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Sam Bankman-Fried faced an onslaught of questions on Monday about his past public statements and whether he told the truth about the relationship between his private trading firm Alameda Research and the FTX exchange, as New York prosecutors cross-examined the former cryptocurrency mogul on trial for fraud.
Prosecutors showed the jury notes written by Bankman-Fried after his businesses filed for bankruptcy in November 2022 in which he said his crypto empire would not have collapsed if Alameda had truly been “100 per cent separate” and “completely unrelated . . . in every way”.
The 31-year-old, who had earlier answered questions from his own lawyers, was confronted by prosecutors throughout the day with emails, congressional testimony and statements to the press in which he had repeatedly presented Alameda in public as independent from FTX. “Its account is like everyone else’s,” he wrote in a 2022 email shown in court.
The question of secret special treatment for Alameda on the FTX exchange has been central to Bankman-Fried’s trial. Prosecutors claim he directed the creation of features that ultimately let Alameda drain billions from the exchange, leaving FTX unable to honour client withdraws.
Under questioning, he acknowledged that from at least 2020 he knew Alameda had “distinct rules” for when its positions on FTX would be liquidated, compared to other customers of the exchange. Asked if he had disclosed this special treatment to customers and investors, Bankman-Fried said “I don’t think so” and “I’m not sure”.
Bankman-Fried took a notably different approach to prosecutors’ questions than he had during questioning last week, during a hearing with the jury not present. He largely refrained from long answers with many caveats that had drawn exasperated comment from the judge. Instead his responses were curt, repeatedly answering questions from assistant US attorney Danielle Sassoon with a string of “yups”.
Jurors were also shown tweets, interviews and congressional testimony in which Bankman-Fried repeatedly vouched for FTX’s governance and risk management.
He admitted to calling a “specific subset” of crypto investors “dumb motherfuckers” and conceded he had referred to his advocacy for crypto regulation as “just PR” in the days leading up to his arrest last December.
He also admitted to writing “fuck regulators” to a reporter in November 2022.
Prosecutors played an audio recording of an interview in which he had claimed to not be “involved at all” in the running of Alameda. Moments earlier, he acknowledged in testimony that he was still involved in discussions over the firm’s trading strategy.
The barrage of evidence came as the trial against Bankman-Fried entered its fifth week, having previously featured testimony from some of the former billionaire’s closest friends and colleagues, including Caroline Ellison, Gary Wang and Nishad Singh, all of whom are co-operating with prosecutors.
Under direct examination from his defence lawyer earlier on Monday, Bankman-Fried testified he believed FTX “had no holes on its balance sheet” just days before it collapsed into bankruptcy with $8bn of customer deposits missing.
Presented with a tweet from November 7 2022 — four days before the exchange declared bankruptcy — in which he said “FTX is fine”, Bankman-Fried maintained that at the time the exchange itself “had effectively no liabilities” and that there was “no hole in terms of assets”.
He added: “FTX did not do any investments with customer assets.”
However, he conceded that at that point the exchange was “on the verge of a liquidity crisis” as customers were withdrawing billions of dollars a day after the founder of competing exchange Binance cast doubt over FTX’s finances.
He also testified he had left it to Ellison, who ran Alameda, to hedge the trading firm’s positions after its balance sheet deteriorated in the summer of 2022. When updated on that strategy in September, Bankman-Fried said he felt the company “could have hedged twice as much”.
Bankman-Fried, who has pleaded not guilty to all charges, was later asked by Sassoon whether he agreed that he knew “how to tell a good story”, to which he replied: “It depends on what metric you use.” Before FTX’s collapse, Bankman-Fried was one of the best-known figures in the nascent crypto industry, becoming a mainstay of media coverage and hobnobbing with politicians and celebrities.
He added that he told “what I thought was the truth about the company” to journalists, investors, and the US Congress, before being presented with testimony to Congress from May 2022 in which he said FTX offered protections to customers including maintaining sufficient liquid assets to always meet withdrawal requests. The exchange was unable to meet such requests in November of that year, and was forced into bankruptcy.
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