Sam Bankman-Fried wraps up testimony as fraud trial nears end
The trial of cryptocurrency’s most infamous entrepreneur is near its end, with closing arguments set to begin on Wednesday.
Sam Bankman-Fried, the founder of the now bankrupt cryptocurrency exchange FTX, stepped down from the witness stand in Manhattan federal court shortly before noon on Tuesday as his cross-examination ended.
During his testimony on Tuesday, prosecutors pressed him on how Alameda Research, the sister hedge fund to FTX, spent $8bn of customer funds. On 7 November last year, Bankman-Fried tweeted and deleted, “FTX has enough to cover all client holdings” – though he admitted in a Signal chat that he knew there would still be an $8bn shortfall even if FTX liquidated its assets, prosecutors showed with chat records.
Bankman-Fried’s defense attorneys rested their case after the government’s questioning ended, and federal prosecutors declined to call rebuttal witnesses. Closing arguments are set to begin on Wednesday.
On Monday, the prosecution had grilled Bankman-Fried on his public persona, asking if his unkempt boygenius look was a facade to woo investors and customers, and on his many media appearances. He balked at the questions, replying multiple times with: “I don’t recall.” Assistant US attorney Danielle Sassoon often answered his remarks with quotes from interviews and emails illustrating that he did, in fact, recall an event.
On Tuesday, his defense sought to explain the apparent lapses in memory in redirect. Bankman-Fried said he had spoken to up to 50 journalists in the wake of FTX’s demise.
Bankman-Fried’s testimony began three days earlier with an evidentiary hearing on what lines of questioning would be admissible before the jury. Judge Lewis Kaplan ruled that his defense attorneys could not pursue most of their proposed lines of questioning, including Bankman-Fried’s contention he was acting under bad advice from FTX’s lawyers about the use of his customers’ funds, believing what he was doing was within the scope of the law and blessed under the terms of service of FTX and Alameda. Prosecutors allege he used those customers’ funds for his own ends – risky investments, a $40m Bahamas penthouse, A-list celebrity endorsements, private jets and $100m in political contributions.
He likewise allegedly used FTX customers’ cryptocurrency and cash to plug an $8bn hole in the budget of Alameda after the market cratered in 2022, sending the value of the hedge fund’s assets plummeting.
On Tuesday, prosecutors asked him about the jets. Bankman-Fried attempted to justify how often he flew privately from the Bahamas to Washington by saying he needed to meet with senators and regulators.
Bankman-Fried is charged with seven counts of wire fraud and conspiracy to launder money for his role in the collapse of the cryptocurrency exchange. Prosecutors allege he “misappropriated and embezzled” billions of dollars from his customers. If convicted, he faces decades in prison. He has pleaded not guilty.
Members of the one-time crypto mogul’s inner circle have turned against him at his trial. Caroline Ellison, his ex-girlfriend and the former chief executive of Alameda Research, testified that she committed crimes at his direction, serving as the prosecution’s star witness with damning, detailed testimony.
Gary Wang, a co-founder of FTX, said Bankman-Fried was not surprised to hear about the budget shortfall at Alameda Research. Ellison and Wang pleaded guilty to fraud and conspiracy charges for their roles in the implosion of FTX and Alameda.