From the moment his cryptocurrency empire collapsed in November, Sam Bankman-Fried hasn’t stopped talking.
Against the advice of his defense attorneys, Bankman-Fried embarked on a lengthy press tour to explain the failure of his FTX cryptocurrency exchange, giving interviews to TV hosts and obscure Twitter personalities. After being accused of fraud and placed under house arrest, he invited journalists to visit him so he could continue defending his actions.
On Friday, Bankman-Fried, 31, made an even riskier decision: She took the stand to testify at her criminal fraud trial in federal court in New York.
During five and a half hours of testimony, Bankman-Fried denied committing fraud or stealing from FTX clients, while emphasizing her efforts to make the exchange successful. But he also acknowledged that he had made mistakes, citing “significant oversights” that harmed FTX customers.
Wearing a gray suit and purple tie, his famously unkempt hair cut by a fellow inmate at the jail where he is being held, Bankman-Fried said he had “made a series of small mistakes and a series of bigger mistakes. “
FTX was supposed to “move the ecosystem forward,” he testified. “It turned out to be the complete opposite of that.”
Mr. Bankman-Fried’s testimony was the most anticipated moment of a trial that has become a referendum on the excesses of the once high-flying crypto industry. The businessman, who positioned himself as the face of the industry when prices of digital currencies like bitcoin and Ether were rising, emerged last year as a warning about the unbridled arrogance and risk-taking that cost customers billions. of dollars when the cryptocurrency market began to grow. it crashed.
His decision to testify was a huge risk. Lawyers often advise criminal defendants not to take the stand, so that prosecutors don’t have the opportunity to catch them in contradictions.
But after weeks of damaging testimony from her closest friends and colleagues, Bankman-Fried was left with no choice but to make a risky attempt to change the course of the trial. He was the defense’s third and final witness and took the stand after an unusual hearing Thursday delayed his testimony by a day.
“The risks involved in testifying are enormous and numerous,” said Daniel Silva, a former federal prosecutor now in private practice. “SBF will be subject to extensive impeachment by prosecutors based on the significant public and private statements he has made.”
Bankman-Fried was arrested in December and accused of orchestrating a years-long scheme to misappropriate up to $10 billion from customers who had deposited their savings with FTX. Prosecutors accused him of funneling the money into venture capital investments, political contributions and extravagant real estate purchases. They also said he used the funds to prop up a cryptocurrency trading company he founded, Alameda Research.
Her trial has been the most closely watched white-collar fraud case since Elizabeth Holmes, founder of blood-testing startup Theranos, was convicted and sentenced to 11 years in prison in 2022. Bankman-Fried, who pleaded guilty Not guilty, he could receive what would amount to life in prison if a jury finds him guilty of seven counts of fraud, conspiracy and money laundering.
Mr. Bankman-Fried’s defense faces significant obstacles, after a cavalcade of former FTX and Alameda employees testified that he had lied to the public and stolen money from FTX customers for years. On cross-examination, his lead attorneys, Mark Cohen and Christian Everdell, struggled to find holes in the witnesses’ testimony, hampered by prosecutors’ objections.
But Mr. Bankman-Fried’s decision to testify gave the defense the opportunity to tell its side of the story.
When he took the stand Friday morning, the FTX founder showed little emotion as he defended his decisions in front of a packed courtroom. Court officials set up a row of folding chairs in the gallery to accommodate a group of visiting students. Bankman-Fried’s parents, Stanford law professors Joe Bankman and Barbara Fried, also watched from the benches, scribbling notes on a legal pad. Author Michael Lewis, who recently published a book about the founder of FTX, was sitting a couple rows behind them.
Bankman-Fried began her testimony with a mea culpa, acknowledging that FTX’s collapse had hurt people across the crypto industry. All he wanted to do, he said, was “build the best product on the market.”
Under questioning by Cohen, Bankman-Fried walked the jury through his biography, from his upbringing in Palo Alto, California, to his college education at the Massachusetts Institute of technology. In college, he said, he belonged to an unusual type of fraternity that was “coed, nerdy and dry,” before graduating and getting a job at the Wall Street trading firm Jane Street.
At times, he portrayed himself as something of a rookie. When he started trading cryptocurrencies with Alameda in 2017, he said, “I had no idea how it worked.”
His business empire grew faster than he had ever imagined, Bankman-Fried testified. He soon began working 22 hours a day, he said, and received thousands of emails daily. He also began making political donations, she said, after concluding that “he could have a substantial impact on the world.”
Bankman-Fried suggested that the sheer volume of work caused him to ignore important parts of the business. When asked if FTX had a risk management department, he said: “Sure we should have, but no, we didn’t.”
That exchange echoed a central claim in Cohen’s opening statement: that Bankman-Fried was effectively building a plane in the air and acting in “good faith” all along.
Bankman-Fried also reiterated several other claims that her attorneys have defended throughout the trial. She denied illegally backdating documents and said she used legitimate sources of financing to finance investments and real estate purchases.
He also blamed the problems at Alameda on Caroline Ellison, the company’s chief executive and his ex-girlfriend, saying she had failed to adequately manage the risk. (Ms. Ellison pleaded guilty and testified against Bankman-Fried.) She learned about an $8 billion hole in FTX’s accounts much later than prosecutors had claimed, she added.
At times during the testimony, Mr. Bankman-Fried seemed surprisingly relaxed, smiling and cracking occasional jokes. He said that he had ruled out a possible stadium sponsorship with the Kansas City Royals because he did not want FTX “to be known as the Kansas City Royals of crypto exchanges.” When asked why his hair was so neglected during his tenure at FTX, he said: “He was a little busy and a little lazy.”
Bankman-Fried is likely to face much more difficult times during cross-examination, which could begin as soon as Monday, when the trial resumes.
A preview of that testimony unfolded Thursday, when the judge overseeing the case, Lewis A. Kaplan, held a hearing in which Bankman-Fried offered testimony on a narrow set of issues without the jury present.
Under intense questioning from a prosecutor, Bankman-Fried peppered her responses with “ums” and “ahs,” and often stared at her lap as she considered what to say, especially when asked if she had sought advice from her prosecutor. lawyers over whether Alameda could borrow billions of dollars from FTX clients.
Judge Kaplan repeatedly reprimanded him for not answering questions directly.
“The witness has what I’ll just call an interesting way of responding,” Judge Kaplan said.
