Former FTX Chief Government Sam Bankman-Fried, who faces fraud expenses over the collapse of the bankrupt cryptocurrency trade, walks outdoors the Manhattan federal courtroom in New York Metropolis, U.S. March 30, 2023.
Amanda Perobelli | Reuters
FTX founder Sam Bankman-Fried informed jurors in his prison trial on Friday that he did not commit fraud at his crypto trade, which collapsed late final 12 months.
Bankman-Fried addressed the New York courtroom a day after U.S. District Decide Lewis Kaplan sent jurors home early to contemplate whether or not some features of the defendant’s deliberate testimony, associated to authorized recommendation he obtained 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 buyer funds, to which Bankman-Fried mentioned “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 is convicted. Bankman-Fried, the son of two Stanford authorized students, has pleaded not responsible within the case.
Previous 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 Analysis. All of them singled out Bankman-Fried because the mastermind of a scheme to make use of FTX buyer cash to fund all the pieces from enterprise investments and a high-priced condo in the Bahamas to overlaying Alameda’s crypto losses.
Courtroom sketch displaying Sam Bankman Fried questioned by his lawyer Mark Cohen. Decide Lewis Kaplan on the bench
Artist: Elizabeth Williams
Prosecutors walked former leaders of Bankman-Fried’s companies via particular actions taken by their boss that resulted in shoppers losing billions of dollars final 12 months. A number of of the witnesses, together with Bankman-Fried’s ex-girlfriend Caroline Ellison, who ran Alameda, have pleaded responsible to a number of expenses and are cooperating with the federal government.
The choose’s resolution to ship the jury house on Thursday allowed Bankman-Fried and his protection group to audition their finest authorized materials for Decide Kaplan.
‘Vital oversights’
On Friday, Bankman-Fried acknowledged that certainly one of his largest errors was not having a threat administration group or chief regulatory officer. That led to “important oversights,” he mentioned.
Cohen walked Bankman-Fried via his background and the way he obtained into crypto. The defendant mentioned he studied physics on the Massachusetts Institute of Know-how and graduated in 2014. He then labored as a dealer on the worldwide desk at Jane Road for over three years, managing tens of billions of {dollars} a day in buying and selling. That is the place he realized the basics of issues like arbitrage buying and selling.
Within the fall of 2017, Bankman-Fried based Alameda Analysis.
“This was when crypto was beginning to develop into publicly seen for the primary time,” Bankman-Fried testified.
He mentioned individuals had 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 most likely be massive demand for an arbitrage supplier, he mentioned.
“I had completely no concept” how cryptocurrencies labored, Bankman-Fried mentioned. “I simply knew they had been issues you can commerce.”
The primary Alameda workplace was in an Airbnb in Berkeley, California, he mentioned. 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. Buying and selling 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 tons of 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 mentioned.
Bankman-Fried mentioned 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 basic restrictions on what could possibly be performed with funds that had been borrowed so long as the corporate believed property had been better than liabilities, Bankman-Fried testified.
![Sam Bankman-Fried takes the stand](https://image.cnbcfm.com/api/v1/image/107324417-16984158631698415859-31770286414-1080pnbcnews.jpg?v=1698416073&w=750&h=422&vtcrop=y)
In 2020, a routine liquidation gone incorrect led to among the particular borrowing permissions at Alameda, he mentioned. The danger engine was sagging below the load of progress. A liquidation that ought to have been within the 1000’s of {dollars} was within the trillions of {dollars}. Alameda was abruptly underwater due to closing the place.
The incident uncovered a bigger concern, that the potential of an misguided liquidation of Alameda could possibly be disastrous for customers.
Bankman-Fried mentioned 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 steered creating an alert, which might immediate the consumer to deposit extra collateral, or a delay, Bankman-Fried mentioned. They later carried out a function like that, he mentioned, including that he realized it was the “enable detrimental” function.
Bankman-Fried testified that he wasn’t conscious of the quantity Alameda was borrowing or its theoretical max. So long as the online asset worth was constructive on the trade and the size of borrowing was cheap, rising the road of credit score so Alameda may maintain filling orders was high-quality, he mentioned. Bankman-Fried added that he now believes what Singh and Wang did was enhance the road of credit score.
Powerful promote
Convincing the jury can be a tall order for Bankman-Fried after a mountain of damning proof was introduced 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 buyer 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 did not 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 outdoors counsel Fenwick & West, which suggested the crypto trade. Bankman-Fried spoke about Friedberg’s energetic involvement in all the pieces from the companywide auto-deletion coverage on messaging apps like Sign, to the creation of Alameda’s North Dimension checking account, the place billions of {dollars} value of FTX buyer cash was funneled.
The previous FTX chief additionally mentioned that the tons of of hundreds of thousands of {dollars} in private loans to himself and different founders of the platform had been structured via promissory notes drafted by his in-house authorized group and mentioned in live performance together with his basic counsel and Friedberg. Having the blessing of his authorized counsel was one thing that SBF mentioned he “took consolation in.”
— CNBC’s Daybreak Giel contributed to this report
![Sam Bankman-Fried set to testify at fraud trial in what experts deem a major gamble for the case](https://image.cnbcfm.com/api/v1/image/107323316-16982798321698279830-31748695981-1080pnbcnews.jpg?v=1698280105&w=750&h=422&vtcrop=y)