Sam Bankman-Fried testifies lawyers were involved in key FTX decisions
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[October 27, 2023]
By Luc Cohen and Jody Godoy
NEW YORK (Reuters) -FTX founder Sam Bankman-Fried testified on Thursday
at his fraud trial outside the jury's presence that lawyers at his
now-bankrupt cryptocurrency exchange were involved in key decisions at
the heart of the case, as he sought to distance himself from
responsibility for any wrongdoing.
Bankman-Fried, taking the witness stand hours after the prosecution
rested its case presented over 12 trial days, gave testimony that fit
with the defense argument that he acted in good faith while running FTX,
which collapsed in November 2022 following a wave of customer
withdrawals.
But on cross-examination by prosecutors, Bankman-Fried often struggled
to point to specific conversations in which lawyers approved his
actions. U.S. District Judge Lewis Kaplan said several of Bankman-Fried's
responses did not directly answer prosecutors' questions.
"The witness has what I'll simply call an interesting way of responding
to questions," Kaplan said.
Accused of stealing billions of dollars from unwitting customers,
Bankman-Fried has pleaded not guilty to two counts of fraud and five
counts of conspiracy. If convicted, he could face decades in prison.
Prosecutors have said Bankman-Fried used the misappropriated funds to
prop up his crypto-focused hedge fund, Alameda Research, make
speculative venture investments and donate more than $100 million to
U.S. political campaigns.
The 31-year-old former billionaire, clad in a gray suit, was called to
the stand in Manhattan federal court after his lawyers kicked off the
defense case with testimony from two other witnesses.
Kaplan decided that Bankman-Fried would initially provide testimony
without jurors present so he could determine which portions of it, if
any, would be admissible as evidence. Prosecutors have said Bankman-Fried
should not be allowed to suggest that the involvement of lawyers in
decision-making showed that he lacked criminal intent.
Speaking in a confident tone, Bankman-Fried often gave lengthy responses
to questions from defense lawyer Mark Cohen.
Bankman-Fried said FTX's lawyers were involved in crafting its
document-retention policies, setting up a system under which FTX
customers deposited their funds into an Alameda bank account, and
crafting loans that he and other executives took from Alameda.
Prosecutors have said Bankman-Fried encouraged employees to use
encrypted messaging platforms such as Slack and Signal and auto-delete
their communications to hide their tracks. They also have said he stole
funds by having FTX customers deposit money into accounts controlled by
Alameda, which then lent money to FTX executives.
Bankman-Fried is expected to testify to the jury on Friday. Kaplan said
he would decide then whether jurors could hear his testimony about
lawyers' involvement.
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FTX founder Sam Bankman-Fried attends as FBI agent Marc Troiano
testifies as Bankman-Fried faces fraud charges over the collapse of
the bankrupt cryptocurrency exchange, at federal court in New York
City, U.S., October 26, 2023 in this courtroom sketch. REUTERS/Jane
Rosenberg
SWAYING SIDE TO SIDE
Under cross-examination by prosecutor Danielle Sassoon, Bankman-Fried
swayed slightly side to side and motioned with his hands when
speaking. He frequently began responses by saying "yep."
Much of Sassoon's questioning focused on what FTX lawyers told
Bankman-Fried about the company's practice of having FTX customers
deposit funds intended for the exchange into accounts belonging to
Alameda, which Bankman-Fried testified happened for a time because
FTX did not yet have its own bank account.
When Sassoon asked if he ever spoke with lawyers about the
"permissibility" of Alameda spending the deposits, Bankman-Fried
paused for several seconds and said, "I don't recall any
conversations that were contemporaneous and phrased that way."
The judge sent the jurors home for the day after Bankman-Fried's
lawyers said they planned to elicit testimony from the defendant
about the involvement of FTX lawyers in key company decisions.
Legal experts have said Bankman-Fried has little to lose by bucking
conventional wisdom and testifying to the jury, given weeks of the
testimony against him by insiders painting an unflattering portrait
of his character. Cohen said Bankman-Fried's direct testimony to the
jury could last close to five hours, before prosecutors get a chance
to cross-examine him.
Former close FTX colleagues who testified for the prosecution told
the jury that Bankman-Fried directed them to commit crimes by
diverting customer funds to Alameda and lying to investors and
lenders. Bankman-Fried's risky decision to testify gives prosecutors
the chance to cross-examine him on those claims.
His lawyers have said three of his former colleagues, who have
pleaded guilty and agreed to cooperate with prosecutors, tailored
their testimony to implicate Bankman-Fried in the hopes of receiving
lenient sentences. Bankman-Fried has maintained that while he made
mistakes running FTX, he never intended to steal funds.
The prosecution rested after calling one final witness - FBI agent
Marc Troiano, who told jurors about Bankman-Fried's use of Signal.
The defense's first two witnesses were Krystal Rolle, Bankman-Fried's
lawyer in the Bahamas; and database expert Joseph Pimbley.
(Reporting by Luc Cohen and Jody Godoy in New YorkEditing by Noeleen
Walder, Will Dunham and Matthew Lewis)
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