(NEW YORK) — Former crypto billionaire Sam Bankman-Fried testified before a jury Monday at his federal fraud and conspiracy trial that he wanted FTX customers to trust him.
“That would be ideal,” he testified.
Bankman-Fried is on trial for what federal prosecutors have described as “one of the biggest financial frauds in American history.” He faces seven counts of fraud, conspiracy and money laundering centered on his alleged use of customer deposits on the crypto trading platform FTX to cover losses at his hedge fund, pay off loans and buy lavish real estate, among other personal expenses.
He has pleaded not guilty to all counts. If convicted, he could face a sentence of up to 110 years in prison.
On cross-examination Monday, prosecutors portrayed Bankman-Fried as a hypocrite out for good publicity. Assistant U.S. Attorney Danielle Sassoon showed an October 2022 tweet in which Bankman-Fried supported federal regulations for cryptocurrency provided it protected customers.
“This was just for PR,” Sassoon said. “In private you said things like ‘f— regulators,’ didn’t you?”
“I said that once,” Bankman-Fried answered.
Prosecutors confronted Bankman-Fried with tweets, emails and interview responses in which he insisted the FTX account for Alameda Research — his companion hedge fund — was just like everyone else’s with no special access, privileges or rules.
“Did you claim that Alameda had no special privileges on FTX?” Sassoon asked.
“I did thousands of interviews I don’t honestly remember,” Bankman-Fried answered, though he conceded that “in some ways” he represented Alameda and FTX operated separately. Prosecutors contend the two companies were intertwined, that Alameda could withdraw billions of dollars from FTX using a line of credit that no other account enjoyed and with no risk of being liquidated.
During cross-examination, Bankman-Fried gave clipped, one-word answers, often a clipped “yup,” while during direct examination, his answers were so long-winded the judge interjected to remind him just to answer the question.
“For a period of time, you were a billionaire, correct?” Sassoon also asked.
“Yup,” Bankman-Fried replied.
The prosecution pointed out inconsistencies in Bankman-Fried’s public statements compared to what he said on the witness stand.
Bankman-Fried conceded at trial that he was not walled off from Alameda’s trading decisions. “And you understood it was important to tell the truth?” Sassoon asked.
“Yup,” Bankman-Fried answered before Sassoon played an excerpt of an interview during which Bankman-Fried said: “I was intentionally not getting involved in it because I was concerned about a conflict of interest.”
Sassoon cast doubt on the veracity of Bankman-Fried’s account, pointing out he reviewed notes, documents and spreadsheets prior to his testimony.
“Would you agree that you know how to tell a good story?” Sassoon asked.
“I don’t know, it depends on what metric you use,” Bankman-Fried answered.
Sassoon then asked a series of questions about Bankman-Fried’s appearances on Capitol Hill when he pitched FTX as safe and reliable, his interviews and his interactions with FTX customers on social media that convinced them to park as much as $15 billion in assets on his crypto exchange.
“You wanted customers to trust you with their money, didn’t you?” Sassoon asked, to which Bankman-Fried replied: “Yeah.”
“Do you recall describing FTX as having a healthy take on risk management?” she asked.
“No, but I may have,” the FTX founder said.
“You also acted like you cared about customer protections?” Sassoon continued.
“I think I did care about them, yes,” Bankman-Fried replied.
Bankman-Fried testifies on former colleague, ex-girlfriend Caroline Ellison
Earlier in the day, Bankman-Fried told the jury he confronted then-colleague Caroline Ellison four months before FTX collapsed into bankruptcy with concerns Alameda Research could become insolvent.
He testified that he told Ellison, who was then co-chief executive of Alameda and is Bankman-Fried’s ex-girlfriend, that the hedge fund should have hedged against some of its risky investments.
“She started crying,” Bankman-Fried said. “She also offered to step down.”
Part of Bankman-Fried’s defense strategy is to deflect blame for the FTX collapse. Ellison pleaded guilty to criminal charges and testified under a cooperation agreement with federal prosecutors in New York. She has testified that she committed fraud with Bankman-Fried and at his direction.
She also testified earlier this month that Bankman-Fried thought there was a “5% chance he would become president,” and that he believed in utilitarianism and thought rules against lying or stealing inhibited his ability to maximize the greatest benefit for the most people.
Bankman-Fried conceded on the witness stand Monday he made mistakes but testified that he committed no fraud.
“Did you defraud anyone?” defense attorney Marc Cohen asked. “No, I did not,” Bankman-Fried answered.
“Did you take customer funds?” Cohen asked, to which Bankman-Fried responded: “No.”
The defense has tried to convince the jury that Bankman-Fried was unaware of how dire his company’s finances were. He testified he traveled to the Middle East in October 2022 because he felt Alameda was solvent and in no danger of going bankrupt. Otherwise, he said, “I would have been in full-on crisis mode.”
Earlier this month, prosecutors explored Bankman-Fried’s unusual living arrangements and the luxurious lifestyle he’d been living in the Bahamas that was allegedly paid for, illegally, with customer and investor money.
Bankman-Fried stepped down from his role at FTX in November 2022 amid a rapid collapse that ended with the company declaring bankruptcy. Prosecutors charged Bankman-Fried the following month with an array of alleged crimes focused on a scheme to defraud investors.
In an interview with ABC News’ George Stephanopoulos in November 2022, Bankman-Fried denied knowing “there was any improper use of customer funds.”
“I really deeply wish that I had taken like a lot more responsibility for understanding what the details were of what was going on there,” Bankman-Fried said at the time. “A lot of people got hurt, and that’s on me.”
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