Sam “SBF” Bankman-Fried took the stand this week to testify in his ongoing criminal trial in the Southern District of New York, denying any wrongdoing
Sam “SBF” Bankman-Fried took the stand this week to testify in his ongoing criminal trial in the Southern District of New York, denying any wrongdoing between FTX and Alameda Research, while acknowledging making “big mistakes” during the companies’ fast-paced growth.
His official testimony started on Oct. 27, after a hearing on the previous day without the jurors present. During the hearing, Bankman-Fried struggled to answer questions raised by government attorneys, whereas he appeared much better prepared the following day to face the jury.
A few highlights of Bankman-Fried’s testimony this week include denying directing his inner circle to make millionaire political donations in 2021, as well as claims that FTX’s Term of Uses covered transactions between Alameda and the crypto exchange. Moreover, the former CEO stated that he had requested additional hedging strategies for Alameda throughout 2021 and 2022, but they were never implemented.
The defense is expected to conclude Bankman-Fried’s examination on Oct. 30, followed by the prosecution’s cross-examinations and closing arguments from both sides. Prosecutors also hinted about a possible rebuttal witness next week — someone who is called to prove that the testimony of another witness is false or inaccurate.
Bankman-Fried could be jailed for 115 years if found guilty of all fraud and conspiracy counts. Cointelegraph’s on-the-ground coverage of his testimony is summarized below.
SBF refutes claims over political donations
Bankman-Fried denied in court having directing Ryan Salame, former co-CEO of FTX Digital Markets, and Nishad Singh, former director of engineering, to funnel millions of dollars in contributions to political campaigns.
According to data available on OpenSecret, Singh gave $8 million to federal campaigns in the 2022 election cycle. Salame also donated $10 million to politicians via loans from Alameda Research.
Even though Bankman-Fried denied instructing both to make political contributions, he recognized that lobbying in Washington, D.C. played a key role in his efforts to push a regulatory framework for crypto firms in the United States during 2021.
“I came to believe that I could impact the world.”
According to prosecutors, Bankman-Fried used funds from customers’ deposits on FTX to make more than $100 million in political campaign contributions ahead of the 2022 midterm elections.
Bankman-Fried denied any wrongdoing during his testimony, asserting that FTX had more than $1 billion in revenue in 2021 and that political donations were made from the exchange’s own funds.
Maxine Waters is chairing the investigation into FTX https://t.co/oFMctH4rRh pic.twitter.com/Ox6O5w4nOl
— Jordan Schachtel @ dossier.today (@JordanSchachtel) November 17, 2022
The New York Times test
Bankman-Fried had a guideline for employees’ communication at FTX and Alameda Research: The New York Times test.
Based on the informal test, employees should not write anything they wouldn’t be comfortable seeing on the front page of the newspaper. According to Bankman-Fried, even harmless things could “look pretty bad out of context,” so employees should be sure to always provide sufficient context in written messages.
Bankman-Fried described the test as part of his explanation of why more than 200 channels on Signal had an autodelete policy that permanently deleted messages after a week.
Prosecutors used evidence of the autodelete feature in the previous days to suggest that any wrongdoing between the companies was being covered up. According to Bankman-Fried, official communications and regulatory paperwork were handled through other channels, such as Slack or email, but Signal was the choice for daily communication within the companies.
Alameda’s unique role on FTX
Bankman-Fried provided details about Alameda’s billionaire line of credit with FTX. According to his testimony, Alameda served as FTX’s payment provider for wire transactions while the exchange was unable to have its own account.
Besides being a payment processor, Alameda was also the primary liquidity provider, market maker and a client of FTX.
As liquidity provider and market maker, Alameda would have to step in and cover customer losses if FTX’s risk engine failed. During his testimony, Bankman-Fried provided an example of a failure of the risk engine that resulted in Alameda covering millions of dollars in losses in 2021.
The nature of Alameda’s role in the exchange’s operations prompted custom features in FTX’s code, such as the ability to go negative via a line of credit without activating the risk engine. According to Bankman-Fried, the exemption was necessary to prevent Alameda’s potential liquidation, which would negatively impact the crypto markets.
As a client of FTX, Alameda was also able to borrow funds by depositing collateral in the exchange. The terms of use of FTX allow borrowers to use funds for any purpose, which means Alameda could trade with the borrowed…
cointelegraph.com
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