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Sam Bankman-Fried admitted making “a series of major mistakes” while operating his cryptocurrency exchange FTX, but denied defrauding customers as he testified in his own defense before a New York jury.
After being sworn in shortly before 10 a.m. local time, Bankman-Fried explained that he and his co-founders thought they could “maybe build the best product on the market” and “make a difference.” [cryptocurrency] “Advance the ecosystem” by founding the company.
When asked if that goal was realized, the 31-year-old said that the FTX exchange “basically turned out the opposite,” adding that “a lot of people got hurt” when the company launched with one last November Hole in the balance sheet of $8 billion collapsed Blatt.
When asked if FTX had a risk management team, he replied: “We definitely should have.”
Bankman-Fried, the former billionaire who faces decades in prison if convicted of the charges against him, including wire fraud and money laundering, will be cross-examined by prosecutors later on Friday. He has pleaded not guilty.
Wearing a gray suit and purple tie, Bankman-Fried calmly explained to the jury how his two companies – FTX and an affiliated trading firm, Alameda Research – were founded with college friends from MIT and former colleagues at New York trading firm Jane Street Capital. The jury has previously heard evidence from some of them, including Gary Wang, Nishad Singh and Caroline Ellison, who are co-operating with the prosecution.
“I made a series of minor mistakes and a series of major mistakes,” Bankman-Fried said of his management of FTX. He added that “by far the biggest mistake” is not having dedicated risk management.
One of the main allegations against him is that his trading firm Alameda had secret privileges on the FTX exchange that allowed it to borrow billions in customer funds.
Bankman-Fried testified that some of these features – including the ability to maintain a negative account balance and access a virtually unlimited line of credit – were created by his employees to prevent an “erroneous” liquidation of Alameda, which was “considered crucial.” Given the trading firm’s role as a liquidity provider, this may be disruptive to other FTX customers.
He said that after near misses in the early days of the exchange, he instructed his lieutenants Wang and Singh to find solutions but was unaware of the details of the privileges they granted Alameda.
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Bankman-Fried said he believes Alameda could do “anything” with the money borrowed from FTX, provided “the risks are managed,” whether to “buy muffins” or “pay business expenses.”
Defense attorney Mark Cohen also sought to highlight the onslaught of decisions and information Bankman-Fried faced as CEO of the fast-growing exchange. Bankman-Fried said he worked 12 hours on a “light day” and 22 hours on a “heavy day” and received hundreds of Signal chats. He said his goal was to have just 60,000 unread emails, but “I usually haven’t achieved that.”
Bankman-Fried previewed his testimony Thursday without the jury present, answering questions on a variety of topics so the judge could decide whether the topics were admissible as evidence during the defense’s case.
On Friday morning, Judge Lewis Kaplan, who is overseeing the case, ruled that Bankman-Fried could not answer questions intended to elicit statements in which he claims he followed the advice of lawyers in implementing certain policies at FTX and Alameda be.