Former FTX CEO Sam Bankman-Fried finally took the stand in his criminal fraud trial this week, as his defense team looked to pose questions that aimed to justify his actions in running FTX.
Bankman-Fried taking the stand also meant that prosecutor Danielle Sassoon also got a chance to cross-examine Bankman-Fried.
Bankman-Fried Believed Taking Customer Funds Was Legal
Mark Cohen, the lead defense lawyer, sought to draw focus on Bankman-Fried’s simultaneous leadership of FTX and his proprietary trading firm, Alameda Research. When asked by Cohen about why he had the signing authority for both of the companies in question, Bankman-Fried replied that he was the CEO of both firms at the time. He also added that FTX did not have a bank account.
Cohen further questioned his client regarding the mingling of FTX customer deposits and Alameda funds, asking Bankman-Fried if he thought this was legal. To this, Bankman-Fried stated that he did think taking FTX customer funds through Alameda Research was legal.
“JUST IN: Sam Bankman-Fried says he believed it was legal to take FTX customer funds through Alameda Research.”
Bankman-Fried Did Not Intentionally Commit Fraud
Cohen asserted in his opening arguments that while Bankman-Fried made several mistakes while running FTX and Alameda Research, he did not intentionally commit fraud during that time. According to the defense, the young founder only wanted to scale operations at the now-bankrupt cryptocurrency exchange rapidly. They further argued that mistakes and oversights were inevitable in such a chaotic startup environment.
Alameda Research was heavily reliant on FTX customer funds to make trades and offer loans. This co-dependency had a significant role to play in the $32 billion worth FTX’s quick collapse when withdrawals peaked last November. During the testimony, the judge asked Bankman-Fried if he had read FTX’s terms of service in full. To this, he admitted that he had skimmed over certain parts while reading other parts more thoroughly.
Prosecutor Danielle Sassoon Takes Aim At SBF
As Bankman-Fried took the stand, it meant prosecutor Danielle Sassoon got a chance to have a go at him. The trial had a lot of testimony about disappearing messages on Signal, which the prosecution has implied is evidence of wrongdoing. During her cross-examination of Bankman-Fried, Sassoon asked him when he had specifically discussed the auto-deletion of messages with his lawyers. This led to a very long pause from Bankman-Fried, which was the first of many.
Finally, Bankman-Fried replied that he thought it was shortly after he started using Signal, which was around the spring of 2021, adding that he had mentioned it to them at the time. Sassoon prodded further, asking if he had sought approval, to which Bankman-Fried said he didn’t know that he had sought approval exactly, describing it as a jumble of word-salad.
“So I remember — my memory of the policy is that it laid out various circumstances in which it was not permissible to do so or in which there needed to be a lengthy retention period for company communications, and that outside of those sets of topics or forums, there was permissibility to have effectively whatever data-retention link or setting felt appropriate.”
Bankman-Fried had earlier stated that Slack was for formal communications. However, Caroline Ellison had testified that she had sent him the seven prospective fake balance sheets over Signal. Sassoon wanted to know if that was a formal document, to which Bankman-Fried replied that it was only a draft. However, he could not answer what specific conversations led him to this conclusion.
Earlier in the trial, we saw a memo about shutting down Alameda Research. Gary Wang, another alleged co-conspirator, had alleged that doing so would be impossible because of the money Alameda owed FTX’s customers. Bankman-Fried said he did not recall conversations about the $11 billion hole in the balance sheet. When asked about Adam Yedidia’s testimony about Bankman-Fried telling him that Signal messages auto-deleted because keeping them was “all downside,” he said he did not recall that either.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
