FTX founder Sam Bankman-Fried concluded his second day of testimony in his highly-publicized fraud case at the Manhattan federal court. U.S. Assistant Attorney Danielle Sassoon led the cross-examination, with Bankman-Fried providing brief responses and frequently evading questions regarding specific evidence and witness testimonies. Throughout his time on the witness stand, Bankman-Fried appeared visibly anxious, occasionally fidgeting in his chair and speaking softly or stumbling over his words.
One notable moment occurred when Bankman-Fried claimed he had no recollection of receiving an altered financial spreadsheet from Alameda Research CEO Caroline Ellison, which was intended to be presented to investors. However, the prosecution presented metadata from Bankman-Fried’s Google account that proved he did access the spreadsheet. In response, Bankman-Fried admitted, “I could not recall” numerous times, eventually jokingly offering to make a “wild guess” if prompted.
Repayments and Margin Trading
The prosecution revisited an incident from mid-June 2022, suggesting that Bankman-Fried authorized Ellison to use funds from FTX to repay third-party loans, even though additional borrowing from FTX was necessary. When asked for a direct answer, Bankman-Fried initially brought up margin trading, but Judge Kaplan intervened and demanded a straightforward response. Eventually, Bankman-Fried acknowledged that using FTX funds for loan repayments could constitute margin trading, although he described his earlier statement as “speculative.” The prosecutor did not request further explanation.
Alameda Research and Modulo Capital
In September 2022, Bankman-Fried sent a memo suggesting that Alameda Research should be replaced in the market by Modulo Capital, another trading firm in which Bankman-Fried had undisclosed investments. Bankman-Fried argued that Modulo Capital offered lower PR costs compared to the “large” expenses associated with Alameda Research. He admitted to spending billions on public relations for his crypto empire but claimed that shutting down Alameda Research was not possible due to the outstanding debt owed by FTX.
The disgraced founder refused to acknowledge the potential risk to FTX when repaying Alameda Research’s loans by borrowing more money from FTX. However, Sassoon demonstrated that Bankman-Fried had knowledge of Alameda Research’s significant $65 billion line of credit in FTX’s database. Bankman-Fried distanced himself from direct involvement, stating that he offered “suggestions” to the chief technical officer and head of engineering.
Bankman-Fried is expected to conclude his testimony tomorrow. The prosecution will then present two witnesses, an FBI agent and an employee from Apollo Crypto, during their rebuttal. If convicted, Bankman-Fried could face a potential life sentence.
