Chelsea Jia Feng/Insider.
Sam Bankman-Fried took the stand in his trial in a rare hearing without the jury’s presence.During questioning, he often meandered, dodged, and rephrased questions. The judge will take the night to decide whether the jury can hear Bankman-Fried’s testimony.
In an unusual, tense hearing Thursday afternoon, the judge in Sam Bankman-Fried’s criminal fraud trial criticized his “interesting,” often circuitous answers to questions about whether he used funds belonging to customers of his cryptocurrency exchange for his own benefit.
Bankman-Fried took the witness stand in a downtown Manhattan courtroom after jurors were sent home for the afternoon. US District Judge Lewis Kaplan offered him the opportunity to testify about his conversations with lawyers during his time at FTX, which Bankman-Fried’s current legal team argues is evidence that he acted by-the-book and in good faith when the cryptocurrency exchange collapsed in late 2022.
Kaplan has indicated in previous rulings that those discussions have little to do with the charges at hand — that Bankman-Fried allegedly defrauded customers and investors, and laundered the money for his own benefit — and should not be allowed to be presented to the jury.
By the end of Thursday’s hearing, Kaplan seemed more skeptical than ever of the arguments. He suggested the situation was comparable to someone who bought a house with funds he robbed from a bank, but didn’t tell his real estate lawyer where the money came from.
“Part of the problem is that the witness has what I’ll simply call an interesting way of responding to questions,” Kaplan said during the hearing.
Throughout the highly-anticipated testimony, Bankman-Fried hedged in his answers, sometimes taking a long pause or asking for a moment to think.
He said that some of the issues that prosecutors had indicated were elements of fraud — such as keeping all FTX customer funds in one big bank account, allowing his cryptocurrency hedge fund Alameda Research to have a negative balance on the exchange, taking millions of dollars in personal loans from the company, and auto-deleting messages — were either normal industry practices or formalized with his legal team.
“Mr. Bankman-Fried consulted with counsel and took comfort in their counsel,” his criminal defense lawyer Mark Cohen told Kaplan.
SBF gave rambling answers during cross-examination
During cross-examination, Bankman-Fried hunched forward and kept his hands in his lap. He tilted his torso side-to-side, like a boxer dodging punches, and answered many questions from Assistant US Attorney Danielle Sassoon with “I don’t specifically recall.”
He often rephrased questions before answering them, sometimes telling Sassoon that he would answer the “question I understand you to be trying to ask.”
Kaplan had to remind Bankman-Fried to “listen to the question and answer the question directly.”
“I apologize,” Bankman-Fried said — one of 11 different apologies he gave on the witness stand about his meandering answers.
When Sassoon asked Bankman-Fried directly if he discussed spending FTX customer deposits with his lawyers, he took a long pause and looked down before he answered the question.
“I don’t recall any conversations that were contemporaneous and phrased that way,” he responded.
“I certainly in retrospect wish that I have,” he added.
Caroline Ellison, Gary Wang, and Nashad Singh were all members of Bankman-Fried’s inner circle who testified against him.
Chelsea Jia Feng/Insider
Bankman-Fried testified that, based on his understanding of FTX’s terms of service, Alameda’s role as a payment processor and stablecoin convertor on FTX, and the payment agreement between Alameda and FTX, there could arise a scenario where the funds of many customers could be used as collateral for a massive loss.
This, his lawyers argued in their opening statement for the trial, is what happened in November of 2022: The downturn in the cryptocurrency market caused Alameda to lose a lot of money, and many customers had “socialized losses” as collateral.
Sassoon, questioning Bankman-Fried on the witness stand, asked Bankman-Fried to be more explicit about why he thought that explanation was acceptable. Alameda, she pointed out, was treated differently from every other customer on the FTX exchange.
She pulled up the payment agreement between FTX and Alameda — which Bankman-Fried signed twice, once as the CEO of FTX and once as the CEO of Alameda — and asked him which part of the contract said it was OK to use customer money.
Bankman-Fried gave a rambling response that started with “So I should preface this by saying I’m not a lawyer” and did not answer the question.
Cohen repeatedly argued that Sassoon’s questions, which stretched beyond the trial’s usual 4:30 p.m. ending time, were well beyond the scope of the hearing.
“This is a deposition,” Cohen asserted.
Kaplan allowed most of the questions to move through anyway.
Asked directly by Sassoon if it was OK to steal customer funds, Bankman-Fried rejected that interpretation of events.
“That is not what I viewed to be happening, and that is certainly not how I discussed it with attorneys,” he said.
Kaplan sustained an objection from Cohen to another question from Sassoon, directly answering if it was OK to embezzle funds.
Bankman-Fried answered anyway: Of course it wasn’t, he said.
“I felt the need to answer that one,” he said, to laughter in the courtroom.
Bankman-Fried’s risky decision to testify made for a busy day in the courthouse. In line for security at the beginning of the day, Bankman-Fried’s stoic parents grumbled to each other about press photographers taking their picture through the window. Asked how she was feeling about the day, his mother Barbara Fried offered a tight-lipped shrug.
Cohen distinguished Bankman-Fried’s situation from Kaplan’s hypothetical bank robbery case, noting that such a theft is clearly wrong. But in this case, he said, the defense’s position is that the use of funds was not improper.
“If the client is doing something he thinks is proper,” Cohen said, “the commercial conduct is inconclusive or unclear.”
After Bankman-Fried was excused at 5 p.m., Kaplan said he would take the night to consider whether his statements could be shared with the jury.
Bankman-Fried previously reserved the right not to testify. If he does, the government will certainly cross-examine him in front of jurors. Sassoon made that clear on Thursday as Kaplan asked for a broad timeline of the rest of the trial.
“We will try to keep it tight,” she said. “But if the defendant is unresponsive, it could take longer.”