FTX Founder Sam Bankman-Fried arrives at Manhattan Federal Court docket for a court docket look in New York, United States on June 15, 2023.
Fatih Aktas/ | Anadolu Company | Getty Photographs
Sam Bankman-Fried, who pleaded not responsible to legal fraud expenses tied to the collapse of his crypto empire, has one final probability to get a Manhattan jury to consider him.
After two days on the witness stand, Bankman-Fried is about to wrap up his testimony on Tuesday. All that is left is a pair extra hours of cross-examination by prosecutors, adopted by a redirect examination by Bankman-Fried’s group. After that, the protection plans to relaxation its case.
The roughly four-week trial has largely consisted of government-supported testimony from Bankman-Fried’s former shut mates, confidants and high executives at crypto trade FTX and sister hedge fund Alameda Analysis. All of them singled out Bankman-Fried because the mastermind of a scheme to make use of FTX buyer cash to fund every part from enterprise investments and a high-priced condominium within the Bahamas to overlaying Alameda’s crypto losses after the market crashed final 12 months.
Bankman-Fried’s protection didn’t land any important blows in cross-examining the prosecution’s key witnesses, together with Caroline Ellison, the defendant’s ex-girlfriend and the previous head of Alameda. When it was protection lawyer Mark Cohen’s probability to take the lead, he solely referred to as three witnesses, with the majority of his case driving on Bankman-Fried’s potential to persuade the jury of his story.
The 31-year-old former billionaire, whose crypto companies spiraled out of business over the course of some days final November, instructed jurors in his first day on the stand on Friday that he did not commit fraud and that he thought FTX’s exterior expenditures, like paying for the naming rights at a sports activities area, got here out of firm income.
When requested by Cohen on Friday morning if he defrauded anybody, Bankman-Fried stated, “No, I didn’t.” His lawyer then requested if he took buyer cash, to which Bankman-Fried stated, “No.”
FTX founder Sam Bankman-Fried is questioned by prosecutor Danielle Sassoon throughout his fraud trial over the collapse of the bankrupt cryptocurrency trade, earlier than U.S. District Decide Lewis Kaplan at federal court docket in New York Metropolis, U.S., October 30, 2023 on this courtroom sketch.
Jane Rosenberg | Reuters
Bankman-Fried, the son of two Stanford College authorized students, faces seven legal counts, together with wire fraud, securities fraud and cash laundering, that would land him in jail for all times if he is convicted. His argument to the jury is that he made errors, like not having a threat administration group in place, which led to “important oversights.” However in terms of the central query — what occurred to billions of {dollars} in buyer cash — Bankman-Fried would not provide any clear explanations and claims to probably not know.
Ellison, who was one among a number of witnesses cooperating with the federal government on a plea deal, had a extra exact reply, in her Oct. 10 look on the stand.
“We in the end took round $14 billion, a few of which we had been in a position to pay again,” she stated. “I despatched steadiness sheets to lenders on the route of Sam that incorrectly said Alameda’s belongings and liabilities.”
Ellison stated Alameda siphoned a number of billion {dollars} from FTX prospects and that Bankman-Fried had not solely arrange a system to steal the funds but additionally directed Ellison and others to make use of buyer funds to repay loans within the ballpark of $10 billion.
Bankman-Fried testified that he wasn’t conscious of the quantity Alameda was borrowing from FTX, or its theoretical max. So long as Alameda’s internet asset worth was constructive and the size of borrowing was affordable, growing its line of credit score in order that Alameda might hold filling orders was tremendous, he stated. Earlier testimony from former engineering director Nishad Singh and co-founder Gary Wang urged the road of credit score was raised to $65 billion, a quantity Bankman-Fried stated he wasn’t conscious of.
Prosecutors entered corroborating supplies, together with encrypted Sign messages and different inner paperwork that seem to indicate Bankman-Fried orchestrating the spending of FTX buyer cash.
‘Common degree sports activities fan’
Bankman-Fried tried to clarify away a few of these bills. For instance, the naming rights to Miami’s basketball area would price $10 million a 12 months, or roughly 1% of income, and ship returns nicely in extra of that due to the model consciousness it could create for even an “common degree sports activities fan,” he stated. He added that he thought the cash was coming from income from the trade and returns from enterprise investments, versus buyer funds.
Equally, Bankman-Fried testified that he believed the lavish Bahamas properties had been being paid for with FTX working money that got here from income and enterprise investments. He stated having obtainable property to hire was a essential incentive if the corporate needed to poach builders from Fb and Google.
On Monday, Bankman-Fried’s technique shifted to one among blaming lots of his former high lieutenants, who’d beforehand testified in opposition to him.
Caroline Ellison, former chief government officer of Alameda Analysis LLC, leaves Manhattan Federal Court docket after testifying throughout the trial of FTX CEO Sam Bankman-Fried, on October 10, 2023 in New York Metropolis.
Michael M. Santiago | Getty Photographs
When it got here to Ellison, Bankman-Fried stated that he repeatedly tried to ensure she was implementing ample hedging methods at Alameda to make sure the fund did not collapse below the burden of tumbling crypto costs.
Bankman-Fried testified about a number of conversations on the matter he’d had with Ellison between June and September 2022, and stated he was notably involved in regards to the decline in Alameda’s internet asset worth from $40 billion the prior 12 months 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 instructed the jury.
“She began crying,” Bankman-Fried stated, concerning Ellison’s response when he instructed her that. “She agreed.”
Bankman-Fried stated Ellison provided to resign over the matter, however the defendant testified he wasn’t centered on blame or previous failures however reasonably ensuring that Alameda remained solvent.
In September, he checked in once more with Ellison in regards to the hedging exercise, Bankman-Fried testified. Ellison instructed him Alameda had hedged. He requested in regards to the scale of the trades and stated his intuition was that they may have been twice the dimensions. After Ellison despatched him spreadsheets in regards to the trades, she agreed there was extra room to hedge and he or she did so, Bankman-Fried stated.
In strolling via FTX’s failure, Bankman-Fried mentioned the function performed by Singh, who was additionally referred to as as a authorities witness. Bankman-Fried highlighted Singh’s private monetary issues, and stated he was suicidal with a therapist on name 24/7 to observe over him. Bankman-Fried stated he was making an attempt to consolation Singh about his loans and bills partly to forestall him from hurting himself.
In describing the swift downfall of FTX, Bankman-Fried stated that buyer withdrawals had rapidly elevated from $50 million a day to $1 billion a day. He stated it was like a run on the financial institution and he was very involved because the solely option to withdraw all buyer funds was to liquidate each open margin commerce.
Bankman-Fried defended his tweets from early November that he stated had been designed to ease buyer issues.
Concerning the “belongings are tremendous” tweet he wrote throughout the panic, he stated he thought Alameda’s internet asset worth was roughly $10 billion and that FTX did not have a gap in its steadiness sheet.
“My view was the trade was OK and there was no gap within the belongings,” he instructed the court docket.
Shorter solutions
In testimony in a while Monday, Bankman-Fried was confronted with cross-examination as the federal government had its flip with the defendant. Removed from the extra descriptive solutions Bankman-Fried offered in response to Cohen’s questions, the prosecutors inquiries had been met with plenty of fast replies like “Yep” and “I do not recall.”
In some cases, his solutions had been straight adopted with a authorities exhibit, reminiscent of a tweet, interview transcript, congressional testimony or e mail, meant to dispute his reply.
For instance, Assistant U.S. Lawyer Danielle Sassoon requested Bankman-Fried if he assured people who Alameda performed by the identical guidelines as others on the FTX trade. Bankman-Fried stated he wasn’t positive. The federal government adopted by exhibiting a tweet from him straight addressing the subject together with an e mail during which he wrote that Alameda’s account is like everybody else’s.
After the federal government wraps its questioning on Tuesday and the protection will get its shot at redirect, all that is left on the docket is 2 witness rebuttals from the prosecution. One will come from an FBI knowledge analyst and the opposite from an worker at funding agency Apollo, which had been in talks to assist finance an FTX rescue.
At that time, Bankman-Fried’s destiny will lie within the arms of the 12 jurors who’ve spent the previous 4 weeks sitting a number of ft away from the defendant in a decrease Manhattan courtroom.
If you’re having suicidal ideas or are in misery, contact the Suicide & Disaster Lifeline at 988 for help and help from a educated counselor.
— CNBC’s Daybreak Giel contributed to this report
WATCH: Sam Bankman-Fried walks jury via ultimate days of FTX