FTX’s Sam Bankman-Fried Admits Customer Harm in Court but Refutes Fraud Allegations

While on the witness stand during his fraud trial this past Friday, Sam Bankman-Fried portrayed himself as an inept pioneer in the cryptocurrency sector who was uninformed about the industry when he founded FTX, lacked marketing expertise as he became the company’s public face, and was unaware of a $10 billion shortfall in his businesses until just before they imploded.

The proceedings took place in a federal court in Manhattan, where Bankman-Fried, aged 31, firmly refuted any allegations of fraudulent activity. He conceded that mistakes had been made, both major and minor, but he also refuted claims by four ex-senior executives who accused him of being responsible for the collapse of his businesses last year. This collapse occurred when a massive wave of customer withdrawals revealed that billions of dollars were unaccounted for.

“We had aspirations to develop the preeminent product in the market and to advance the cryptocurrency ecosystem,” he noted. However, the reality was far removed from the aspiration. “The end result was quite the contrary. Numerous people, including customers and employees, suffered, leading the company into bankruptcy,” added Bankman-Fried.

When queried by his defense attorney, Mark Cohen, about whether he had committed fraud or misappropriated customer funds, Bankman-Fried categorically responded, “No, I did not.”

Maintaining a largely stoic demeanor throughout his testimony, Bankman-Fried disclosed that he was taken aback upon discovering in October 2022 that Alameda, his company, had accrued an $8 billion debt of which he was unaware, bringing the total debt to approximately $10 billion.

The entrepreneur from California has entered a not guilty plea against charges of conspiracy, which accuse him of redirecting billions of dollars from customers and investors towards high-risk investments, luxury real estate, ostentatious marketing campaigns, and substantial political and charitable contributions. His testimony aims to underscore the absence of criminal intent in actions that the prosecution contends led directly to last year’s collapse of businesses he founded in 2017 and subsequently operated out of the Bahamas.

Bankman-Fried also informed the jury about his lack of expertise when he launched his initial venture, Alameda Research, stating, “I was essentially ignorant about the sector. All I knew was that bitcoin is digital.” His accidental transformation into the public face of FTX occurred when media interviews “exceeded my expectations,” he said.

The witness testimony continued to focus on the rapid ascent and subsequent downfall of FTX and Alameda. Bankman-Fried blamed the companies’ failures partly on Caroline Ellison, Alameda’s CEO and his intermittent romantic partner, for not following his risk mitigation strategies.

Prior to Bankman-Fried taking the stand, Judge Lewis A. Kaplan primarily disallowed the defense from presenting evidence that the defendant had consulted legal experts before making significant business decisions.

Bankman-Fried was extradited from the Bahamas to New York in December to answer fraud charges. Initially granted a $250 million personal recognizance bond, the bond was revoked and he was imprisoned after Kaplan determined that he had attempted to tamper with potential witnesses.

The prosecution has spent three weeks constructing their case against Bankman-Fried, relying predominantly on testimonies from his former top executives who cohabited with him in a penthouse in the Bahamas. These executives claimed that Bankman-Fried directed them to allocate billions of dollars from FTX customer accounts through Alameda Research, a hedge fund he established in 2017, two years prior to initiating the FTX cryptocurrency exchange.

For comprehensive AP reporting on Sam Bankman-Fried and FTX, please visit: AP Coverage Link

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More about Sam Bankman-Fried Fraud Trial

• FTX Official Website
• Overview of Sam Bankman-Fried’s Career
• Legal Proceedings in Manhattan Federal Court
• Alameda Research Company Profile
• Timeline of FTX’s Financial Collapse
• U.S. Federal Court System
• Judge Lewis A. Kaplan Profile
• Fraud Charges in the United States
• Cryptocurrency Regulations in the United States
• High-Profile Fraud Cases in the Financial Sector