When the FTX cryptocurrency exchange was booming, Sam Bankman-Fried, the company’s founder, communicated with the public in a relentless stream of tweets, television interviews, and speeches in front of Congress.
Now, as Bankman-Fried testifies at her fraud trial in Manhattan, those words have come back to haunt her.
On Monday, a federal prosecutor peppered the disgraced cryptocurrency mogul with questions as he took the stand for a second day of testimony in federal court. For four hours, Danielle Sassoon, the prosecutor, questioned Bankman-Fried about inconsistencies between his public statements and how he ran his crypto empire before it spectacularly collapsed in November.
Bankman-Fried, 31, dressed in a light gray suit and purple tie, responded with brief “yes” or “no,” avoiding the sometimes meandering statements he made at other points in the trial. At times, rocking back and forth in his chair, he insisted that he didn’t remember much of what he had said publicly, including about FTX’s handling of customer deposits and the conflicts of interest that plagued his business.
“I’m not sure,” Bankman-Fried responded again and again, as Sassoon asked him about statements he had made when he was CEO of FTX. “I don’t remember,” he said at other points.
The cross-examination exposed cracks in Mr Bankman-Fried’s claims, dealing a potentially serious blow to his credibility with the jury of nine women and three men who will decide his fate. On a large projection screen, Sassoon showed statements that appeared to show Bankman-Fried saying one thing in public and then acting differently in private. After asking her to recount FTX’s communications to government officials in Washington, Sassoon asked her to repeat private messages in which he used an insult to dismiss regulators as useless.
Mr. Bankman-Fried’s testimony was the most anticipated moment of the trial, which has highlighted the arrogance and rampant risk-taking throughout the crypto industry. Bankman-Fried, once the face of cryptocurrency efforts to court the public, is now widely compared to some of the most notorious scammers in recent history, including Elizabeth Holmes, the founder of the failed analytics startup of Theranos blood.
Going up to the stand was risky. Those accused of crimes often avoid testifying so that prosecutors do not have the opportunity to question them. But the first weeks of the trial were so damaging for Bankman-Fried, as a cavalcade of government witnesses testified that he lied to the public and stole from FTX clients, that he was left with few other options to salvage the case.
In December, federal prosecutors accused Bankman-Fried of orchestrating a sweeping scheme to steal up to $10 billion from FTX customers. They said he had spent the money on extravagant projects, including venture capital investments, political contributions and luxury real estate purchases in the Bahamas, where FTX was based. Bankman-Fried was also accused of creating a secret backdoor in FTX’s code that allowed a hedge fund he founded, Alameda Research, to seize billions of dollars in client funds.
He has pleaded not guilty to seven counts of fraud, conspiracy and money laundering, and could face what amounts to life in prison if convicted.
Not long after FTX imploded, three of Bankman-Fried’s closest associates (Caroline Ellison, Nishad Singh and Gary Wang) pleaded guilty to fraud and agreed to cooperate with the government, hoping for lenient sentences. All three testified against Bankman-Fried at trial, telling the jury that they lied and stole for years at his behest.
Bankman-Fried took the stand Friday to tell her side of the story. Under questioning by his own lawyer, he presented himself as a hard-working founder who felt overwhelmed by his responsibilities and left important business problems unresolved. He denied committing fraud and blamed his colleagues for many of the problems that led to FTX’s collapse.
On Monday it was the prosecutor’s turn to ask questions. The courtroom was packed with spectators, including Bankman-Fried’s parents (law professors Joe Bankman and Barbara Fried) and Damian Williams, New York’s top federal prosecutor. Ms Sassoon’s mother also attended.
Sassoon focused many of his questions on Bankman-Fried’s comments in interviews, congressional testimony and on Twitter. She pressed him on inconsistent statements she had made over the years about his famously unkempt hair and pointed out his frequent use of private jets, suggesting that his seemingly humble lifestyle was a public relations act. The private flights cost a total of $15 million, Sassoon said.
She also questioned him about interviews he gave before the FTX collapse, in which he insisted that Alameda had no special privileges as a client trading on the exchange. During the first three weeks of the trial, prosecution witnesses testified that the opposite had happened and that Bankman-Fried had funneled billions of dollars to Alameda.
At one point, Ms. Sassoon walked to the witness stand and presented Mr. Bankman-Fried with a copy of “Number Go Up,” a new book on cryptocurrencies written by Bloomberg News reporter Zeke Faux. She pointed to an interview in the book in which Bankman-Fried appeared to contradict his earlier claims, acknowledging that Alameda had special privileges.
Ms. Sassoon asked if seeing the book jogged Mr. Bankman-Fried’s memory of that recognition. “No, it’s not like that,” she replied.
Finally, Bankman-Fried, who is expected to return to the stand Tuesday, made some concessions. He acknowledged that Alameda had a $65 billion line of credit with FTX, essentially allowing it to borrow unlimited funds. The second-largest line of credit, which FTX had with another company, was $150 million, he said.
But time and time again, Bankman-Fried said she couldn’t remember several statements about Alameda and FTX that journalists had attributed to her. He did not read all the articles, he said, and often objected to the reports.
“I disagreed with basically every article written about me” after the FTX collapse, he said.
Bankman-Fried said she also couldn’t remember many of the key moments in the narrative prosecutors had presented about FTX’s downfall. He said he did not remember telling a former colleague that he should transfer to Alameda some of the $2 billion that FTX had raised from venture capital firms. Prosecutors have accused Bankman-Fried of embezzling money from FTX venture investors as well as its clients.
At one point, Sassoon asked Bankman-Fried if she remembered making statements about the importance of safeguarding client funds. He hesitated and stammered, and finally said that he couldn’t remember.
“I made a lot of public statements,” he said.
Sassoon then showed the jury a tweet Bankman-Fried had posted about that exact topic.
“And, as always, the money and safety of our users come first,” he had written.
