A Lot of People Got Hurt

The former FTX CEO returned to the witness stand to present his testimony to a jury of 12 people as the criminal trial began to reach its final stages.

Defense attorneys representing Sam “SBF” Bankman-Fried questioned the former FTX CEO before a jury for the first time as they prepared to rest their case.

According to reports from the New York courtroom on Oct. 27, Bankman-Fried denied defrauding FTX customers and taking their funds while leading the crypto exchange. The former CEO reportedly said he knew “basically nothing” about digital assets when launching crypto hedge fund Alameda Research.

“FTX declared bankruptcy,” said SBF in response to a question from his lawyer, Mark Cohen. “A lot of people got hurt.”

Cohen questioned SBF about Alameda’s operations in Hong Kong, asking how he believed risk at FTX could have potentially affected the hedge fund. At the center of allegations against Bankman-Fried are claims he directed efforts that resulted in Alameda using FTX customer funds without their knowledge. He faces seven criminal charges in his current trial.

“Alameda was a market maker [for FTX],” said Bankman-Fried, according to reports from the courtroom. “If an account went negative, we’d start selling off, but if late, we had backstop liquidity.”

SBF added, over the objection of prosecutors:

“We increased the number of servers, for the risk engine. But we learned that if there was an erroneous liquidation of Alameda, or any other large account […] it would be catastrophic for FTX.”

According to Bankman-Fried, he told former FTX chief technology officer Gary Wang to “stop such liquidations of Alameda’s account,” also suggesting Wang implemented the “allow negative” feature without SBF’s prior knowledge. Wang testified on Oct. 6 that Bankman-Fried had ordered him and former FTX engineering director Nishad Singh to implement the feature in 2019.

At the time of publication, Bankman-Fried had yet to face cross-examination by the U.S. government for his testimony before a jury. Judge Lewis Kaplan had SBF “preview” his testimony before prosecutors and defense attorneys on Oct. 26 without the jury present. 

Before Oct. 25, it was uncertain whether Bankman-Fried would testify in the criminal trial. As prosecutors were preparing to finish questioning the last witness in their case, defense attorneys told Kaplan they were preparing to call only a handful of witnesses, including SBF.

The trial is expected to end within a few business days, with prosecutors and defense lawyers delivering closing arguments to the jury. Bankman-Fried is scheduled to face five more criminal counts in a second trial expected to start in March 2024. He has pleaded not guilty to all charges in both cases.