Sam Bankman-Fried blames top lieutenants for FTX troubles in second day of testimony in criminal trial

FTX founder Sam Bankman-Fried resumed his testimony on Monday, and used his time on the stand responsible his former shut buddies and colleagues for the downfall of his crypto empire.

As his criminal fraud trial enters what’s anticipated to be its final week, Bankman-Fried is making an attempt to undermine the prosecution’s key witnesses, who positioned the FTX founder on the middle of the crypto alternate’s misuse of buyer funds and its final demise.

Bankman-Fried, 31, faces a possible life sentence if convicted of fraud prices stemming from the collapse in November of FTX and sister hedge fund Alameda Research. He has pleaded not responsible.

On Monday, Mark Cohen, Bankman-Fried’s lead protection lawyer, allowed his shopper to take goal at Caroline Ellison, who ran Alameda and can also be Bankman-Fried’s ex-girlfriend. The major theme was Bankman-Fried’s concern, expressed in conversations between June and September 2022, about whether or not Alameda was correctly hedged given the crash in crypto costs. He mentioned he was notably involved concerning the decline in Alameda’s web asset worth from $40 billion the prior 12 months to $10 billion.

The market had already dropped 70% and if it fell one other 50%, he was afraid the agency could be bancrupt, Bankman-Fried advised the jury.

“She began crying,” Bankman-Fried mentioned, relating to Ellison’s response when he advised her that. “She agreed.”

Ellison, who took a plea deal and is cooperating with the federal government, additionally mentioned Alameda should not have made some enterprise investments, Bankman-Fried testified. He mentioned she provided to step down and mentioned he advised her that this wasn’t about blame or previous failures, however that Alameda ought to urgently be placing on hedges. He mentioned he hadn’t meant for her to resign.

In September, he checked in once more with Ellison concerning the hedging exercise, Bankman-Fried testified. She mentioned Alameda had hedged. He requested concerning the scale of the trades and mentioned his intuition was that they might have been twice the dimensions. After Ellison despatched him spreadsheets concerning the trades, she agreed there was extra room to hedge and he or she did so, Bankman-Fried mentioned.

Bankman-Fried’s testimony on Monday follows his initial appearance on the stand on the finish of final week. He advised jurors then that he did not commit fraud, and that he thought the crypto alternate’s outdoors expenditures, like paying for the naming rights at a sports activities enviornment and its enterprise investments, got here out of firm income.

The majority of the four-week trial to date has been highlighted by prosecutors strolling former leaders of Bankman-Fried’s companies by particular actions taken by their boss that resulted in purchasers losing billions of dollars final 12 months. Several of the witnesses have pleaded responsible to a number of prices and are cooperating with the federal government.

Bankman-Fried mentioned Gary Wang, a co-founder who beforehand testified on behalf of the prosecution, advised him that the backlog of withdrawal calls for needed to do with a backlog of bitcoin withdrawals and that he was making a repair in the code.

FTX’s engineering director Nishad Singh, who was additionally known as as a authorities witness, had a problematic private monetary state of affairs, Bankman-Fried testified. He mentioned Singh was suicidal and had therapist on name 24/7 to look at over him. Bankman-Fried mentioned he was making an attempt to consolation him about his loans and bills and to stop him from hurting himself.

Bankman-Fried then blamed Can Sun, who was FTX’s basic counsel. He mentioned they’d a chat earlier than Bankman-Fried’s follow-up name with funding fund Apollo. The spreadsheet supplied to Apollo did have the $8 billion legal responsibility included, Bankman-Fried mentioned. He advised the courtroom that he spoke with Sun and advised Apollo about his finest understanding of the framework across the fiat account.

In describing the swift downfall of FTX, Bankman-Fried mentioned that buyer withdrawals had shortly elevated from $50 million a day to $1 billion a day. He mentioned it was like a run on the financial institution and he was very involved because the solely strategy to withdraw all buyer funds was to liquidate each open margin commerce.

Bankman-Fried defended his tweets that have been designed to chill buyer issues.

Regarding the “property are advantageous” tweet he wrote through the panic, he mentioned he thought Alameda’s web asset worth was roughly $10 billion and that FTX did not have a gap in its steadiness sheet.

“My view was the alternate was OK and there was no holes in the property,” he advised the courtroom.

On Nov. 8, he realized that Alameda was going to must be shut down. He had calls with potential buyers to try to safe “vital” outdoors capital as a result of run on FTX.

As the protection wraps up its questioning of Bankman-Fried, the main target will flip again to the prosecution. Renato Mariotti, a former prosecutor in the U.S. Justice Department’s Securities & Commodities Fraud Section and now a trial companion in Chicago with Bryan Cave Leighton Paisner, mentioned he expects the cross-examination to be “devastating given SBF’s frequent prior statements concerning the points in the case.”

“What we have heard to date has been the direct examination — the protection telling its story,” Mariotti advised CNBC. “There have been no huge twists or shockers. The protection would not seem to have an ace up its sleeve.”

If you’re having suicidal ideas or are in misery, contact the Suicide & Crisis Lifeline at 988 for help and help from a educated counselor.

— CNBC’s Dawn Giel contributed to this report

WATCH: Sam Bankman-Fried testifying in his criminal case