New York CNN –
Former crypto billionaire Sam Bankman-Fried appeared before a judge and jury in his fraud trial last week. If convicted on all seven fraud counts he faces, the 31-year-old could spend the rest of his life in prison.
Prosecutors allege that Bankman-Fried’s crypto exchange FTX was “built on lies” and that he took money from customers to enrich himself and his family, buying luxury beachfront properties in the Bahamas and investing millions in political campaigns in the USA to stick.
Bankman-Fried’s lawyers argue that their client, like many entrepreneurs, “built the plane the way they flew it” and that “it is not a crime to be the CEO of a company that later declares bankruptcy.”
After a full day on the witness stand on Friday, the disgraced former CEO is expected to return for further testimony on Monday.
Here’s what we’ve learned so far.
Sam Bankman-Fried’s casual wardrobe and wild curly hair were the subject of discussion in court on Friday.
Caroline Ellison, Bankman-Fried’s ex-girlfriend and former CEO of sister company Alameda Research, testified earlier this month that Bankman-Fried’s style was part of a marketing strategy to look like an eccentric startup founder. Bankman-Fried’s lead attorney, Mark Cohen, tried to undermine this.
“Why did you wear the shorts and T-shirts?” Cohen asked.
“I found them comfortable,” Bankman-Fried replied.
Cohen also asked about the famously unruly mop of dark hair.
“I was pretty busy and lazy and didn’t bother to get a haircut for a long time,” Bankman-Fried said.
Overall, Bankman-Fried said he never intended to be the public face of FTX. At first it was “an accident,” he said in court.
“I didn’t plan on being a public face of anything,” he said, adding that he was “a bit of an introvert.”
Bankman-Fried’s testimony has so far reinforced his view that other executives at FTX and Alameda often acted independently, without direct oversight from Bankman-Fried, who was CEO of both companies for a time.
“At the end of the day, I had authority,” he said. “On the other hand, I wasn’t much of a programmer” and didn’t directly supervise the work of the developers who created the FTX code.
Bankman-Fried is essentially saying that he was unaware of the so-called backdoor that Alameda used to withdraw FTX customer funds – a central issue in this case.
“I wasn’t entirely sure what was going on,” Bankman-Fried said.
Prosecutors accuse Bankman-Fried of building a “backdoor” into FTX’s accounting system that allowed him to change the company’s financial records without raising accounting red flags. Bankman-Fried is accused of using this “backdoor” to transfer billions of dollars in FTX customer funds to Alameda.
When Bankman-Fried and Gary Wang launched FTX in 2019, there were already dozens of crypto exchanges. However, Bankman-Fried said Friday that he believes their “design philosophies” are “clunky” and “don’t make much sense.”
“If you wanted to trade, you had to manage hundreds of wallets for a single account,” he said. FTX’s goal was to create an exchange that was more seamless and accessible for traders.
He said he originally envisioned quickly selling FTX to cryptocurrency exchange Binance as he “had no idea how we would attract customers.”
However, Binance ended up using an internal team to build its own exchange platform. And the more he thought about it, the more convinced he was that he could grow FTX despite the challenge of acquiring customers, Bankman-Fried said.
It felt “less hopeless, like maybe we could figure it out,” SBF said.
“I thought there was maybe a 20 percent chance of success” and an 80 percent chance that it would be shut down after a few months, he told jurors. “Even that 20% chance was a huge opportunity considering the largest exchanges at the time were multi-billion dollar companies.”
In searching for an arena with which FTX could form a brand partnership, Bankman-Fried testified Friday that his company has been in discussions with several other sports venues.
Eventually they decided on the home of the Miami Heat and renamed the American Airlines Arena the FTX Arena. It was reportedly a 19-year, $135 million contract.
Among the venues that were not functioning at the time were the New Orleans Saints and Kansas City Chiefs football stadiums and the Kansas City Royals baseball stadium.
“No offense to the Kansas City Royals, but we didn’t want to be known as the Kansas City Royals of crypto exchanges,” SBF said Friday afternoon.
Following the company’s collapse last fall, FTX Arena was later renamed Kaseya Center.
Judge Lewis Kaplan expressed irritation at some of Bankman-Fried’s convoluted answers, noting at one point: “The witness has what I simply call an interesting way of answering questions.”
When questioned by his own lawyers, Bankman-Fried appeared confident and optimistic. But as he was criticized by the public prosecutor, he became increasingly agitated.
Under cross-examination Thursday, he often gave vague answers, saying he was “not entirely sure” or didn’t remember previous conversations about company policies and meetings with lawyers.
At one point, Kaplan interjected and asked Bankman-Fried to “listen to the question and answer it directly.”
In response to questions from Assistant U.S. Attorney Danielle Sassoon, Bankman-Fried responded differently: “I’ll give you my best guess at answering the question.” “I’ll answer the question you asked in my opinion, but I apologize if I do “I’m answering the wrong question” and “I wouldn’t put it that way.” But I think I think the answer to the question you’re trying to ask is yes.”
When asked if he could “point out to us where in this agreement you think Alameda is allowed to issue FTX customer funds,” Bankman-Fried responded:
“So I should say upfront that I am not a lawyer. I am not giving any legal interpretation here. I’m just repeating what I remember as best I can. And the parts of it that are consistent with that, I, you know – I’m not trying to make a final legal decision about what that says and doesn’t say. I’m not sure I would answer the question as you last phrased it entirely with “yes.” I will try, as best I can, to give the answer that I believe, at least as far as I remember understanding at the time, either FTX itself or, as I think, actually happened, without FTX as an intermediary, Customers’ fiat funds would be transferred to Alameda bank accounts, FTX would effectively retain a debt from Alameda for these and a lien on Alameda’s assets as security for this ongoing liability, so that it would be repayable at FTX’s direction in the “Return” section here, and in the Payment Instructions section; and that Provider may hold or transfer the Funds as set forth in the “FTX Assets” section unless or until directed to return them to FTX.”