Disgraced FTX founder Sam Bankman-Fried testified on Monday in his historic fraud trial, stating that he believed his hedge fund Alameda Research ‘had enough assets to cover an $8 billion debt’ to the cryptocurrency exchange – up until days before both collapsed.
Taking the stand in his own defense at trial, the 31-year-old former crypto bro told jurors that ‘he was concerned and surprised, but not alarmed’, upon learning – in October 2022 – that Alameda had borrowed a total of $8 billion from deposits that FTX customers sent to the exchange.
Reuters reported:
“‘If it were far larger, I would have been calling a crisis’, Bankman-Fried said from the witness stand in Manhattan federal court in response to questions from his defense lawyer, Mark Cohen.”
Accused of looting billions of dollars in FTX customer funds to prop up Alameda, and also to make speculative investments and contribute to U.S. political campaigns, SBF can face decades in prison if convicted.
He has acknowledged mistakes that led to FTX’s bankruptcy, but said he did not steal customers’ money.
“On the witness stand in federal court in Manhattan, Bankman-Fried has sought to offer alternative explanations for what happened to the money. He has sought to emphasize that FTX was a ‘margin’ exchange, where many customers, including Alameda borrowed money from other users to place bets.”
In a tough cross-examination, prosecutor Danielle Sassoon asked Bankman-Fried about testimony by Caroline Ellison, Alameda’s former CEO, that the fund borrowed money from FTX customers to repay its lenders.
Sassoon asked Bankman-Fried repeatedly if taking FTX funds to repay lenders was margin trading.
“‘It’s my testimony that it depends on the details but that it very well could be a margin trade’, Bankman-Fried said, sighing. ‘I’m not saying that’s what happened, and I’m not saying that’s not margin trading’.”
Bankman-Fried implied he left operational details to others, and that he did not directed them to commit crimes.
SBF has been accused of directing his team to grant Alameda special trading privileges on FTX – a move that prosecutors say allowed the fund to steal customer funds.
“Bankman-Fried testified on Friday that said he asked [Gary] Wang and [Nishad] Singh to prevent Alameda from getting liquidated by mistake, but did not know their solution was to let Alameda run a negative balance. On Monday, prosecutor Sassoon challenged that assertion. ‘You did not learn the details for the code change that you directed?’ Sassoon asked. ‘That’s correct’, Bankman-Fried said. ‘I trusted Gary and Nishad’.”
He always made a point of publicly reassuring customers their funds were in safe hands, and his statements have now come back to haunt him.
Washington Post reported:
“In her cross-examination, Sassoon contrasted Bankman-Fried’s statements on social media and in interviews, as well as his appearances before congressional hearings, with his private comments, which showed disdain for his colleagues as well as for his followers.
At one point, in a text to his inner circle of associates, he referred to government regulators with a vulgarity. In another text, he crudely disparaged a subset of his followers as ‘dumb motherf—–s’ even as he publicly courted their trust.”
The former crypto mogul was on edge as prosecutors questioned him, shifting in his seat.
Prosecutors delved on discrepancies between his version of events and the considerably different version by the prosecution’s three key witnesses.
“Those former top executives in Bankman-Fried’s crypto empire all have pleaded guilty to crimes they say he directed. They spent weeks describing their ex-boss as the mastermind of a scheme to defraud FTX customers, testifying that he knowingly tapped billions of dollars in customer funds to pay for risky investments, real estate acquisitions and political contributions.
Bankman-Fried insisted on Friday he consistently acted in good faith and only learned that his hedge fund, Alameda Research, owed $8 billion to FTX in the month before the businesses collapsed. He acknowledged making mistakes — conceding ‘a lot of people got hurt’ — but insisted he neither defrauded anyone nor took customer funds.”
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