Sam Bankman-Fried testified in his own defense at his fraud trial, but surprisingly without the jury present.
Judge Lewis Kaplan said there was “a number of potential witness statements” that the prosecution believed the jury should not hear.
The unusual hearing was necessary without the jury present to decide what to tell them, the judge said.
After testimony, Judge Kaplan said he would make a decision and the jury would be reinstated.
Bankman-Fried took the stand wearing a gray suit and purple tie. He spoke in a nasal voice but appeared calm and answered his lawyer Mark Cohen’s questions clearly.
Sam Bankman-Fried took the stand to testify in his own defense at his fraud trial on Thursday, but without the jury present. Bankman-Fried took the stand wearing a gray suit and purple tie
The former billionaire faces up to 115 years in prison on charges including conspiracy and wire fraud related to the collapse of his cryptocurrency exchange FTX in November 2022
Bankman-Fried said there have been “constant hacking attempts” on FTX, but the company has never suffered what he called a “core breach.”
He said there have been “constant hacking attempts” on FTX, but the company has never suffered what he called a “core breach.”
According to Bankman-Fried, “for most of FTX’s existence there have been concerns” about hacking, particularly in its Hong Kong office.
He said there were “political events occurring at a certain time that gave rise to concerns about unauthorized access to (staff) equipment.”
At the start of the trial, the court heard that Bankman-Fried had activated auto-deletion using the messaging app Signal.
In his statement, Bankman-Fried said he followed FTX’s document retention guidelines when he did so.
He said: “In general, these were not channels through which formal business documents would be available.” They were not channels through which decisions would be announced or issued or documents relevant to government investigations would be discussed .’
Bankman-Fried said it was “chatter” and conversations, which he likened to “someone coming to my desk” and asking him if they “have any thoughts about the Japanese regulatory environment at the moment.”
He added that in November 2022, shortly before FTX went bankrupt, he disabled the automatic deletion of message chats after speaking with financial regulators.
His lawyers’ filings say he will try to claim that he has sought the advice of his lawyers and that there is “nothing improper” about FTX’s finances.
Bankman-Fried was asked about North Dimension, a company that was a subsidiary of Alameda Research, FTX’s sister company.
Prosecutors allege that Alameda plundered $10 billion in FTX customer funds to finance lavish spending and political contributions.
Bankman-Fried said that when North Dimension was formed, he signed the forms because he “could trust that they were correct and necessary.”
“I had a lot of things come by my desk to sign,” he said, adding, “I gave them a quick check and didn’t see anything obviously wrong.”
Bankman-Fried said he believes the payment agreements he signed allowed FTX customers to deposit funds into Alameda.
He told the court that it took “a few years” for FTX to get its own bank account. By then, customers had sent their money to Alameda and it had appeared in their FTX wallets.
When asked about FTX’s terms of service, Bankman-Fried said he believes he runs the company within those terms.
Judge Lewis Kaplan interrupted and asked Bankman-Fried if he had read the “entire document.”
He replied: “I read parts thoroughly, parts I just skimmed.”
According to Bankman-Fried, investments made by FTX were sometimes made through a loan to him or another company.
Bankman-Fried’s lawyer, Mark Cohen, asked him: “Were you comforted by the fact that the lawyers had structured the loans?”
“Yes, of course,” Bankman-Fried said.
Judge Kaplan had to interrupt the testimony again shortly afterward to force Bankman-Fried to explain what a blockchain explorer is, a device that allows one to view the history of cryptocurrency sales.
Sam Bankman-Fried pictured at the 2022 Super Bowl with singer Katy Perry (far left), actor Orlando Bloom, actress Kate Hudson (far right) and Hollywood agent and investor Michael Kives. The picture was presented to the court
Brady and Bankman-Fried are pictured together in a clip they shared on social media as one of his celebrity endorsements
Facing a 115-year prison sentence, Bankman-Fried made the risky decision to testify after the three former employees, all of whom took plea deals, were blamed for the company’s collapse.
He will first be questioned by his own lawyers, but then the prosecution can question him about the entire case in front of the jury.
FTX was worth $32 billion at its peak and Bankman-Fried appeared on the cover of Forbes magazine, which touted him as the future of finance.
But last November, the “house of cards” collapsed as crypto prices collapsed amid fears of a recession.
Bankman-Fried, 31, was arrested in his penthouse in the Bahamas – where FTX was based – and extradited to the US to face trial.
A filing from Bankman-Fried’s lawyers ahead of his testimony said he would reject claims that he ordered the transfer of FTX’s assets to regulators in the Bahamas when the company went bankrupt.
The document said Bankman-Fried would reject the idea of doing so in order to have a greater chance of retaining control of the company.
According to the filing, Bankman-Fried had the “understanding that automatic (message) deletion policies were implemented under the guidance of attorneys” and not at his own insistence.
He also wants to say that FTX’s lawyers were also involved in loans and other financial arrangements because it was “directly relevant to his state of mind and goodwill at the time.”
The prosecution’s key witness was Caroline Ellison, Bankman-Fried’s ex-girlfriend, who ran Alameda Research, FTX’s sister company
The court heard Bankman-Fried tried to blame Ellison for the debt, saying in an email she was “not a natural leader” and should be replaced
The filing states: “Bankman-Fried’s knowledge that attorneys were involved in structuring and documenting the loans would be evidence of his good faith that there was nothing improper about the loans.”
His lawyers claimed he had a “good faith belief that there was nothing unusual about FTX’s finances,” it said.
Bankman-Fried’s defense will call three more witnesses: Krystal Rolle, a Bahamian lawyer who represented Bankman-Fried, data expert Joseph Pimbley and a records manager, to talk about the different roles of people at FTX.
Bankman-Fried denied 13 charges between 2019 and 2011, including wire fraud, money laundering and violating campaign finance laws that could result in a prison sentence of 115 years.
Seven of them will be heard in this process, the rest next year.
The prosecution’s key witness was Caroline Ellison, Bankman-Fried’s ex-girlfriend, who ran Alameda Research, FTX’s sister company.
She described how he “instructed” her to commit the fraud and burst into tears as he apologized for her feeling of “constant fear” last summer at the Losses, knowing the extent of the crisis.
FTX co-founder and former chief technology officer Gary Wang accepted a plea deal and testified earlier this month
Nishad Singh (pictured arriving in court with his girlfriend Claire Watanabe) testified that the company spent millions on celebrity partnerships in early 2022 – as prosecutors sought to show how Bankman-Fried squandered customer money to boost its reputation
The court heard Bankman-Fried tried to blame Ellison for the debt, saying in an email she was “not a natural leader” and should be replaced.
Nishad Singh, FTX’s former chief technical officer, told the court he was “embarrassed and ashamed” by the company’s excessive spending.
He said that it “reeked of excess and flashiness” and that it “didn’t align with what we wanted to build the company for.”
Singh said he learned about the “enormous” gap in FTX customer accounts about two months before the company collapsed and that most of it was due to Bankman-Fried’s lavish spending.
He felt “really betrayed” and said he had long felt “intimidated” by Bankman-Fried.
Singh also walked the jury through FTX’s tens of millions of dollars in political donations, including $5 million to Joe Biden’s re-election campaign.
FTX co-founder Gary Wang told the court that, at Bankman-Fried’s direction, he changed the computer code to allow Alameda to withdraw unlimited customer funds from FTX.
The July 2019 change would eventually result in Alameda stealing more than $10 billion in FTX user funds, Wang said in court.