On Tuesday, Sam Bankman-Fried, the founder of failed cryptocurrency exchange FTX, repeatedly denied knowing that billions of dollars in customer funds had been embezzled until shortly before his company collapsed last year, while a federal prosecutor harassed him for a second day in his fraud trial.
The 31-year-old former crypto mogul searched for an answer as prosecutor Danielle Sassoon repeatedly asked whether he told his employees not to spend FTX customer funds on investments, expensive real estate and other expenses. Mr. Bankman-Fried also could not name any employees who may have authorized the use of FTX customer funds for these expenses.
“I don’t remember giving any direction,” Mr. Bankman-Fried said three times about issuing FTX customer funds before concluding his testimony. Both sides rested their case before noon on Tuesday, with closing statements expected to be released on Wednesday.
Mr. Bankman-Fried was on the witness stand for a third day, testifying before a jury in his own defense for a trial that symbolized the ups and downs of the volatile crypto industry. The entrepreneur is accused of plotting a years-long fraud in which he stole up to $10 billion from FTX’s customers and then used the money for extravagant real estate purchases and other expenses, Alameda Research founded.
FTX, which was valued at $32 billion at its peak, spectacularly imploded last year, leaving many customers unable to get their deposits back. Mr. Bankman-Fried pleaded not guilty to seven counts of fraud, conspiracy and money laundering. If convicted, he could face life in prison.
The first few weeks of his trial were marked by a procession of prosecution witnesses pointing the finger directly at Mr Bankman-Fried, saying he had directed them to commit crimes. Three of his closest associates – Caroline Ellison, Nishad Singh and Gary Wang – have pleaded guilty and agreed to cooperate with prosecutors.
The accumulation of damaging testimony may have resulted in the FTX founder being coerced into testifying, a risky proposition for a defendant. The statement gave Mr. Bankman-Fried an opportunity to say that he never intended to defraud anyone and that his business decisions were made in good faith. But it has also allowed prosecutors to more closely examine his past public statements and compare them with what he has done privately.
When Mr. Bankman-Fried took the stand for the first time on Friday, he was answering questions from his own lawyer, Mark Cohen. Mr. Bankman-Fried denied committing fraud or stealing from FTX’s customers, but also acknowledged making mistakes, citing “significant lapses” that harmed the exchange’s customers.
On Monday, under cross-examination, prosecutor Ms. Sassoon pressed Mr. Bankman-Fried on the contradictions between his public statements and the way he ran his crypto empire. He often insisted that he could not remember much of what he had said publicly.
On Tuesday, cross-examination continued, focusing on Mr. Bankman-Fried’s actions and statements leading up to FTX’s implosion in November. Mr. Bankman-Fried, wearing the same gray suit and purple tie as he had on the witness stand in previous days, testified before a packed courtroom where Damian Williams, the top federal prosecutor in New York, was also present. Missing from the gallery was Mr. Bankman-Fried’s mother, Stanford law professor Barbara Fried, who had been present every day of the trial.
Ms. Sassoon, the federal prosecutor, was relentless, asking Mr. Bankman-Fried about FTX’s failure, including whether some of the cooperating witnesses had not told the truth about the Alameda trading firm, which owed billions of dollars in customer funds to the exchange. Mr. Bankman-Fried previously testified that he only learned of the missing funds in about October 2022, while other witnesses testified that he knew much earlier.
At one point, Ms. Sassoon asked Mr. Bankman-Fried whether Adam Yedidia, a former FTX developer who testified in the trial, was lying when he said in court that Mr. Bankman-Fried told him in the summer of 2022 that Alameda owed FTX customers $8 billion.
“I don’t remember him saying that,” Mr. Bankman-Fried replied.
Ms. Sassoon then asked whether Ms. Ellison, who ran Alameda and was once Mr. Bankman-Fried’s girlfriend, was wrong when she testified that she and Mr. Bankman Fried conspired with others to misuse FTX customer funds.
“You didn’t tell your employees, ‘Don’t issue FTX customer deposits?’” Ms. Sassoon once asked.
“I didn’t,” Mr. Bankman-Fried said. “I deeply regret not taking a closer look at this.”
Ms. Sassoon also asked Mr. Bankman-Fried if he remembered doing favors for government officials in the Bahamas, where FTX is headquartered. He said he didn’t remember giving Bahamian Prime Minister Philip Davis and his wife tickets to the FTX Arena in Miami. The jury was then shown screenshots of messages in which he said exactly that. (The arena has been renamed.)
Prosecutors also presented emails in which Mr. Bankman-Fried offered to facilitate withdrawals for Bahamian customers after FTX stopped customer withdrawals last year when people tried to withdraw their money from the exchange. At the time, FTX was under investigation by Bahamian regulators.
During a brief redirect, Mr. Bankman-Fried attempted to clarify that he did not know who at Alameda approved the issuance of FTX customer funds. FTX had about two dozen employees, he said, and “I wasn’t particularly interested in assigning blame.”
After closing statements on Wednesday, jurors could begin deliberating a verdict in the case as early as Thursday.