naming rights for a sports arena and venture investments were taken out of profits. Prosecutors have used the majority of the four-week long trial to lead former associates of Bankman-Fried through a recount of his actions that resulted in clients incurring billions of dollars in losses in the prior year. Several of these witnesses have already pleaded guilty to numerous charges while cooperating with the government.
On Monday, Bankman-Fried spoke about his analysis showing Alameda's net asset value remaining at $10 billion. The defense then questioned Bankman-Fried about events from November 1st to November 11th, which encompassed FTX's rapid downfall followed by its aftermath. He informed the court that Wang told him there was a backlog on bitcoin withdrawals and that he was making changes to the code. Bankman-Fried additionally declared that Singh, a prosecution witness, was stricken with personal financial issues, was suicidal, and was monitored by a therapist constantly. He also noted that he had a conversation with FTX's general counsel, Can Sun, prior to talking to Apollo. The spreadsheet for Apollo did contain the $8 billion liability and Bankman-Fried told the court of his best understanding of the framework for the fiat account. To demonstrate the swift downfall of FTX, Bankman-Fried had stated that withdrawals had increased from $50 million daily to $1 billion daily, likening it to a run on the bank. He went on to defend his tweets aimed at calming customer worries.
He claimed that neither Alameda's net asset value nor FTX had any holes in the balance sheet when tweeting about the panic. In court, he said his sentiment was that the FTX exchange was in good health. Around Nov. 8, he was aware of the need to shutter Alameda and was trying to acquire substantial capital from outside investors that had been pulled due to the panic.
Renato Mariotti, a trial partner with Bryan Cave Leighton Paisner, formerly employed in the U.S. Justice Department's Securities & Commodities Fraud Section, stated that the cross-examination will be a serious challenge based on the defendant's statements about the case thus far. He commented that the defense has not revealed anything new, saying that "there were no big twists or shockers" and that it does not look like they have an "ace up its sleeve.”
Following the morning break, Assistant U.S. Attorney Danielle Sassoon began cross-examining the defendant, Bankman-Fried, who gave mostly brief responses to questions, typically saying "yep" or "I don't recall." When asked if Bankman-Fried had described FTX's global exchange as safe compared to other exchanges, he answered "I'm not sure." The prosecution then presented government exhibits, such as tweets, interviews, congressional testimonies, and emails that contradicted his statement. For example, Sassoon asked whether Bankman-Fried had assured people that Alameda followed the same rules as other users on FTX exchange. Bankman-Fried again said he was unsure, and the prosecution then showed a tweet from him about the topic along with an email in which he wrote that Alameda's account was like everyone else's.The prosecution also inquired about Alameda's negative account balance and if any other users had pledged outside investments as collateral. He confirmed that Crypto Lotus was permitted to pledge $100 million, but the information was not public.Sassoon asked Bankman-Fried if he "know[s] how to tell a good story," to which he replied, "I don't know. It depends on what metrics you use." By way of example, she asked about the stories he told investors to raise more than $1 billion, such as touting FTX's automated liquidation protocols. The prosecution also brought up Bankman-Fried's past profane comments about regulators, referencing direct messages published by Vox. Bankman-Fried admitted to referring to a subset of crypto-twitter as "dumb motherf------."Later, Sassoon questioned Bankman-Fried's contradictory statements about Alameda's role. She referenced a CNBC story from September 2022 in which he said he was no longer in control of Alameda and that it was "a neutral piece of market infrastructure," while he told other reporters a different story.Sassoon also asked Bankman-Fried if he traveled to the 2022 Super Bowl on a private plane; he answered that he was unsure. She then cited that his company had spent $50 million on private jet travel, and showed an exhibit of Bankman-Fried in shorts and a T-shirt leaning back on a private plane. At the same time, she mentioned that FTX had authorized Amazon packages to be sent via planes. Bankman-Fried couldn't cite the specific cost of this action but confirmed that it had been approved. Sassoon also asked him a few questions about his testimony that he worked up to 22 hours a day, to which he admitted that he had a high opinion of himself.The government expects about two more hours of cross-examination Tuesday followed by a redirect, after which the defense plans to rest its case. The government will present two witnesses in rebuttal: an FBI data analyst and an employee at Apollo. If you are having suicidal thoughts or are in distress, contact the Suicide & Crisis Lifeline at 988 for support and assistance from a trained counselor.— CNBC's Dawn Giel contributed to this reportWATCH: Sam Bankman-Fried testifying in his criminal case
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