Sam Bankman-Fried has taken the stand to testify in his own defense at his fraud trial but, in a surprise twist, it was without the jury present.
Judge Lewis Kaplan said there were a ‘number of areas of potential testimony’ that the prosecution said the jury should not hear.
The unusual hearing was necessary without the jury present to determine what they should be told, the judge said.
After the testimony Judge Kaplan said he would make a decision and the jury would be brought back in.
Bankman-Fried went into the witness box wearing a gray suit and a purple tie. He spoke in a nasal voice but appeared calm and answered questions from his lawyer Mark Cohen clearly.
Sam Bankman-Fried took the stand to testify in his own defense at his fraud trial on Thursday but without the jury present. Bankman-Fried went into the witness box wearing a gray suit and a purple tie
The former billionaire faces up to 115 years behind bars for charges including conspiracy and wire fraud related to the November 2022 collapse of his cryptocurrency exchange FTX
Bankman-Fried said that there were ‘constant hacking attempts’ on FTX but the company never suffered what he called a ‘core breach’
He said that there were ‘constant hacking attempts’ on FTX but the company never suffered what he called a ‘core breach.’
According to Bankman-Fried there were ‘concerns for most of FTX’s existence’ about hacking especially in its Hong Kong office.
He said that there were ‘political occurrences during a period there which meant there was concern about unauthorized access to (staff) devices’.
Earlier in the trial the court heard that Bankman-Fried set auto deletion on with messaging app Signal.
In his testimony Bankman-Fried said that he was acting within FTX’s document retention policy when he did this.
He said: ‘As a general matter those were not channels where there would be formal business records. They were not channels in which decisions would be announced or enacted or documents relevant to regulatory inquiries were intended to be discussed.’
Bankman-Fried said it was for ‘chatter’ and conversations which he likened to ‘someone wandering over to my desk’ and asking him if they ‘have any thoughts about the Japanese regulatory environment right now.’
He added that in November 2022 shortly before FTX went bankrupt he turned off auto delete on message chats after speaking to financial regulators.
Filings by his lawyers state he will try to claim that he was taking advice from his lawyers and that there was ‘nothing improper’ about FTX’s finances.
Bankman-Fried was asked about North Dimension, a company which was a subsidiary of Alameda Research, FTX’s sister company.
Prosecutors claim that Alameda plundered $10billion of FTX customers’ money to pay for lavish spending and political donations.
Bankman-Fried said when North Dimension was set up he signed the forms because he ‘trusted they were proper and necessary.’
‘I had a lot of things that passed my desk to sign’, he said, adding: ‘I briefly reviewed them and didn’t see anything obviously wrong.’
Bankman-Fried said that he believed having FTX customers deposit money in Alameda was permitted because of payment agreements he had signed.
He told the court that it took a ‘couple of years’ for FTX to get its own bank accounts and before then customers sent their money to Alameda and it appeared in their FTX wallets.
Asking about FTX’s terms of service, Bankman-Fried said he believed he was managing the company within those terms.
Judge Lewis Kaplan interrupted and asked Bankman-Fried if he read the ‘entire document’.
He replied: ‘I read parts in depth, parts I skimmed over’.
According to Bankman-Fried, investments made by FTX were sometimes done through a loan to him or through another entity.
Bankman-Fried’s lawyer Mark Cohen asked him: ‘Did you take comfort from the fact the lawyers had structured the loans?’
‘Yeah of course’, said Bankman-Fried.
Judge Kaplan had to pause testimony again soon after to get Bankman-Fried to explain what a Blockchain Explorer was, which is a device to view the history of cryptocurrency sales.
Sam Bankman-Fried pictured at the 2022 Super Bowl with singer Katy Perry (far left) actor Orlando Bloom, actress Kate Hudson (far right) and Hollywood agent turned investor Michael Kives. The image was shown to the court
Brady and Bankman-Fried are pictured together in a clip they shared on social media as one of his celebrity endorsements
Facing 115 years in jail, Bankman-Fried made the risky decision to testify after being blamed for the collapse of the company by its top three former employees who have all taken plea deals.
He will first be questioned by his own lawyers but then the prosecution will be able to interrogate him in front of the jury about the entire case.
FTX was worth $32billion at its peak and Bankman-Fried appeared on the cover of Forbes magazine which touted him as the future of finance.
But the ‘house of cards’ came crashing down last November as crypto prices tumbled amid fears of a recession.
Bankman-Fried, 31, was arrested at his penthouse in the Bahamas – where FTX was based – and extradited to the US to face trial.
A filing from Bankman-Fried’s lawyers ahead of his testimony said that he would rebut the claim that he directed FTX’s assets be transferred to regulators in the Bahamas when it went bankrupt.
Bankman-Fried will reject the idea this was done so he would have more chance of retaining control of the company, the document states.
According to the filing, Bankman-Fried had the ‘understanding that (message) auto-deletion policies were instituted under the guidance of lawyers’ rather than his own insistence.
He also plans to say that FTX’s lawyers were also involved in making loans and other financial arrangements because it is ‘directly relevant to his state of mind and good faith at the time’.
The star witness for the prosecution has been Caroline Ellison, Bankman-Fried’s ex-girlfriend who ran Alameda Research, FTX’s sister company
The court heard that Bankman-Fried tried to blame Ellison for the debts and in an email said she was ‘not a natural leader’ and should be replaced
According to the filing: ‘Bankman-Fried’s knowledge that lawyers were involved in structuring and documenting the loans would be probative of his good faith belief that there was nothing inappropriate about the loans’.
His lawyers claimed he had a ‘good faith belief that there was nothing improper’ about the finances of FTX, it is claimed.
Bankman-Fried’s defense will call three other witnesses: Krystal Rolle, an attorney from the Bahamas who represented Bankman-Fried, data expert Joseph Pimbley and a custodian of records to talk about the various roles of people at FTX.
Bankman-Fried has denied 13 counts between 2019 and 2011 including wire fraud, money laundering and violations of campaign finance laws which could see him jailed for 115 years.
Seven of them are being dealt with at this trial with the rest next year.
The star witness for the prosecution has been Caroline Ellison, Bankman-Fried’s ex-girlfriend who ran Alameda Research, FTX’s sister company.
She described how he ‘directed’ her to commit the fraud and broke down in tears as apologized to those who lost money of her feeling of ‘constant state of dread’ last summer knowing the scale of the crisis.
FTX co-founder and former chief technology officer Gary Wang has taken a plea deal and testified earlier this month
Nishad Singh (pictured arriving at court with girlfriend Claire Watanabe) testified that the company spent millions on celebrity partnerships in early 2022 – as prosecutors attempted to show how Bankman-Fried squandered customer money to boost his stature
The court heard that Bankman-Fried tried to blame Ellison for the debts and in an email said she was ‘not a natural leader’ and should be replaced.
Nishad Singh, FTX’s former head of engineering, told the court how he was ’embarrassed and ashamed’ of the company’s excessive spending.
He said that it ‘reeked of excess and flashiness’ and it ‘didn’t align with what I thought we were building the company for’.
Singh said that he found out about the ‘enormous’ hole in FTX customer accounts about two months before the company collapsed, and that most of it had gone on Bankman-Fried’s lavish spending.
He felt ‘really betrayed’ and said that he had long felt ‘intimidated’ by Bankman-Fried.
Singh also guided the jury through the tens of millions in political donations made by FTX including $5 million to Joe Biden’s reelection campaign.
FTX co-founder Gary Wang told the court that, at Bankman-Fried’s direction, he changed the computer code so that Alameda could make unlimited withdrawals of FTX’s customer money.
The change in July 2019 would eventually lead to Alameda effectively stealing more than $10 billion of FTX user’s money, Wang told the court.