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FTX founder, Sam Bankman-Fried, took the stand on Friday in his own defense during his ongoing fraud trial, admitting to making “mistakes” but vehemently denying allegations of defrauding anyone or misappropriating customer funds. Bankman-Fried’s testimony provided insights into the collapse of the cryptocurrency exchange and the legal battle he faces.
Admissions and Denials
During the first day of his testimony in Manhattan federal court, the 31-year-old entrepreneur, who was once a billionaire, acknowledged the adverse impact of the exchange’s collapse on many, including customers and employees. However, he stressed that his intentions were to build the best product and not to engage in fraudulent activities.
Charges and Consequences
Bankman-Fried, who has pleaded not guilty to two counts of fraud and five counts of conspiracy, faces the possibility of serving decades in prison if convicted. Prosecutors have accused him of using FTX customer funds for various purposes, including supporting Alameda, making speculative investments, and donating substantial amounts to U.S. political campaigns. Additionally, he is alleged to have orchestrated schemes to deceive Alameda’s lenders and FTX investors.
In his defense, Bankman-Fried refuted claims that FTX customer funds were used for illicit purposes. He asserted that sponsorships and real estate expenses were covered by the company’s revenue or capital from equity investors, not customer funds. Regarding political donations, he stated that he borrowed from Alameda, an entity he owned, to make these contributions.
Distancing from Colleagues
Bankman-Fried distanced himself from the actions of three former colleagues who had pleaded guilty to fraud and testified against him. He portrayed himself as a detached CEO who entrusted his subordinates with decision-making. Notably, his former girlfriend and key witness for the prosecution, Caroline Ellison, testified that he had directed her to falsify Alameda’s balance sheets during a crypto market crash in 2022. Bankman-Fried claimed that he had only briefly reviewed the spreadsheet provided by Ellison, deeming it reasonable. He Stated,
“I remember looking over it and saying that it seemed reasonable to me”
Code Changes and Privileges
Former FTX Chief Technology Officer Gary Wang testified that Bankman-Fried had instructed him to make changes in FTX’s computer code, granting special privileges to Alameda. These privileges, including a $65 billion line of credit and protection from automatic liquidation, allegedly facilitated the misappropriation of funds. Bankman-Fried stated that he had requested the changes to prevent accidental liquidation but was unaware of the actual features implemented by his colleagues.
Crisis and Arrest
Bankman-Fried’s arrest in December 2022 followed FTX’s declaration of bankruptcy, triggered by a wave of customer withdrawals due to concerns about fund safety. During his testimony, he attempted to shift blame onto Ellison, emphasizing her failure to hedge against crypto market downturns and her inattention to risk management. In a notable change of appearance, Bankman-Fried presented a clean-cut image in court, contrary to his previous trademark unkempt look while running FTX, which he attributed to comfort and busyness. Prosecutors will have the opportunity to cross-examine him in the coming week.
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