Sam Bankman-Fried admitted to making management mistakes while at the helm of FTX, his former multibillion-dollar cryptocurrency empire, during testimony in his defense at trial.
“I made a number of small mistakes and a number of large mistakes,” Bankman-Fried, 31, said in sharing his version of the rise and fall of crypto trading platform FTX. The biggest mistake, he said, was not implementing a dedicated risk management team.
“There were significant oversights,” he said.
Asked by his lawyer, Mark Cohen, if he defrauded anyone or took customers’ funds, Bankman-Fried answered: “No, I did not.”
Bankman-Fried told the jury he didn’t know much about cryptocurrency before launching FTX. “I had absolutely no idea how they worked,” he told Cohen. “I just knew they were things you could trade.” But, he continued, he saw an opportunity to move the cryptocurrency system forward.
As FTX took off, Cohen suggested, Bankman-Fried got hopelessly overloaded. Cohen noted how FTX went from single-digit millions of daily trading in 2019 to tens of billions in 2022.
“When you started FTX in 2019, did you expect this level of growth?” Cohen asked.
“Absolutely not,” said Bankman-Fried. He similarly expressed in testimony that he had been overwhelmed by the snowballing amount of media attention he received, saying he “hadn’t intended to be a public face of anything”.
“Even when it became sort of overwhelming, when there were more PR and interview requests than I could manage … by that point, it was too late to have a new public face of that company,” he said.
Bankman-Fried’s testimony comes after the prosecution presented 12 days of testimony in federal court in Manhattan, including from former business partners and his ex-girlfriend, Caroline Ellison, who helmed the FTX-affiliated hedge fund Alameda Research.
Questioning from Bankman-Fried’s defense team sought to humanize the notoriously quirky executive and explain away some of the company’s unconventional, including employees co-habitating. It also addressed Bankman-Fried’s romantic relationship with Ellison, who has become a star witness for the prosecution.
Ellison has testified that Bankman-Fried masterminded billions of dollars in fraud, and that his disheveled boy genius appearance was a carefully curated facade. In testimony on Friday, Bankman-Fried said the two began dating on and off starting in 2020, and that their final breakup was in spring 2022.
Bankman-Fried sought to shift the blame for the collapse of FTX to Ellison, who he said repeatedly refused to hedge Alameda Research funds against potential losses. As the crypto market crashed in 2022, Alameda-held assets correlated with the market decline as well.
“I became fairly concerned about Alameda’s risk,” he said. “It had not hedged against the market crashes despite the many conversations about hedging.”
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He claims he brought up the topic a number of times, including in late 2021 and again in August 2022, but Ellison refused to hedge the funds. An analysis of the firm at the time found that Alameda Research was $8bn in debt, at which point he advised Ellison to shutter the firm, but she refused, Bankman-Fried testified.
However Gary Wang, a co-founder of FTX, previously testified that Bankman-Fried was not surprised to hear about the $8bn hole in FTX’s balance sheet.
Wang, like Ellison, has pleaded guilty in agreements with federal prosecutors to wire, securities and commodities fraud. Bankman-Fried has pleaded not guilty. He was arrested in the Bahamas and extradited to the US last December, a month after his businesses collapsed.
Prosecutors have accused Bankman-Fried of pillaging FTX for his own high-flying ends. He faces seven counts of wire fraud and conspiracy to launder money, felony charges that could carry sentences of decades in prison if he is convicted. He has pleaded not guilty to the allegations that he stole FTX customers’ funds and used them for a $40m Bahamas penthouse, A-list celebrity endorsements and $100m in political contributions.
Prosecutors put forward multiple witnesses including former members of Bankman-Fried’s inner circle who say they committed crimes at his direction.
Also central to the charges are allegations that FTX mishandled customer data and used encrypted and disappearing messages to discuss operations of the company. The defense team sought to dispel allegations that these practices were used purposefully to obscure fraud. Bankman-Fried said in court that lawyers approved of FTX auto-deleting communications and that he believed it was allowed under FTX data retention policies. He also stated that the company encrypted communications due to “concern[s] about hacking attempts” and ex-employees interfering in its business.
The federal judge hearing the trial indicated during Thursday’s proceedings that the jury may start deliberating on the case early next week, meaning closing arguments are expected to begin soon. On Monday, Bankman-Fried will continue his testimony.
