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Sam Bankman-Fried said he was “very surprised” in October 2022 to be taught in regards to the $8bn of buyer deposits his personal buying and selling agency Alameda Research owed to his FTX crypto trade, giving new particulars in testimony on Friday of the businesses’ dramatic collapse.
In a day of gruelling testimony, Bankman-Fried supplied his account of FTX’s implosion, acknowledging he had made “mistakes” however implying that his closest workers and pals had stored him in the dead of night in regards to the scale of the hole till weeks earlier than his crypto empire got here crashing down.
The former crypto entrepreneur informed jurors in New York that he solely understood “pieces” of the complete monetary state of his corporations, as he took the stand in federal court docket to defend himself in opposition to accusations that Alameda drained buyer cash from FTX, resulting in the trade’s chapter final November.
Bankman-Fried, the one-time paper billionaire who faces a long time behind bars if convicted on the fraud costs in opposition to him, will likely be cross-examined by prosecutors subsequent week. He has pleaded not responsible.
Wearing a gray swimsuit and purple tie, he calmly talked the jury via the founding of his two corporations — FTX and an affiliated buying and selling agency, Alameda Research — with faculty pals from MIT and former colleagues at New York buying and selling agency Jane Street Capital. The jury has heard testimony from a few of them, together with Gary Wang, Nishad Singh and Caroline Ellison, who’re co-operating with the prosecution.
The witnesses had testified to a number of conversations with the previous chief government within the months earlier than the businesses collapsed through which they mentioned the $8bn legal responsibility created as a result of Alameda had obtained FTX buyer deposits into its financial institution accounts earlier than the trade arrange its personal accounts.
He contradicted these accounts, saying he solely realized the scale of the hole when he appeared it up in a brand new model of the corporate database — which he was given entry to in October 2022. Until then, he thought Alameda’s whole money owed to FTX had been round $2bn, he said.
Even after the invention, he said he nonetheless thought Alameda would “be good for it” for the reason that buying and selling agency “had plenty of asset value to be able to cover the liability”.
Earlier within the day Bankman-Fried said he believed Alameda may do “anything” with cash it borrowed from FTX supplied “risks were being managed”, whether or not it was to “buy muffins” or “pay business expenses”.
His declare that he didn’t have a full image of his personal corporations’ funds till weeks earlier than their demise has been crucial to his defence. Friday’s testimony added new specifics to his account.
His lieutenants had testified that he directed them to extend the raid on buyer cash in June 2022 with the intention to repay Alameda’s third-party lenders within the midst of the broader crypto crash. He said it was Ellison who advised it “probably made sense” to repay the loans, and that he had assented with out understanding in regards to the $8bn legal responsibility.
Defence lawyer Mark Cohen additionally tried to point out the onslaught of choices and knowledge his consumer had confronted as chief government of the fast-growing trade. Bankman-Fried said that he labored 12 hours on a “light day” and 22 hours on a “heavy day”, and obtained a whole lot of Signal chats. He said he aimed to have solely 60,000 unread emails, however “I didn’t usually succeed”.
Bankman-Fried testified that secret particular privileges that Alameda loved on FTX had been created by Wang and Singh to assist the buying and selling agency present liquidity on the trade — and that he didn’t know the main points on the time.
He additionally solid blame for Alameda’s collapse on Ellison. He testified that he had urged her to hedge the buying and selling agency’s debt-fuelled bets on rising crypto costs. He said she informed him she was “looking into doing so” however by no means did — in the end costing the agency about $10bn.
He said it had been Ellison’s concept to ship Alameda’s lenders a steadiness sheet that hid its large money owed to FTX, considered one of seven various variations prosecutors had proven to the jury. He said he had solely “briefly” mentioned the doc together with her.
The testimony briefly touched upon Bankman-Fried’s “on-again, off-again” relationship with Ellison, which he said ended for good in 2022 as a result of “she wanted more from [the relationship] than I was able to give”.
He added that he didn’t “have the time or the energy” to dwell as much as Ellison’s expectations, and that relationships had been “not something I have been great at”.
He had given a preview of his testimony, with out the jury current, on Thursday, answering questions on plenty of points so the choose may determine whether or not the subjects had been admissible as proof as a part of the defence’s case.
On Friday morning, Judge Lewis Kaplan, who’s overseeing the case, dominated that Bankman-Fried couldn’t reply questions designed to elicit testimony through which he claims he was following the recommendation of attorneys when implementing sure insurance policies at FTX and Alameda.
