Lawyers frequently advise their clients in the United States not to testify in criminal trials against them. It is a risky maneuver that can backfire. However, the position of FTX founder Sam Bankman-Fried in the New York trial against him is so desperate that he has decided to risk it. After a kind of strange trial without a jury the day before, this Thursday he testified to defend himself. In his appearance, dressed in a gray suit and violet tie, he admitted errors, but denied that he committed deliberate fraud, trying to compensate for the evidence and testimony accumulated against him.
Bankman-Fried, 31, had a precipitous fall, from his heyday as the benefactor and billionaire young king of cryptocurrencies with his FTX platform, to his arrest in the Bahamas and extradition to the United States last December. He is accused of seven crimes of fraud, conspiracy and money laundering for which he could be sentenced to decades in prison if convicted of what the prosecution defined as “one of the largest financial frauds in the history of the United States.” ”. The accused pleads not guilty.
In the trial that began at the beginning of the month, Bankman-Fried presented himself this Friday as a tireless worker who slept in an armchair in his office, who received thousands of emails every day, used six screens at the same time and who did not know no cryptocurrencies before setting up his business with two other partners. “We thought we could build the best product on the market” and “advance the system” of cryptocurrencies, he said on the stand, according to statements reported by AP and Bloomberg. “It turned out basically the opposite of that,” and many customers and others were hurt, Bankman-Fried said. Asked by his lawyer, Mark Cohen, if he defrauded anyone or kept clients’ funds, Bankman-Fried responded: “No, I didn’t.” “Did you make a mistake?” Cohen asked. “I made several small mistakes and several big mistakes,” the defendant responded.
Among those errors was, as he has acknowledged, not having a risk management team. “We sure should have had it. But no, we didn’t have it,” he acknowledged. Prosecutors and supervisors say FTX was a fraud from the beginning, diverting client money to Alameda Research, an investment fund owned by Sam Bankman-Fried, known by its initials as SBF.
Also accused along with Bankman-Fried are Caroline Ellison, Bankman-Fried’s ex-partner and former head of Alameda Research, and Zixiao Wang, co-founder of the platform who was its chief technology officer. Both pleaded guilty and have collaborated with justice. Ellison is the star witness for the prosecution and two weeks ago testified that Alameda took several billion dollars of money from FTX clients and used it for his own investments and to pay off debts he owed. Asked about this by his own lawyer, SBF has given an evasive statement: “I wasn’t entirely sure what was happening,” says Bankman-Fried.
Before Bankman-Fried began testifying, the judge presiding over the case, Lewis A. Kaplan, has mostly blocked her lawyers’ attempts to suggest to jurors that Bankman-Fried made many decisions about her businesses after to consult with lawyers. In her previous nonjury statement Thursday, Bankman-Fried testified before the judge about her communications with attorneys. “That evidence would be, in my opinion, confusing and highly prejudicial by falsely implying, given yesterday’s testimony, that the attorneys with full knowledge of the facts, all the facts, and blessed what the defendant supposedly did. And I didn’t hear that yesterday at all,” Kaplan explained.
With that line of defense largely closed, the accused tries to emphasize that he had no intention of defrauding, that he acted in good faith and that the fall of FTX was due to management errors. This Friday he responded to questions from his own lawyer. The complicated part will come when he has to respond to the prosecution, probably next week, and there it will be proven whether taking the stand has been the right decision. In Friday’s statement without a jury, he already had difficulties when the prosecution questioned him and he was left without an answer on several occasions, claiming that he did not understand the questions. The trial has now entered its final stretch.
Prosecutors believe he diverted billions of dollars from his clients and investors to make high-risk investments, buy luxury homes, hire stars for his advertising campaigns and make large political and charitable donations. He presented himself as an honest, supportive visionary concerned with the problems of humanity. He boasted good relations with regulators. In his public relations campaign he signed celebrities such as quarterback American football player Tom Brady, supermodel Gisele Bundchen and basketball player Stephen Curry. He sponsored the Miami Heat and was advertised at the Super Bowl as “the safest, easiest way to buy and sell cryptocurrency.”
When Alameda’s investments suffered losses, clients’ money evaporated. According to supervisors and the indictment, the founder of FTX told investors that his exchange had sophisticated automated measures to protect clients’ assets, that those portfolios were secure, that his firm was transparent and that Alameda, the group’s seed , was just another client of the platform without special privileges, but all that was a lie. Customer money was transferred to accounts controlled by Alameda without transparency or adequate controls. In addition, Alameda had a practically unlimited line of credit from FTX that was financed with the money of other clients and in exchange it provided the group’s own crypto assets with almost no real value as collateral.
Although he was initially granted $250 million bail and allowed to live with his parents in Palo Alto, California, the bail was revoked in August and he was jailed when Kaplan concluded that he had attempted to influence potential witnesses at his trial. His parents, law professors at Stanford, were present this Friday in the courtroom during his son’s testimony.
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