© Reuters. FILE PHOTO: Indicted FTX founder Sam Bankman-Fried leaves america Courthouse in New York Metropolis, U.S., July 26, 2023. REUTERS/Amr Alfiky/File Picture
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By Jody Godoy and Luc Cohen
NEW YORK -FTX founder Sam Bankman-Fried, testifying in his personal protection at his fraud trial on Friday, mentioned a “lot of individuals acquired damage” when the cryptocurrency trade collapsed final yr, however insisted he didn’t defraud anybody or steal billions of {dollars} from clients.
Bankman-Fried fielded questions from his personal lawyer in his first day of testimony with jurors current, admitting to creating “errors” comparable to not setting up a risk-management crew whereas additionally searching for to put blame on Caroline Ellison, the previous CEO of his crypto-focused Alameda Analysis hedge fund who was a key witness for the prosecution.
The 31-year-old former billionaire’s solutions conformed to his longstanding place that he missed some features of his enterprise as an entrepreneur constructing a fast-growing firm from scratch however by no means got down to steal from folks.
“We thought that we’d be capable to construct the most effective product available on the market,” Bankman-Fried mentioned throughout his six hours of testimony in Manhattan federal courtroom. “It turned out principally the other of that. Lots of people acquired damage – clients, workers – and the corporate ended up in chapter.”
Bankman-Fried has pleaded not responsible to 2 counts of fraud and 5 counts of conspiracy. If convicted, he may face a long time in jail.
Prosecutors have accused Bankman-Fried of utilizing FTX buyer funds to prop up Alameda, make speculative enterprise investments and donate greater than $100 million to U.S. political campaigns. He is also accused of scheming to cheat Alameda’s lenders and FTX buyers.
Responding in a calm-sounding tone to protection lawyer Mark Cohen’s questions, Bankman-Fried mentioned he believed funds used for sponsorships and actual property got here not from FTX’s clients, as prosecutors allege, however from the corporate’s income or capital it obtained from fairness buyers. He mentioned he borrowed from Alameda, which he owned, to make political donations.
Bankman-Fried sought to distance himself from particular actions he mentioned three of his closest former colleagues – every of whom pleaded responsible to fraud and testified in opposition to him at trial – took with out his firsthand involvement.
Whereas they testified he directed them to take particular actions that furthered the theft of buyer funds and lies to buyers 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 steadiness sheets to maintain lenders at bay throughout a June 2022 crash in crypto markets.
Bankman-Fried on Friday testified that whereas Ellison supplied him a spreadsheet she was contemplating sending to a lender, he didn’t take a look at it intimately.
“I bear in mind wanting over it and saying that it appeared cheap to me,” mentioned Bankman-Fried, who often appeared towards the jury whereas testifying.
Former FTX chief know-how officer Gary Wang testified that Bankman-Fried directed him to implement adjustments in FTX’s pc code that might give Alameda particular privileges, comparable to a $65 billion line of credit score and an exemption from being mechanically liquidated ought to its positions lose worth, that enabled the theft of funds.
Bankman-Fried testified he requested Wang and FTX chief engineering officer Nishad Singh to forestall Alameda from unintentionally being liquidated, however didn’t know on the time that what his colleagues put in place was a characteristic that allowed Alameda to hold a damaging steadiness.
Bankman-Fried was arrested in December 2022, a month after FTX declared chapter following a wave of withdrawals from clients who grew involved in regards to the security of their funds.
On Friday, Bankman-Fried sought to put a lot of the blame for Alameda’s failure on Ellison. He testified that he grew to become involved that Ellison had didn’t hedge in opposition to crypto market downturns, and mentioned that whereas she was a superb supervisor, she was not centered on “threat administration.”
He additionally pushed again on her testimony that he thought his trademark unkempt look was an vital a part of FTX’s picture. He wore T-shirts and shorts whereas operating FTX, he mentioned, as a result of they had been “snug,” and didn’t reduce his hair as a result of he was “busy and lazy.” Bankman-Fried offered a clean-cut look to the jury, clad in a darkish go well with.
Bankman-Fried was questioned by each side on Thursday with out jurors current because the choose assessed what elements of his testimony could be admissible. Prosecutors will get their first likelihood to query Bankman-Fried with jurors current once they cross-examine him subsequent week. Cohen mentioned he would end direct examination on Monday morning.
