Sam Bankman-Fried admits 'mistakes' but testifies he did not defraud
anyone
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[October 28, 2023]
By Jody Godoy and Luc Cohen
NEW YORK -FTX founder Sam Bankman-Fried, testifying in his own defense
at his fraud trial on Friday, said a "lot of people got hurt" when the
cryptocurrency exchange collapsed last year, but insisted he did not
defraud anyone or steal billions of dollars from customers.
Bankman-Fried fielded questions from his own lawyer in his first day of
testimony with jurors present, admitting to making "mistakes" such as
not putting in place a risk-management team while also seeking to lay
blame on Caroline Ellison, the former CEO of his crypto-focused Alameda
Research hedge fund who was a key witness for the prosecution.
The 31-year-old former billionaire's answers conformed to his
longstanding position that he overlooked some aspects of his business as
an entrepreneur building a fast-growing company from scratch but never
set out to steal from people.
"We thought that we might be able to build the best product on the
market," Bankman-Fried said during his six hours of testimony in
Manhattan federal court. "It turned out basically the opposite of that.
A lot of people got hurt - customers, employees - and the company ended
up in bankruptcy."
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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 accused Bankman-Fried of using FTX customer funds to
prop up Alameda, make speculative venture investments and donate more
than $100 million to U.S. political campaigns. He also is accused of
scheming to cheat Alameda's lenders and FTX investors.
Responding in a calm-sounding tone to defense lawyer Mark Cohen's
questions, Bankman-Fried said he believed funds used for sponsorships
and real estate came not from FTX's customers, as prosecutors allege,
but from the company's revenue or capital it received from equity
investors. He said he borrowed from Alameda, which he owned, to make
political donations.
Bankman-Fried sought to distance himself from specific actions he said
three of his closest former colleagues - each of whom pleaded guilty to
fraud and testified against him at trial - took without his firsthand
involvement.
While they testified he directed them to take specific actions that
furthered the theft of customer funds and lies to investors and lenders,
Bankman-Fried portrayed himself as an aloof CEO who trusted his
subordinates.
'SEEMED REASONABLE TO ME'
Ellison, who was Bankman-Fried's former on-and-off girlfriend, testified
on Oct. 11 that he directed her to falsify Alameda's balance sheets to
keep lenders at bay during a June 2022 crash in crypto markets.
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![](../images/102823PIX/news_c4.jpg)
Indicted FTX founder Sam Bankman-Fried leaves the United States
Courthouse in New York City, U.S., July 26, 2023. REUTERS/Amr Alfiky/File
Photo
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Bankman-Fried on Friday testified that while Ellison provided him a
spreadsheet she was considering sending to a lender, he did not look
at it in detail.
"I remember looking over it and saying that it seemed reasonable to
me," said Bankman-Fried, who occasionally looked toward the jury
while testifying.
Former FTX chief technology officer Gary Wang testified that Bankman-Fried
directed him to implement changes in FTX's computer code that would
give Alameda special privileges, such as a $65 billion line of
credit and an exemption from being automatically liquidated should
its positions lose value, that enabled the theft of funds.
Bankman-Fried testified he asked Wang and FTX chief engineering
officer Nishad Singh to prevent Alameda from accidentally being
liquidated, but did not know at the time that what his colleagues
put in place was a feature that allowed Alameda to carry a negative
balance.
Bankman-Fried was arrested in December 2022, a month after FTX
declared bankruptcy following a wave of withdrawals from customers
who grew concerned about the safety of their funds.
On Friday, Bankman-Fried sought to place much of the blame for
Alameda's failure on Ellison. He testified that he became concerned
that Ellison had failed to hedge against crypto market downturns,
and said that while she was a good manager, she was not focused on
"risk management."
He also pushed back on her testimony that he thought his trademark
unkempt appearance was an important part of FTX's image. He wore
T-shirts and shorts while running FTX, he said, because they were
"comfortable," and did not cut his hair because he was "busy and
lazy." Bankman-Fried presented a clean-cut look to the jury, clad in
a dark suit.
Bankman-Fried was questioned by both sides on Thursday without
jurors present as the judge assessed what parts of his testimony
would be admissible. Prosecutors will get their first chance to
question Bankman-Fried with jurors present when they cross-examine
him next week. Cohen said he would finish direct examination on
Monday morning.
(Reporting by Jody Godoy and Luc Cohen in New York; Editing by Will
Dunham and Daniel Wallis)
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