Sam Bankman-Fried testifies he made ‘big mistakes’ at FTX

Sam Bankman-Fried testifies he made 'big mistakes' at FTX

Sam Bankman-Fried hasn’t stopped talking since his cryptocurrency empire collapsed in November.

Against the advice of his defense lawyers, Mr. Bankman-Fried embarked on a lengthy press tour, giving interviews to TV anchors and obscure Twitter personalities to explain the failure of his FTX cryptocurrency exchange. When he was accused of fraud and placed under house arrest, he invited journalists to visit him so he could continue to defend his actions.

On Friday, Mr. Bankman-Fried, 31, made an even riskier decision: He took the stand to testify in his criminal fraud trial in federal court in New York.

In more than two hours of testimony in the morning, the FTX founder denied that he committed fraud and emphasized his efforts to turn the exchange into a successful business. But he also admitted that he made missteps, citing “significant omissions” that caused losses to FTX clients.

Wearing a brown suit and purple tie, with his famously matted hair cut short by a fellow inmate in a Brooklyn prison, Mr. Bankman-Fried said he “made a lot of little mistakes, and a lot of big mistakes.”

He testified that FTX was supposed to “move the ecosystem forward.” “It turned out to be the opposite.”

Mr Bankman-Fried’s testimony was the most anticipated moment of a trial that has become a referendum on the excesses of the once high-flying crypto industry. The entrepreneur, who established himself as the face of the industry at a time when prices of digital coins like Bitcoin and Ether were rising, wrote a cautionary tale of the unbridled arrogance and risk-taking that cost customers billions of dollars in the crypto market last year. emerged as. crashed down.

His decision to testify was a huge risk. Lawyers commonly advise criminal defendants not to take the stand, so that prosecutors do not have a chance to catch them in perjury.

But after weeks of damaging testimony from his closest friends and colleagues, Mr. Bankman-Fried was left with no choice but to make a prolonged effort to change the course of the trial. He was the defense’s third and final witness, and took the stand after his testimony was delayed by a day following an unusual hearing on Thursday.

“The risks that come with testifying are massive and numerous,” said Daniel Silva, a former federal prosecutor who is now in private practice. “SBF will be subject to comprehensive impeachment by prosecutors based on significant public and private statements he has made.”

Mr. Bankman-Fried was arrested in December and accused of orchestrating a years-long scheme to embezzle more than $10 billion from customers who deposited their savings at FTX. Prosecutors accused him of funneling the money into venture capital investments, political contributions and extravagant real estate purchases. He also said that he used the money to promote Alameda Research, a crypto trading firm he founded.

The trial of Elizabeth Holmes, the founder of blood-testing start-up Theranos, has been the most watched white-collar fraud case since she was convicted in 2022 and sentenced to 11 years in prison. Mr Bankman-Fried, who has pleaded not guilty, could face life in prison if a jury convicts him of seven counts of fraud, conspiracy and money laundering.

Mr. Bankman-Fried’s defense faced significant obstacles after a procession of former FTX and Alameda employees testified that he lied to the public and stole money from FTX clients for years. During cross-examination, his lead lawyers, Mark Cohen and Christian Everdale, struggled to poke holes in the witness’ testimony over the objections of prosecutors.

But Mr Bankman-Fried’s decision to testify gave the defense an opportunity to tell its side of the story. The FTX founder showed little emotion in front of a packed courtroom as he took the stand on Friday morning. His parents, law professors Joe Bankman and Barbara Fried, watched from the gallery, writing notes on a legal pad.

Mr. Bankman-Fried began his testimony with a mea culpa, acknowledging that the collapse of FTX had harmed people throughout the crypto industry. What he wanted to do, he said, was “make the best product on the market.”

Under questioning from Mr. Cohen, Mr. Bankman-Fried told the jury about his biography, from his upbringing in Palo Alto, Calif., to his undergraduate education at the Massachusetts Institute of Technology. In college, he said, before graduating to a job at the Wall Street trading firm Jane Street, he belonged to an unusual type of fraternity that was “coed, nerdy and dry.”

Sometimes, he presented himself as a novice. When he started trading cryptocurrencies with Alameda in 2017, he said, “I had absolutely no idea how it worked.”

Mr. Bankman-Fried testified that his business empire grew faster than he imagined. He was soon working 22-hour days and receiving thousands of emails a day, he said.

Mr Bankman-Fried suggested that the excessive amount of work had caused him to ignore important parts of the business. Asked whether FTX had a risk management department, he said, “We definitely should have, but no, we didn’t.”

The exchange reiterated a key claim in Mr Cohen’s opening statement: that Mr Bankman-Fried was effectively building a plane in mid-air, and was acting in “good faith” the entire time.

Mr Bankman-Fried may face a very difficult time during cross-examination. On Thursday, the judge overseeing the case, Lewis A. Kaplan held a hearing, in which Mr. Bankman-Fried offered testimony on a narrow set of topics without the presence of a jury.

Under intense questioning by a prosecutor, Mr. Bankman-Fried punctuated his answers with “ums” and “ahhs” and often stared at his lap as he considered what to say, especially when asked if He has sought advice from his lawyers on whether his Alameda trading firm can borrow billions of dollars from FTX customers.

Judge Kaplan repeatedly chastised him for failing to answer questions directly.

Judge Kaplan said, “The witness has what I would call an interesting way of responding.”

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