Sam Bankman-Fried admits ‘mistakes’ but testifies he didn’t cheat anyone

NEW YORK, Oct 27 – FTX founder Sam Bankman-Fried testified in his own defense at his fraud trial on Friday, saying “a lot of people were hurt” when the cryptocurrency exchange collapsed last year, but insisted he didn’t cheat anyone. Stealing billions of dollars from customers.

Bankman-Fried fielded questions from her own attorney during her first day of testimony with jurors, admitting to making “mistakes” such as not putting in place a risk management team, while blaming former CEO Carolyn Ellison. His crypto-focused Alameda Research hedge fund was a key witness for the prosecution.

The 31-year-old ex-billionaire’s answers were consistent with his longstanding stance that he is an entrepreneur who builds a fast-growing company from scratch, but never steals from the people.

“We thought we could make the best product on the market,” Bankman-Fried said during her six-hour testimony in Manhattan federal court. “It basically turned out to be the opposite. A lot of people were hurt — customers, employees — and the company ended up in bankruptcy.”

Bankman-Fried pleaded not guilty to two counts of fraud and five counts of conspiracy. If convicted, he could face decades in prison.

Prosecutors accused Bankman-Fried of funneling FTX client funds to Alameda, making speculative investments and donating more than $100 million to U.S. political campaigns. He is also accused of conspiring to defraud Alameda’s creditors and FTX investors.

Responding to questions from defense attorney Mark Cohen in a calm tone, Bankman-Fried said the funds used for sponsorships and real estate did not come from FTX’s clients, but from the company’s income or capital received from equity investors. He said he took a loan from Alamelu, which he owns, to make political donations.

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Bankman-Fried has sought to distance herself from specific actions that three of her closest former colleagues — each of whom pleaded guilty to fraud and testified against her at trial — took without directly involving her.

As they testified, he instructed them to take specific steps to steal client funds and provide lies to investors and lenders.

‘Sounds fair to me’

Ellison, Bankman-Fried’s former on-and-off girlfriend, testified on Oct. 11 that she allegedly falsified Alameda’s balance sheet to deter lenders during the June 2022 crash in crypto markets.

Bankman-Fried testified Friday that when Ellison sent a spreadsheet to her lender, she didn’t look at it in detail.

“I remember looking at it and saying it looked fair to me,” said Bankman-Fried, who occasionally saw the jury while testifying.

Former FTX chief technology officer Gary Wang testified that Bankman-Fried instructed him to implement changes to FTX’s computer code that would have given Alameda special privileges, such as an exemption from automatic liquidation if its $65 billion loan and positions lost value. Aided in theft of funds.

Bankman-Fried testified that she asked Wang and FTX Chief Engineering Officer Nishad Singh to prevent Alameda from accidentally liquidating, but it was not known at the time that her colleagues put in place a feature that would allow Alameda to carry a negative balance.

Bankman-Fried was arrested in December 2022, a month after FTX declared bankruptcy, following withdrawals from customers concerned about the safety of their funds.

On Friday, Bankman-Fried tried to place most of the blame for Alameda’s loss on Ellison. He testified that he was concerned that Ellison had failed to hedge against crypto market declines, and that while he was a good manager, he did not focus on “risk management.”

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He restated his testimony that the irregular appearance of his trademark was an important part of FTX’s image. FTX wore T-shirts and shorts while running because they were “comfortable” and said he didn’t cut his hair because he was “busy and lazy.” Bankman-Fried presented the jury with a clean appearance in a dark suit.

Bankman-Fried was tried Thursday without jurors on either side as a judge weighed which parts of her testimony would be admissible. Prosecutors will have their first chance to question Banker-Fried with jurors when they cross-examine him next week. Cohen said he will complete the live test on Monday morning.

Reporting by Jodi Godoi and Luke Cohen in New York; Editing by Will Dunham and Daniel Wallis

Our Standards: Thomson Reuters Trust Principles.

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Jody Godoy reports on banking and securities law. Reach her at [email protected]

Reports on New York Federal Courts. Previously worked as a correspondent in Venezuela and Argentina.

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