Sam Bankman-Fried acknowledges 'errors' but affirms he didn't commit fraud

28.10.2023 posted by Admin

FTX founder's trial. Defense amid alleged fraud

FTX founder Sam Bankman-Fried, who is currently on trial for alleged fraud, took the stand on Friday to defend himself. He acknowledged that a lot of people suffered when the cryptocurrency exchange collapsed last year, but he maintained that he did not engage in any fraudulent activities or steal billions of dollars from customers.

During his first day of testimony, Bankman-Fried answered questions from his own lawyer while jurors were present. He admitted to making some errors, like not establishing a risk-management team. However, he also attempted to shift responsibility onto Caroline Ellison, the former CEO of his crypto-focused Alameda Research hedge fund, who was a key prosecution witness.

The 31-year-old ex-billionaire consistently maintained that his actions stemmed from oversights as he rapidly built a company, rather than any intention to defraud individuals. He expressed, "We initially believed we could create the best product on the market. Unfortunately, it turned out to be the opposite, resulting in harm to numerous people, including customers, employees, and the company's bankruptcy."

Bankman-Fried is facing two counts of fraud and five counts of conspiracy. If convicted, he could be sentenced to a lengthy prison term.

Prosecutors have alleged that he misused FTX customer funds to support Alameda, made speculative venture investments, and donated over $100 million to U.S. political campaigns. He is also accused of devising schemes to deceive Alameda's lenders and FTX investors.

In response to his defense lawyer's inquiries, Bankman-Fried asserted that the funds used for sponsorships and real estate did not come from FTX's customers, as claimed by the prosecution, but were derived from the company's revenue or capital from equity investors. He disclosed that he borrowed from Alameda, which he owned, to make political donations.

Bankman-Fried tried to distance himself from specific actions undertaken by three former colleagues who had pleaded guilty to fraud and testified against him. These colleagues asserted that he had directed them to take actions that contributed to the misappropriation of customer funds and deceit of investors and lenders. Bankman-Fried portrayed himself as a hands-off CEO who had faith in his subordinates.

Caroline Ellison, who had a past relationship with Bankman-Fried, testified earlier that he instructed her to manipulate Alameda's financial statements to ward off lenders during a crypto market crash in June 2022.

On Friday, Bankman-Fried stated that although Ellison had shared a spreadsheet she was considering sending to a lender, he did not scrutinize it in detail. He recalled glancing at it and deeming it reasonable. He occasionally glanced at the jury during his testimony.

Former FTX chief technology officer Gary Wang testified that Bankman-Fried had directed him to make alterations to FTX's computer code, providing Alameda with special privileges, including a $65 billion credit line and immunity from automatic liquidation in case of position devaluation, which facilitated the misappropriation of funds.

Bankman-Fried testified that he had asked Wang and FTX chief engineering officer Nishad Singh to ensure that Alameda would not be inadvertently liquidated but was unaware that their actions resulted in a feature allowing Alameda to maintain a negative balance.

Bankman-Fried was arrested in December 2022, shortly after FTX declared bankruptcy due to a surge in customer withdrawals prompted by concerns about fund safety.

During his testimony on Friday, Bankman-Fried attempted to attribute much of Alameda's problems to Ellison. He expressed concern that she had not adequately hedged against crypto market downturns and disputed her testimony that his unconventional appearance was integral to FTX's image. He explained that he wore T-shirts and shorts while running FTX because they were comfortable, and he didn't cut his hair simply because he was busy and lazy. For his court appearance, he adopted a clean-cut appearance in a dark suit.

Bankman-Fried faced questions from both sides on Thursday, with jurors absent, while the judge determined which parts of his testimony would be admissible. Prosecutors will have the opportunity to cross-examine him in front of jurors in the coming week, following the completion of direct examination by his defense attorney.
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