Mon. Jul 22nd, 2024
alert-–-ftx-founder-sam-bankman-fried-is-scolded-by-judge-lewis-kaplan-for-rambling-on-the-stand,-ordering-him-to-‘answer-the-questions-directly’-during-brutal-cross-examinationAlert – FTX founder Sam Bankman-Fried is scolded by Judge Lewis Kaplan for rambling on the stand, ordering him to ‘answer the questions directly’ during brutal cross examination

Sam Bankman-Fried’s withering testimony on the stand left the judge with little patience for the alleged fraudster. 

The founder of failed crypto exchange FTX gave waffling and convoluted answers on Thursday during cross examination, forcing Judge Lewis Kaplan to instruct him to ‘Listen to the question and answer the question directly.’

As the rambling testimony went on, Judge Kaplan remarked he’d ‘gotten beyond my tether here.’

The judge said at one point, ‘Part of the problem is that the witness has what I’ll call an interesting way of responding to questions.’ 

Bankman-Fried struggled to answer the questions and he became so nervous he snatched at a bottle of water.

Sam Bankman-Fried gave waffling and convoluted answers and nervously grabbed a water bottle under cross examination. As the rambling testimony went on, Judge Kaplan remarked he’d, ‘gotten beyond my tether here’

Bankman-Fried made the risky decision to testify after being blamed for the collapse of FTX by its top three former employees

Bankman-Fried reached for the bottle in the witness box while being interrogated by Assistant US Attorney Danielle Sassoon. She had asked him if he had any conversations with lawyers about whether Alameda Research, FTX’s sister company, was allowed to spend FTX users’ money.

There was a long pause then Bankman-Fried said he didn’t recall ‘any conversions that were contemporaneous and phrased that way.’

Bankman-Fried hurriedly reached for the water and took a sip as Sassoon asked him what exactly he did recall.

Judge Lewis Kaplan lost his patience with Bankman-Fried, remarking that he felt he had ‘gotten beyond my tether here’

In a rambling answer he said: ‘There were certainly conversations far later when we were trying to reconcile things in November 2022.’

He said: ‘I wish that I had….I wish I had had conversations that I myself had (been) more informed. I’m not sure if other people were involved in conversations.’

Sassoon pressed Bankman-Fried on whether he had conversations with lawyers about Alameda spending FTX customers’ money.

He said: ‘I don’t recall that specifically, no’.

Bankman-Fried was shown a document outlining the financial terms between FTX and Alameda and asked to show the court where it allowed Alameda to take FTX customers’ money.

He said: ‘I wouldn’t phrase it that way,’ adding, ‘The answer to the question you’re trying to ask is yes.’

Sassoon asked him once again to show her the relevant part of the document.

Bankman-Fried waffled: ‘I’m not a lawyer. I’m not giving a legal interpretation. I’m giving as best I can what my memory is (of) the parts of this that jibe with that.’ 

He added: ‘I’m not sure I would quite answer yes to the question as you most recently phrased it.’

After being asked to look at the document yet again, Bankman-Fried pointed out a line which he said showed it was permitted.

Bankman-Fried struggled again when he was asked about what he knew in May 2022 about measures that had been put in place to stop Alameda from being liquidated, which effectively meant it could spend unlimited amounts of FTX users’ money.

He initially claimed: ‘I don’t recall being aware of the specifics at the time’. But he then claimed to have been ‘aware of at least some speedbumps’.

When Sassoon asked him to explain what he meant by ‘speedbumps’, Bankman-Fried warned that to answer the question would require a ‘substantial digression’.

Sassoon shot back: ‘I don’t think my question calls for extensive context’ and asked him to answer it.

He said that there had been general discussions about the ‘chaos’ that would happen if Alameda were liquidated, adding: ‘I apologize, I wish I could give you a more specific answer.’

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 

Once the testimony had concluded, Judge Kaplan expressed skepticism about the arguments put forward by Bankman-Fried and his legal team, which he called ‘dubious’.

To illustrate his point, Judge Kaplan used the analogy of somebody robbing a bank and then a person coming across the stolen money .

That person then incorporated a company and used it to buy a property with the help of a lawyer – a clear parallel to what Bankman-Fried is accused of doing.

When the person was arrested they claimed they ‘didn’t have criminal intent in hiding money, I did exactly what the lawyer said’, the judge said.

‘How is that different from what you’re trying to do in principal?’ Judge Kaplan asked Bankman-Fried’s lawyer Mark Cohen.

Cohen said that their position was that the source of funds for FTX was ‘not robbing a bank, which is an obviously illegal act’.

Cohen said: ‘Our position is that the use of funds was not improper and our client did not believe it was improper or at minimum it was inconclusive’.

Judge Kaplan said he was ‘pretty dubious’ about that argument.

In a surprise twist, the FTX founder began his testimony and cross examination without the jury present after 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 said that he believed having FTX customers deposit money in Alameda was permitted because of payment agreements he had signed

Bankman-Fried said that there were ‘constant hacking attempts’ on FTX but the company never suffered what he called a ‘core breach’ 

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.

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.

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