When cryptocurrency exchange FTX was at an all-time high, company founder Sam Bankman-Fried communicated with the public in a steady stream of tweets, TV interviews and announcements before Congress.
Now as Mr. Bankman-Fried is testifying at his fraud trial in Manhattan, those words have come back to haunt him.
On Monday, a federal prosecutor bombarded the disgraced crypto mogul with questions as he took the stand for a second day of testimony in federal court. For more than four hours, prosecutor Danielle Sassoon interrogated Mr Bankman-Fried about discrepancies between his public statements and how he ran his crypto empire before it spectacularly collapsed in November.
Mr Bankman-Fried, 31, dressed in a light gray suit and purple tie, answered with a brief “yes” or “no”, avoiding the sometimes circuitous statements he made at other points in the trial. Rocking back and forth in his chair at times, he insisted that he did not remember much of what he had said publicly, including FTX’s handling of customer deposits and the interests that affected their businesses. Including about confrontation.
“I’m not sure,” Mr. Bankman-Fried repeatedly responded when Ms. Sassoon asked about statements he made while he was chief executive of FTX. “I can’t remember,” he said at other points.
Cross-examination exposed cracks in Mr Bankman-Fried’s claims, dealing a potentially serious blow to his credibility with the jury of nine women and three men who will decide his fate. On a large projector screen, Ms. Sassoon displayed statements that showed Mr. Bankman-Freed saying one thing in public and then acting differently in private. After telling government officials in Washington about FTX’s reach, Ms. Sassoon asked them to repeat the private messages, in which she used profanity to dismiss regulators as useless.
Mr Bankman-Fried’s testimony was the most anticipated moment of the trial, which has shed light on arrogance and massive risk-taking in the crypto industry. Once the face of crypto’s efforts to woo the public, Mr Bankman-Fried has now been compared to some of the most notorious fraudsters in recent history, including Elizabeth Holmes, founder of the failed blood-testing start-up Theranos.
Taking a stand was risky. Criminal defendants usually avoid testifying so that prosecutors do not have a chance to question them. But the first few weeks of the trial were so damaging to Mr. Bankman-Fried, as a procession of government witnesses testified that he lied to the public and stole from FTX customers, that he was left with few other options to save the case. Were.
In December, federal prosecutors accused Mr. Bankman-Fried of orchestrating a sweeping scheme to steal more than $10 billion from FTX customers. He said he had spent the money on extravagant projects, including venture capital investments, political contributions and luxury real estate purchases in the Bahamas, where FTX was based. Mr. Bankman-Fried was also accused of creating a secret backdoor in FTX’s code that allowed the hedge fund he founded, Alameda Research, to seize billions of dollars in client funds.
He has pleaded not guilty to seven counts of fraud, conspiracy and money laundering, and could face life in prison if convicted.
Shortly after the FTX implosion, three of Mr. Bankman-Fried’s closest associates – Caroline Ellison, Nishad Singh and Gary Wang – pleaded guilty to fraud and agreed to cooperate with the government, hoping for a lenient sentence. . All three have testified against Mr Bankman-Fried at trial and told the jury he lied and stole for years at their behest.
Mr Bankman-Fried took the stand on Friday to tell his side of the story. During questioning by his own lawyer, he presented himself as a hard-working founder who was overwhelmed by his responsibilities and ignored key business issues. He denied that he committed fraud, and blamed his partners for many of the problems that led to the collapse of FTX.
On Monday, it was the prosecution’s turn to ask questions. The courtroom was packed with spectators, including Mr. Bankman-Fried’s parents – law professors Joe Bankman and Barbara Fried – and Damien Williams, the top federal prosecutor in New York. Ms Sassoon’s mother also attended.
Ms. Sassoon focused many of her questions on Mr. Bankman-Fried’s comments in interviews, congressional testimony and on Twitter. They pressed him on inconsistent statements he had made over the years about his famously disheveled hair, and pointed to his frequent use of private jets, which suggested that his ostensibly modest lifestyle was a public relations performance. The total cost of the private flights is $15 million, Ms. Sassoon said.
They also asked him about interviews he gave before the collapse of FTX, in which he insisted that Alameda had no special privileges as a client trading on the exchange. In the first three weeks of the trial, prosecution witnesses testified that the opposite was true, and that Mr. Bankman-Fried had given billions of dollars to Alameda.
At one point, Ms. Sassoon went to the witness stand and presented Mr. Bankman-Fried a copy of “Numbers Go Up,” a new book about crypto by Bloomberg News reporter Zeke Fox. He pointed to an interview in the book in which Mr. Bankman-Fried appeared to contradict his previous claims while acknowledging that Almeida had special privileges.
Ms Sassoon asked whether seeing the book had reminded Mr Bankman-Fried of that admission. “No, it’s not,” he replied.
Eventually, Mr. Bankman-Fried, who is expected to return to the stand on Tuesday, made some concessions. He acknowledged that Alameda had a $65 billion line of credit with FTX, which essentially allowed it to borrow an unlimited amount of money. The second-largest credit line, which FTX had with another firm, was $150 million, he said.
But repeatedly, Mr. Bankman-Fried said he could not recall various statements about Alameda and FTX that journalists had attributed to him. He did not read all the articles, he said, and he often objected to the reporting.
“I disagreed with basically every article that was written about me,” he said after FTX collapsed.
Mr. Bankman-Fried said he did not remember many key moments in the narrative that prosecutors presented about the collapse of FTX. He said he did not recall asking a former colleague to transfer to Alameda some of the $2 billion raised by FTX from venture capital firms. Prosecutors have alleged that Mr. Bankman-Fried misappropriated the money of FTX’s venture investors as well as its clients.
At one point, Ms Sassoon asked Mr Bankman-Fried if he remembered making a statement about the importance of protecting client funds. He procrastinated and eventually said he couldn’t remember.
“I made several public statements,” he said.
Ms Sassoon then showed the jury a tweet Mr Bankman-Fried had posted about the same issue.
“And, as always, the money and safety of our users come first,” he said written,