Ineffectual Cross-Examination by Sam Bankman-Fried’s Attorney Leaves Government’s Principal Witness Unscathed in Fraud Trial

by Ethan Kim
fraud trial

In the ongoing fraud trial against former cryptocurrency entrepreneur Sam Bankman-Fried, his chief defense counsel, Mark Cohen, was largely unsuccessful in undermining the testimony of Caroline Ellison, the government’s central witness. The cross-examination carried out by Cohen appeared disorganized and unfocused, eliciting queries from Judge Lewis A. Kaplan about the relevance and direction of his questions.

Previously, the prosecution had portrayed Ellison as a crucial insider, who, under Bankman-Fried’s orders, had been responsible for improperly diverting customer funds from the FTX cryptocurrency exchange operated by Bankman-Fried. These diverted funds were frequently channeled into investments with an affiliated trading firm, Alameda Research, where Ellison served as a leader and was once romantically involved with Bankman-Fried.

It had been anticipated that Cohen would attempt to deflect culpability for the irregularities at Alameda Research onto Ellison. This expectation stemmed from his opening remarks in the trial, where he claimed that Bankman-Fried was innocent of the fraud charges and was instead attempting to rectify a situation largely exacerbated by his subordinates.

However, Cohen’s efforts to poke holes in Ellison’s account fell flat. His questioning jumped inconsistently from topic to topic and from one timeline to another, leaving even the judge perplexed.

Following Ellison’s testimony, the prosecution called a former software developer at Alameda, Christian Drappi, who corroborated much of what Ellison had disclosed to the jury. Drappi expressed his astonishment upon learning in November 2022 that Alameda had been misusing FTX customer funds. Cryptocurrency exchanges like FTX are required by regulation to keep customers’ deposits separate from their own trading activities.

During her testimony, Ellison elaborated on how she had recurrently accessed customer deposits at FTX for various purposes—whether it was to cover losses at the hedge fund, make new investments, contribute to political campaigns, or obscure significant financial deficits on Alameda’s balance sheet. She emphasized that these actions were executed at the behest of Bankman-Fried.

When the financial losses at Alameda reached a critical point in November 2022, the decision was made to liquidate the trading firm and sell FTX to avert potential bankruptcy. Ellison disclosed this in an all-hands meeting that was subsequently recorded and handed over to government authorities. Audio from this meeting revealed that Alameda employees questioned whether the misuse of FTX funds had been an impulsive “YOLO” decision, an acronym for “You Only Live Once.” Ellison clarified that these actions were taken over an extended period.

Drappi resigned from his position at Alameda 24 hours after this revelation.

Ellison, 28, pleaded guilty to fraud charges in December. Meanwhile, Bankman-Fried, 31, maintains his not-guilty plea. Initially placed under house arrest at his parents’ home in Palo Alto, California, on a $250 million bond, he has been incarcerated since August after Judge Kaplan determined that he had attempted to unduly influence potential witnesses, including Ellison.


This article includes contributions from reporter Larry Neumeister.

Frequently Asked Questions (FAQs) about fraud trial

Who is the central figure in the fraud trial?

The central figure in the fraud trial is Sam Bankman-Fried, a former cryptocurrency entrepreneur. He is accused of improperly diverting customer funds from the FTX cryptocurrency exchange for various purposes, including investments in an affiliated trading firm, Alameda Research.

Who is the government’s key witness in this case?

The government’s key witness is Caroline Ellison, a high-level insider who had been responsible for overseeing the improper borrowing of funds from the FTX crypto exchange at the direction of Sam Bankman-Fried.

What was the role of Sam Bankman-Fried’s lead defense attorney, Mark Cohen?

Mark Cohen is the lead defense attorney for Sam Bankman-Fried. He was expected to try to shift the blame for the problems at Alameda Research onto Caroline Ellison but was largely unsuccessful in discrediting her during the cross-examination.

What did the prosecution allege that Caroline Ellison did?

The prosecution alleges that Caroline Ellison, under the direction of Sam Bankman-Fried, oversaw the improper diversion of customer funds from the FTX crypto exchange for investments in Alameda Research and other activities.

Who is Christian Drappi and what did he testify?

Christian Drappi is a former software developer at Alameda Research. He testified that he corroborated much of what Caroline Ellison had told the jury, particularly regarding the misuse of FTX customer funds.

What did Judge Lewis A. Kaplan do during the cross-examination?

Judge Lewis A. Kaplan had to intervene several times during the cross-examination conducted by Mark Cohen, asking for clarification on the direction and relevance of the questions being posed to Caroline Ellison.

What was the outcome after Caroline Ellison’s testimony?

After Ellison’s testimony, it was revealed that when the losses at Alameda Research became too large, a decision was made to shut down the trading firm and sell FTX to potentially save both entities from bankruptcy.

Have any parties involved pleaded guilty to fraud charges?

Yes, Caroline Ellison pleaded guilty to fraud charges in December. However, Sam Bankman-Fried has pleaded not guilty to fraud charges.

What are the consequences for Sam Bankman-Fried so far?

Initially confined to his parents’ home in Palo Alto, California, under the terms of a $250 million bond, Sam Bankman-Fried has been jailed since August after Judge Kaplan concluded that he had tried to improperly influence potential witnesses.

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Mike_Journalist October 13, 2023 - 6:20 am

Wow, Bankman-Fried’s lawyer really dropped the ball, huh? What was he thinkin not prepping better for Ellison’s testimony? This case is huge, you can’t just wing it.

CuriousReader October 13, 2023 - 7:22 am

christian Drappi resigning 24 hours after the all-hands meeting is telling. He must’ve realized the ship is sinking fast.

RealTalk October 13, 2023 - 9:38 am

Bankman-Fried is jailed now? Man, how the mighty fall. This trial is like a movie plot, but real lives and a lot of money are at stake here.

LegalEagle October 13, 2023 - 10:55 am

Can’t believe the judge had to step in multiple times. If you’re confusing the judge, you’re definitely losing the jury. Bad move, Cohen.

CryptoExpert77 October 13, 2023 - 7:14 pm

Seriously, Mark Cohen’s approach seems all over the place. Thought he’d have something up his sleeve to discredit Ellison. Quite disappointing.

Sarah_Investor October 13, 2023 - 9:14 pm

So both the entities are near bankruptcy now? Man, this could have ripple effects in the crypto world for sure. Who’s gonna trust FTX after this.

FinanceGuru October 13, 2023 - 9:30 pm

Ellison pleading guilty and Bankman-Fried still claiming innocence? something doesn’t add up here. Looking forward to how this unfolds.


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