Sam Bankman-Fried tells jury he did not defraud FTX customers

Former head of the collapsed crypto exchange portrayed himself as a disengaged chief executive at his trial

Samuel Bankman-Fried, founder of the collapsed cryptocurrency exchange FTX, took the stand at his trial on Friday. AFP

“The defence calls Sam Bankman-Fried.”

The words hung in the air inside the hushed federal courtroom. Every eye fixed on the defendant.

Mr Bankman-Fried rose to his feet shortly before 10am and raised his right hand. Then, in the same boyish voice that won over the cryptocurrency world, the man known as SBF began to speak.

“Did you defraud anyone?” his lawyer, Mark Cohen asked.

“No, I did not,” Mr Bankman-Fried answered.

“Did you take customer funds?” Mr Cohen clarified. “No,” he said.

For the first time, the 12 jurors heard Mr Bankman-Fried tell his story about the collapse of the FTX empire.

For the next five hours, Mr Bankman-Fried largely painted himself as a disengaged chief executive, who did not code, oversee Alameda or do little more than skim the company's terms of service.

“I wish I had a better understanding than I did,” he told the jury. “I wasn’t entirely sure what was happening.”

Still, he acknowledged that “a lot of people got hurt” and that he made some mistakes.

Mr Bankman-Fried faces decades in prison on charges that he directed the transfer of FTX customer money into Alameda Research, an affiliated hedge fund, for risky investments, political donations and expensive property before both companies went into bankruptcy last year.

After so many turned against him, Mr Bankman-Fried resorted to the one witness that he was sure would defend him at his criminal trial: himself.

Whatever the verdict, Mr Bankman-Fried’s testimony will go down as a signature episode in one of the most dramatic corporate implosions in recent memory.

Mr Bankman-Fried is accused of orchestrating one of the biggest frauds of all time.

Friday’s testimony was the long-anticipated climax of the month-long trial in Lower Manhattan. In his testimony, Mr Bankman-Fried essentially reiterated that it was all a mistake.

Sam Bankman-Fried – in pictures

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  Former FTX chief executive Sam Bankman-Fried arrives on the day of his hearing at Manhattan federal court in New York. Reuters

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  Mr Bankman-Fried faces fraud charges over the collapse of the FTX cryptocurrency exchange. AP

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  Mr Bankman-Fried pleaded not guilty to charges that he cheated investors and looted customer deposits on his cryptocurrency trading platform. EPA

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  Mr Bankman-Fried is facing federal charges that he illegally used money from investors for personal gain. Reuters

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  The FTX Group has installed a new chief executive as Mr Bankman-Fried deals with his legal challenges. Reuters

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  Mr Bankman-Fried was extradited to the US from the Bahamas in December. AP

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  The FTX Group has filed for bankruptcy and has begun an 'orderly process to review and monetise assets for the benefit of all global stakeholders'. AFP

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  Mr Bankman-Fried was arrested on December 13, 2022, in the Bahamas after being served with several US criminal charges. AFP

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  Mr Bankman-Fried lost much of his wealth in the FTX collapse. AP

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  The US accuses Mr Bankman-Fried of committing one of the biggest financial frauds in history. Reuters

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  Mr Bankman-Fried, seen here in February 2021, has testified on Capitol Hill about cryptocurrency policy. AFP

Old colleagues

He attempted to cast doubt on testimony from his former colleagues and friends: Alameda chief executive Caroline Ellison, FTX’s former head of engineering Nishad Singh, and Gary Wang, a co-founder of the exchange.

All three, who have pleaded guilty to fraud and co-operated with prosecutors, said Mr Bankman-Fried was the one calling the shots when customer funds were misused.

Mr Bankman-Fried testified that he urged Ms Ellison to hedge Alameda’s positions, to no avail.

He said that in June 2022, she told him she was concerned the hedge fund had gone bankrupt but “was not very confident”.

After a few hours of Mr Singh, Mr Wang and former FTX coder Adam Yedidia investigating the situation, Mr Bankman-Fried said he was told there was a “bug” overestimating Alameda liabilities by $8 billion.

He recalled Ms Ellison saying that adjusting for the bug meant Alameda’s net asset value was actually between $8 billion and $10 billion.

Mr Bankman-Fried said because of this he was surprised to learn later that Alameda actually owed FTX around $8 billion and that he was not aware the balance was being tracked through an account called [e-mail].

In total, that meant the hedge fund owed $10 billion because its main account also had a negative balance of about $2 billion.

“I was very surprised,” he testified, contradicting testimony of his former inner circle, who said he was well aware of the fiat@ account and knew it was tracking Alameda’s access to customer funds.

Caroline Ellison, chief executive of crypto hedge fund Alameda Research, departs the trial of former FTX chief executive Sam Bankman-Fried, who is facing fraud charges over the collapse of the bankrupt cryptocurrency exchange, in New York City. Reuters

‘Freakoutedness’

Mr Cohen asked Mr Bankman-Fried about his concerns that Alameda had too much risk in August 2022 and a note that Ms Ellison wrote listing “things Sam is freaking out about”. He asked Mr Bankman-Fried if he was freaking out at the time.

“I don’t tend to show a lot of freakoutedness, but relative to my standard, yes,” he said.

Mr Bankman-Fried maintained that the collapse of his crypto exchange resulted from wrong-headed decisions rather than wrongdoing.

He said that “by far the biggest mistake” FTX made was not hiring a chief risk officer. The purpose of creating FTX was to “build the best product on the market”, he testified. “It turned out basically the opposite of that.”

Earlier, Mr Bankman-Fried’s lawyers assured the judge that their client was receiving the appropriate dose of Adderall to help him focus.

Mr Bankman-Fried described himself as “somewhat introverted” and claimed he became the public face of FTX by “accident at first”.

Blame game

His testimony included numerous mentions of other people, a sign that he was not working alone or in charge of everything at FTX and Alameda.

The former FTX chief executive said that while he had ultimate supervisory authority over Mr Singh and Mr Wang, they often made coding decisions on their own.

“I am not a programmer myself,” he said.

By far the biggest mistake FTX made was not hiring a chief risk officer. The purpose of creating FTX was to build the best product on the market. It turned out basically the opposite of that

Sam Bankman-Fried,
founder of FTX

When asked about his relationship with Ms Ellison, he treated the topic gently. He said their on-and-off romantic relationship ended because he “didn’t have the time or the energy to put in what I think she wanted”.

Jurors paid closed attention as Mr Bankman-Fried told the story of meeting Mr Wang in college, his early work at Jane Street Capital, and launching Alameda in Berkeley, California.

Interest faded when he embarked into explaining the technical details of trading at FTX, company policies and crypto markets.

He told jurors about his time at the Massachusetts Institute of Technology, which he attended from 2010 through 2014. He called the co-ed fraternity Epsilon Theta he belonged to “nerdy and dry”.

There were “lots of board games, no drinking”, he recalled.

The testimony mirrors points raised by Mr Cohen in his opening statement, in which he portrayed his client as a hard worker, who never drank and never intended to defraud anyone – unlike the “cartoon villain” he claimed prosecutors were trying to make him out to be.

The former crypto mogul said he was not good at naming things and the hedge fund ultimately became Alameda Research because it was just a generic name that made sense given that Berkeley was located in Alameda County.

That comment drew a smile from his father, Joe Bankman, who sat in the second row of the courtroom with his mother, Barbara Fried. The two passed notes back and forth throughout their son’s testimony on a legal pad.

Experience

Mr Bankman-Fried tried to portray himself and the others at Alameda as youngsters with no concept of how to run a business.

“These were 25-year-olds who had no experience in starting a company,” he said.

The government successfully objected to that line of testimony, however, cutting his comments short.

Mr Bankman-Fried confirmed that Alameda had a line of credit and could borrow from FTX, the central focus of prosecutor’s case. But he said that Alameda provided bids for crypto trades, and FTX would often give other so-called market makers lines of credit to “make it more efficient for them” to send buy and sell orders.

Mr Bankman-Fried claimed that he knew roughly the amount Alameda was using but “was not aware of a theoretical maximum”.