Former FTX Chief Executive Sam Bankman-Fried, who faces fraud prices over the collapse of the bankrupt cryptocurrency change, walks exterior the Manhattan federal courtroom in New York City, U.S. March 30, 2023.
Amanda Perobelli | Reuters
FTX founder Sam Bankman-Fried instructed jurors in his prison trial on Friday that he didn’t commit fraud at his crypto change, which collapsed late final 12 months.
Bankman-Fried addressed the New York courtroom a day after U.S. District Judge Lewis Kaplan sent jurors home early to contemplate whether or not some features of the defendant’s deliberate testimony, associated to authorized recommendation he acquired whereas working FTX, could be admissible in courtroom.
On Friday morning, protection lawyer Mark Cohen requested Bankman-Fried if he defrauded anybody.
“No, I didn’t,” Bankman-Fried responded.
Cohen adopted by asking if he took customer funds, to which Bankman-Fried stated “no.”
Bankman-Fried, 31, faces seven prison counts, together with wire fraud, securities fraud and cash laundering, that might land him in jail for all times if he’s convicted. Bankman-Fried, the son of two Stanford authorized students, has pleaded not responsible within the case.
Prior to the defendant’s look on the stand, the four-week trial was highlighted by the testimony of a number of members of FTX’s prime management group in addition to the individuals who ran sister hedge fund Alameda Research. They all singled out Bankman-Fried because the mastermind of a scheme to make use of FTX customer cash to fund every little thing from enterprise investments and a high-priced condo in the Bahamas to masking Alameda’s crypto losses.
Courtroom sketch exhibiting Sam Bankman Fried questioned by his lawyer Mark Cohen. Judge Lewis Kaplan on the bench
Artist: Elizabeth Williams
Prosecutors walked former leaders of Bankman-Fried’s companies by means of particular actions taken by their boss that resulted in shoppers losing billions of dollars final 12 months. Several of the witnesses, together with Bankman-Fried’s ex-girlfriend Caroline Ellison, who ran Alameda, have pleaded responsible to a number of prices and are cooperating with the federal government.
The choose’s resolution to ship the jury dwelling on Thursday allowed Bankman-Fried and his protection group to audition their greatest authorized materials for Judge Kaplan.
‘Significant oversights’
On Friday, Bankman-Fried acknowledged that one among his greatest errors was not having a threat administration group or chief regulatory officer. That led to “vital oversights,” he stated.
Cohen walked Bankman-Fried by means of his background and the way he acquired into crypto. The defendant stated he studied physics on the Massachusetts Institute of Technology and graduated in 2014. He then labored as a dealer on the worldwide desk at Jane Street for over three years, managing tens of billions of {dollars} a day in buying and selling. That’s the place he realized the basics of issues like arbitrage buying and selling.
In the autumn of 2017, Bankman-Fried based Alameda Research.
“This was when crypto was beginning to grow to be publicly seen for the primary time,” Bankman-Fried testified.
He stated folks have been enthusiastic about it, watching bitcoin, which had jumped from $1,000 to $10,000 in a two-month interval. Banks and brokers weren’t concerned but and it appeared like there would in all probability be massive demand for an arbitrage supplier, he stated.
“I had completely no concept” how cryptocurrencies labored, Bankman-Fried stated. “I simply knew they have been issues you possibly can commerce.”
The first Alameda workplace was in an Airbnb in Berkeley, California, he stated. It was listed as a two bed room however they used the sofa in the lounge as a 3rd mattress and the attic as a fourth.
He began FTX in 2019. Trading quantity grew considerably on FTX from just a few million {dollars} a day to tens of hundreds of thousands of {dollars} that 12 months to a whole lot of hundreds of thousands of {dollars} in 2020. By 2022, that quantity was as much as $10 billion to $15 billion of {dollars} per day in buying and selling quantity, he stated.
Bankman-Fried stated Alameda was permitted to borrow from FTX, however his understanding was that the cash was coming from margin trades, collateral from different margin trades or property incomes curiosity on the platform.
At FTX, there have been no common restrictions on what might be finished with funds that have been borrowed so long as the corporate believed property have been higher than liabilities, Bankman-Fried testified.
In 2020, a routine liquidation gone mistaken led to among the particular borrowing permissions at Alameda, he stated. The threat engine was sagging below the burden of development. A liquidation that ought to have been within the 1000’s of {dollars} was within the trillions of {dollars}. Alameda was all of a sudden underwater due to closing the place.
The incident uncovered a bigger concern, that the potential of an inaccurate liquidation of Alameda might be disastrous for customers.
Bankman-Fried stated he talked to FTX’s engineering director Nishad Singh and co-founder Gary Wang, each of whom testified earlier on behalf of the prosecution. They prompt creating an alert, which might immediate the consumer to deposit extra collateral, or a delay, Bankman-Fried stated. They later applied a function like that, he stated, including that he realized it was the “permit adverse” function.
Bankman-Fried testified that he wasn’t conscious of the quantity Alameda was borrowing or its theoretical max. As lengthy as the web asset worth was constructive on the change and the dimensions of borrowing was cheap, rising the road of credit score so Alameda might maintain filling orders was nice, he stated. Bankman-Fried added that he now believes what Singh and Wang did was enhance the road of credit score.
Tough promote
Convincing the jury shall be a tall order for Bankman-Fried after a mountain of damning proof was offered by the federal government.
Prosecutors additionally entered corroborating supplies, together with encrypted Signal messages and different inner paperwork that seem to point out Bankman-Fried orchestrating the spending of FTX customer cash.
The protection’s case, which consists of Bankman-Fried’s testimony together with that of two witnesses who took the stand Thursday morning, hinges largely on whether or not the jury believes the defendant didn’t intend to commit fraud.
On Thursday, below questioning led by Cohen, Bankman-Fried appeared to position a lot of the prison blame on FTX’s chief regulatory officer, Dan Friedberg, in addition to exterior counsel Fenwick & West, which suggested the crypto change. Bankman-Fried spoke about Friedberg’s lively involvement in every little thing from the companywide auto-deletion coverage on messaging apps like Signal, to the creation of Alameda’s North Dimension checking account, the place billions of {dollars} value of FTX customer cash was funneled.
The former FTX chief additionally stated that the a whole lot of hundreds of thousands of {dollars} in private loans to himself and different founders of the platform have been structured by means of promissory notes drafted by his in-house authorized group and mentioned in live performance together with his common counsel and Friedberg. Having the blessing of his authorized counsel was one thing that SBF stated he “took consolation in.”
— CNBC’s Dawn Giel contributed to this report
