Former FTX Chief Executive Sam Bankman-Fried, who faces fraud fees over the collapse of the bankrupt cryptocurrency change, walks exterior the Manhattan federal courtroom in New York City, U.S. March 30, 2023.
Amanda Perobelli | Reuters
FTX founder Sam Bankman-Fried advised jurors in his prison trial on Friday that he did not commit fraud at his crypto change, which collapsed late final yr.
Bankman-Fried addressed the New York courtroom a day after U.S. District Judge Lewis Kaplan despatched jurors residence early to think about whether or not some elements of the defendant’s deliberate testimony, associated to authorized recommendation he acquired whereas working FTX, could be admissible in courtroom.
On Friday morning, protection legal professional Mark Cohen requested Bankman-Fried if he defrauded anybody.
“No, I did not,” Bankman-Fried responded.
Cohen adopted by asking if he took buyer funds, to which Bankman-Fried stated “no.”
Bankman-Fried, 31, faces seven prison counts, together with wire fraud, securities fraud and cash laundering, that would 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.
Prior 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 crew in addition to the individuals who ran sister hedge fund Alameda Research. They all singled out Bankman-Fried because the mastermind of a scheme to make use of FTX buyer cash to fund all the things from enterprise investments and a high-priced condominium within the Bahamas to masking Alameda’s crypto losses.
Courtroom sketch displaying Sam Bankman Fried questioned by his legal professional Mark Cohen. Judge Lewis Kaplan on the bench
Artist: Elizabeth Williams
Prosecutors walked 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, together with Bankman-Fried’s ex-girlfriend Caroline Ellison, who ran Alameda, have pleaded responsible to a number of fees and are cooperating with the federal government.
The choose’s resolution to ship the jury residence on Thursday allowed Bankman-Fried and his protection crew to audition their greatest authorized materials for Judge Kaplan.
‘Significant oversights’
On Friday, Bankman-Fried acknowledged that one among his largest errors was not having a threat administration crew or chief regulatory officer. That led to “significant oversights,” he stated.
Cohen walked Bankman-Fried by his background and the way he acquired into crypto. The defendant stated he studied physics on the Massachusetts Institute of Technology and graduated in 2014. He then labored as a dealer on the worldwide desk at Jane Street for over three years, managing tens of billions of {dollars} a day in buying and selling. That’s the place he discovered the basics of issues like arbitrage buying and selling.
In the autumn of 2017, Bankman-Fried based Alameda Research.
“This was when crypto was starting to become publicly visible for the first time,” Bankman-Fried testified.
He stated 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 huge demand for an arbitrage supplier, he stated.
“I had absolutely no idea” how cryptocurrencies labored, Bankman-Fried stated. “I just knew they were things you could trade.”
The first Alameda workplace was in an Airbnb in Berkeley, California, he stated. 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. Trading quantity grew considerably on FTX from a couple of million {dollars} a day to tens of thousands and thousands of {dollars} that yr to a whole lot of thousands and 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 stated.
Bankman-Fried stated 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 completed with funds that had been borrowed so long as the corporate believed property had been larger than liabilities, Bankman-Fried testified.
In 2020, a routine liquidation gone unsuitable led to a number of the particular borrowing permissions at Alameda, he stated. The threat 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 out of the blue underwater due to closing the place.
The incident uncovered a bigger concern, that the potential of an inaccurate liquidation of Alameda could possibly be disastrous for customers.
Bankman-Fried stated 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 urged creating an alert, which might immediate the consumer to deposit extra collateral, or a delay, Bankman-Fried stated. They later carried out a characteristic like that, he stated, including that he discovered it was the “allow negative” characteristic.
Bankman-Fried testified that he wasn’t conscious of the quantity Alameda was borrowing or its theoretical max. As lengthy as the online asset worth was constructive on the change and the dimensions of borrowing was cheap, rising the road of credit score so Alameda might hold filling orders was tremendous, he stated. Bankman-Fried added that he now believes what Singh and Wang did was enhance the road of credit score.
Tough promote
Convincing the jury can be a tall order for Bankman-Fried after a mountain of damning proof was offered by the federal government.
Prosecutors additionally entered corroborating supplies, together with encrypted Signal messages and different inside 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 put a lot of the prison blame on FTX’s chief regulatory officer, Dan Friedberg, in addition to exterior counsel Fenwick & West, which suggested the crypto change. Bankman-Fried spoke about Friedberg’s energetic involvement in all the things from the companywide auto-deletion coverage on messaging apps like Signal, to the creation of Alameda’s North Dimension checking account, the place billions of {dollars} value of FTX buyer cash was funneled.
The former FTX chief additionally stated that the a whole lot of thousands and thousands of {dollars} in private loans to himself and different founders of the platform had been structured by promissory notes drafted by his in-house authorized crew and mentioned in live performance together with his basic counsel and Friedberg. Having the blessing of his authorized counsel was one thing that SBF stated he “took comfort in.”
— CNBC’s Dawn Giel contributed to this report
WATCH: Sam Bankman-Fried testifying in his prison case
Source: www.cnbc.com”