The founder of FTX denied stealing $10billion from customers as he took the risky decision to testify in his fraud trial today.
Sam Bankman-Fried admitted that he made some ‘large mistakes’ and said ‘a lot of people got hurt’ when the crypto exchange collapsed last November.
He blamed ‘significant oversights’ in risk management but claimed he never took anyone’s money.
Asked what he knew about crypto, Bankman-Fried said ‘basically nothing.’
He said: ‘I knew a bitcoin was digital, you could trade it on website. I knew there were other crypto currencies, I had absolutely no idea how they worked.’
But Bankman-Fried looked at the opportunities to make money and went ahead.
Facing 115 years in jail, Bankman-Fried decided to testify after being blamed for the collapse of FTX by its top three former employees who have all testified against him.
Sam Bankman-Fried was back on the stand on Friday to testify in his own defense after being blamed for the collapse of FTX
He admitted to making some ‘large mistakes’ and said ‘a lot of people got hurt’ but blamed ‘significant oversights’ in risk management
The exchange 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 in November last year 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.
Prosecutors claimed he ‘lied to the world’ and blew $10billion on real estate purchases, political donations and by paying himself vast sums of money.
Kicking off his testimony, Bankman-Fried’s lawyer Mark Cohen asked him what his ‘vision’ for FTX was.
He replied: ‘We thought that we might be able to build the best product on the market.’
Bankman-Fried said it was to ‘combine elements from traditional financial products’ with crypto and ‘move the ecosystem forward.’
Cohen asked: ‘Did it turn out that way?’
Bankman-Fried said: ‘No. It turned out basically the opposite of that. A lot of people got hurt’, adding that customers lost their money.
Cohen asked: ‘Did you defraud anyone?’
Bankman-Fried said: ‘No I did not.’
Cohen asked: ‘Did you take customers’ 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 large mistakes.
‘By far the biggest mistake was we did not have a dedicated risk management team. We had a number of people who were involved to some extent but no one dedicated to it and there was significant oversights.’
The exchange was worth $32billion at its peak and Bankman-Fried appeared on the cover of Forbes magazine which touted him as the future of finance
Bankman-Fried faces 115 years behind bars if he’s found guilty of fraud and conspiracy
SBF appears front and center of a group picture with his arm around Caroline Ellison as men in curly wigs – believed to be mocking his signature hairstyle – pose around them. They’re pictured with FTX co-founder Gary Wang (left)
Bankman-Fried told the court that he and Alameda chair Caroline Ellison ended their romantic relationship because he couldn’t dedicate his time to her.
‘I didn’t have the time or the energy to put in what I think she wanted from a relationship,’ Bankman-Fried said. ‘It wasn’t the first time that I had that problem,’
Ellison, who has cut a plea deal with prosecutors to testify against her ex-boyfriend, said earlier in the trial that they split because she wanted more from the relationship.
Speaking clearly in a nasal voice, Bankman-Fried described how he grew up in Palo Alto, California, home to major tech companies like Meta, and studied at MIT.
While living there he met Gary Wang, who he would later co-found FTX with.
Bankman-Fried told the court that he lived in a ‘nerdy’ frat house with 25 other people where nobody drank.
After graduating he worked at Jane St Capital and in 2017 started Alameda Research, the precursor to FTX which would become FTX’s sister company.
Bankman-Fried said he knew ‘basically nothing’ about crypto but looked at the opportunities to make money and thought they were ‘so large I wasn’t sure I even believed it’.
The beginnings were scrappy and they rented out an Airbnb in Berkeley, California for their office.
Bankman-Fried said that it was listed as a two bedroom home but they used the attic as a third bedroom and the living room as a fourth bedroom as it had a couch.
The rest of the home was the office which they ‘packed with desks and computers and boxes from Amazon’.
‘Eventually we had to start dealing with the cardboard box problem pretty soon’, Bankman-Fried said.
The name ‘Alameda Research’ was because Berkeley is in Alameda County and because they wanted to be ‘under the radar’ and so not alert competitors to what they were doing
Bankman-Fried said: ‘I didn’t want to call it Sam’s crypto trading firm. It was far better than the internal name which was Wireless Mouse’.
Bankman-Fried was asked about what happened to the money deposited with Alameda, which then appeared in their FTX wallets.
FTX had this arrangement because it was initially unable to get its own bank accounts, the court has heard.
Bankman-Fried said: ‘I wish I had a better understanding than I did’.
Asked if FTX had the money, Bankman-Fried said: ‘I wasn’t entirely sure what was happening.
‘What I believed was that either the funds were just being held in a bank account, not used or moved, or that they were being sent to FTX in one way or another or Alameda was borrowing funds and using them’.
Bankman-Fried said that he thought FTX’s risk management systems were ‘better’ than other crypto exchanges.
He told the jury it was something he had put a ‘lot of thought and time in to’.
The star witness for the prosecution has been 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 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
Wang was one of the three employees and he was soon followed by Caroline Ellison and Nishad Signh, the three who have testified against Bankman-Fried during the trial.
They eventually rented an office space and then moved Alameda to Hong Kong because it felt like there were more opportunities there.
In 2019, Bankman-Fried spoke with Wang about starting their own crypto exchange and they founded FTX, he told the court.
Bankman-Fried said that when he founded FTX in 2019 he gave himself just a 20 percent chance of lasting beyond a few months.
He said that he initially 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 a day and by 2022 that number had reached $10bn – $15bn a day.
Bankman-Fried has denied 13 counts between 2019 and 2011 including wire fraud, money laundering and violations of campaign finance laws.