FTX’s founder denied stealing $10 billion from customers as he made the risky decision to testify in his fraud trial today.
Sam Bankman-Fried admitted he made some “big mistakes” and said “a lot of people got hurt” when the crypto exchange collapsed last November.
He blamed “significant failures” in risk management but claimed he never took anyone’s money.
When asked what he knew about crypto, Bankman-Fried said “basically nothing.”
He said: “I knew a Bitcoin was digital, you could trade it on the website.” “I knew there were other cryptocurrencies, I had absolutely no idea how they worked.”
But Bankman-Fried looked at the money-making options and went ahead.
Facing a 115-year prison sentence, Bankman-Fried decided to testify after being blamed for FTX’s collapse by his three top former employees, all of whom testified against him.
Sam Bankman-Fried was back on the stand Friday to testify in his own defense after being blamed for the collapse of FTX
He admitted making some “big mistakes” and said “a lot of people were hurt” but blamed “significant failures” in risk management
At its peak, the stock market was worth $32 billion and Bankman-Fried appeared on the cover of Forbes magazine, which touted him as the future of finance.
But in November last year the “house of cards” collapsed. Crypto prices collapsed due to fears of a recession.
Bankman-Fried, 31, was arrested in his penthouse in the Bahamas – where FTX was based – and extradited to the US to face trial.
Prosecutors alleged he “lied to the world” and wasted $10 billion on real estate purchases, political contributions and paying huge sums of money.
At the start of his testimony, Bankman-Fried’s attorney Mark Cohen asked him what his “vision” was for FTX.
He replied, “We thought we might be able to create the best product on the market.”
Bankman-Fried said it is about combining “elements of traditional financial products” with crypto and “advancing the ecosystem.”
Cohen asked, “Is this how it happened?”
Bankman-Fried said, “No.” It turned out basically the opposite. “Many people were injured,” adding that customers lost their money.
Cohen asked, “Have you cheated on anyone?”
Bankman-Fried said, “No, I didn’t.”
Cohen asked, “Have you accepted client funds?”
Bankman-Fried said, “No.”
Cohen asked, “Did you make any mistakes along the way?”
Bankman-Fried said: “I made a number of small mistakes and a number of big ones.”
“The biggest mistake by far was not having a dedicated risk management team. “We had a number of people involved to some degree, but no one was dedicated to the matter and there were significant oversights.”
At its peak, the stock market was worth $32 billion and Bankman-Fried appeared on the cover of Forbes magazine, which touted him as the future of finance
Bankman-Fried faces 115 years in prison if found guilty of fraud and conspiracy
SBF appears front and center in a group photo with his arm around Caroline Ellison, while men in curly wigs – presumably mocking his signature hairstyle – pose around her. They are pictured with FTX co-founder Gary Wang (left).
Bankman-Fried told the court that he and Alameda President Caroline Ellison ended their romantic relationship because he could not devote time to her.
“I didn’t have the time or energy to follow through on what I thought she wanted from a relationship,” Bankman-Fried said. “It wasn’t the first time I had this problem”
Ellison, who made a deal with prosecutors to testify against her ex-boyfriend, said at the start of the trial that they broke up because she wanted more from the relationship.
In a clear, nasal voice, Bankman-Fried described growing up in Palo Alto, California, home to major technology companies like Meta, and studying at MIT.
During his stay there he met Gary Wang, with whom he later founded FTX.
Bankman-Fried told the court that he lived with 25 other people in a “nerdy” frat house where no one drank.
After graduating, he worked at Jane St Capital and in 2017 founded Alameda Research, the precursor to FTX, which later became FTX’s sister company.
Bankman-Fried said he knew “basically nothing” about crypto but looked at the money-making opportunities and thought they were “so big that I wasn’t sure I even believed it.”
They got off to a rocky start and rented an Airbnb in Berkeley, California for their office.
Bankman-Fried said it was a two-bedroom home, but they used the attic as a third bedroom and the living room as a fourth bedroom because it had a couch.
The rest of the house was the office, which they “packed with desks, computers, and boxes from Amazon.”
“Eventually, we soon had to deal with the cardboard issue,” Bankman-Fried said.
The name “Alameda Research” came about because Berkeley is in Alameda County and they wanted to stay “under the radar” so as not to alert competitors to their activities
Bankman-Fried said: “I didn’t want to call it Sam’s Crypto Trading Company.” It was far better than the internal name “Wireless Mouse.”
Bankman-Fried was asked what happened to the money deposited with Alameda, which then appeared in their FTX wallets.
FTX made this agreement because it was initially unable to obtain its own bank accounts, the court heard.
Bankman-Fried said, “I wish I had a better understanding than I do.”
When asked if FTX had the money, Bankman-Fried said, “I wasn’t quite sure what was going on.”
“I believed that the funds were either just held in a bank account, not used or moved, or that they were sent to FTX in one way or another, or that Alameda borrowed funds and used them.”
Bankman-Fried said he believes FTX’s risk management systems are “better” than other crypto exchanges.
He told the jury he had “put a lot of time and thought into it”.
The prosecution’s key witness was Caroline Ellison, Bankman-Fried’s ex-girlfriend, who ran Alameda Research, FTX’s sister company
FTX co-founder and former chief technology officer Gary Wang accepted a plea deal and testified earlier this month
Nishad Singh (pictured arriving in court with his girlfriend Claire Watanabe) testified that the company spent millions on celebrity partnerships in early 2022 – as prosecutors sought to show how Bankman-Fried squandered customer money to boost its reputation
Wang was one of the three employees and he was soon followed by Caroline Ellison and Nishad Signh, the three who testified during Bankman-Fried’s trial.
They eventually rented an office and then moved to Hong Kong with Alameda because they felt there were more opportunities there.
In 2019, Bankman-Fried talked to Wang about starting his own crypto exchange and they founded FTX, he told the court.
Bankman-Fried said that when he founded FTX in 2019, he only gave himself a 20 percent chance of lasting more than a few months.
He said he originally planned to sell the exchange to a rival company because he had no idea how to attract customers.
But after a few friends signed up, word spread “organically” and on social media and more and more people signed up.
By 2019, the daily trading volume was tens of millions of dollars per day and by 2022, this figure reached 10 to 15 billion dollars per day.
Bankman-Fried denied 13 charges between 2019 and 2011, including wire fraud, money laundering and violations of campaign finance laws.