FTX founder Sam Bankman-Fried leaves US Federal Court in New York City on March 30, 2023.
Kyle Mazza | Anadolu Agency | Getty Images
FTX founder Sam Bankman-Fried resumed his testimony on Monday, and used his time on the stand accountable his former shut mates and colleagues for the downfall of his crypto empire.
As his felony fraud trial enters what’s anticipated to be its final week, Bankman-Fried is making an attempt to undermine the prosecution’s key witnesses, who positioned the FTX founder on the middle of the crypto trade’s misuse of buyer funds and its final demise.
Bankman-Fried, 31, faces a possible life sentence if convicted of fraud expenses stemming from the collapse in November of FTX and sister hedge fund Alameda Research. He has pleaded not responsible.
On Monday, Mark Cohen, Bankman-Fried’s lead protection legal professional, allowed his shopper to take goal at Caroline Ellison, who ran Alameda and can also be Bankman-Fried’s ex-girlfriend. The major theme was Bankman-Fried’s concern, expressed in conversations between June and September 2022, about whether or not Alameda was correctly hedged given the crash in crypto costs. He mentioned he was notably involved concerning the decline in Alameda’s web asset worth from $40 billion the prior yr to $10 billion.
The market had already dropped 70% and if it fell one other 50%, he was afraid the agency can be bancrupt, Bankman-Fried informed the jury.
“She started crying,” Bankman-Fried mentioned, relating to Ellison’s response when he informed her that. “She agreed.”
Ellison, who took a plea deal and is cooperating with the federal government, additionally mentioned Alameda should not have made some enterprise investments, Bankman-Fried testified. He mentioned she provided to step down and mentioned he informed her that this wasn’t about blame or previous failures, however that Alameda ought to urgently be placing on hedges. He mentioned he hadn’t supposed for her to resign.
In September, he checked in once more with Ellison concerning the hedging exercise, Bankman-Fried testified. She mentioned Alameda had hedged. He requested concerning the scale of the trades and mentioned his intuition was that they may have been twice the dimensions. After Ellison despatched him spreadsheets concerning the trades, she agreed there was extra room to hedge and she or he did so, Bankman-Fried mentioned.
Caroline Ellison, former chief govt officer of Alameda Research LLC, arrives to court docket in New York, US, on Thursday, Oct. 12, 2023.
Bloomberg | Bloomberg | Getty Images
Bankman-Fried’s testimony on Monday follows his preliminary look on the stand on the finish of final week. He informed jurors then that he did not commit fraud, and that he thought the crypto trade’s exterior expenditures, like paying for the naming rights at a sports activities area and its enterprise investments, got here out of firm income.
The majority of the four-week trial thus far has been highlighted by prosecutors strolling former leaders of Bankman-Fried’s companies by particular actions taken by their boss that resulted in shoppers dropping billions of {dollars} final yr. Several of the witnesses have pleaded responsible to a number of expenses and are cooperating with the federal government.
Bad hedging, troubled private loans
As questioning continued on Monday, Bankman-Fried mentioned his evaluation recommended that web asset worth at Alameda was nonetheless $10 billion.
The protection then walked Bankman-Fried by actions from Nov. 1 to Nov. 11, masking the interval of FTX’s speedy collapse and its fast aftermath.
Bankman-Fried mentioned Gary Wang, a co-founder who beforehand testified on behalf of the prosecution, informed him that the backlog of withdrawal calls for needed to do with a backlog of bitcoin withdrawals and that he was making a repair within the code.
FTX’s engineering director Nishad Singh, who was additionally referred to as as a authorities witness, had a problematic private monetary scenario, Bankman-Fried testified. He mentioned Singh was suicidal and had a therapist on name 24/7 to observe over him. Bankman-Fried mentioned he was making an attempt to consolation him about his loans and bills and to stop him from hurting himself.
Bankman-Fried then blamed Can Sun, who was FTX’s normal counsel. He mentioned they’d a chat earlier than Bankman-Fried’s follow-up name with funding fund Apollo. The spreadsheet supplied to Apollo did have the $8 billion legal responsibility included, Bankman-Fried mentioned. He informed the court docket that he spoke with Sun and informed Apollo about his finest understanding of the framework across the fiat account.
In describing the swift downfall of FTX, Bankman-Fried mentioned that buyer withdrawals had shortly elevated from $50 million a day to $1 billion a day. He mentioned it was like a run on the financial institution and he was very involved for the reason that solely option to withdraw all buyer funds was to liquidate each open margin commerce.
Bankman-Fried defended his tweets that have been designed to chill buyer issues.
FTX founder Sam Bankman-Fried is questioned by protection lawyer Mark Cohen as he testifies in his fraud trial over the collapse of the bankrupt cryptocurrency trade, at federal court docket in New York City, U.S., October 30, 2023 on this courtroom sketch.
Jane Rosenberg | Reuters
Regarding the “assets are fine” tweet he wrote through the panic, he mentioned he thought Alameda’s web asset worth was roughly $10 billion and that FTX did not have a gap in its stability sheet.
“My view was the exchange was OK and there was no holes in the assets,” he informed the court docket.
On Nov. 8, he realized that Alameda was going to have to be shut down. He had calls with potential buyers to try to safe “significant” exterior capital because of the run on FTX.
As the protection wraps up its questioning of Bankman-Fried, the main focus will flip again to the prosecution. Renato Mariotti, a former prosecutor within the U.S. Justice Department’s Securities & Commodities Fraud Section and now a trial accomplice in Chicago with Bryan Cave Leighton Paisner, mentioned he expects the cross-examination to be “devastating given SBF’s frequent prior statements about the issues in the case.”
“What we’ve heard so far has been the direct examination — the defense telling its story,” Mariotti informed CNBC. “There were no big twists or shockers. The defense doesn’t appear to have an ace up its sleeve.”
If you might be having suicidal ideas or are in misery, contact the Suicide & Crisis Lifeline at 988 for help and help from a educated counselor.
— CNBC’s Dawn Giel contributed to this report
WATCH: Sam Bankman-Fried testifying in his felony case
Source: www.cnbc.com”