During his trial, Sam Bankman-Fried acknowledged mistakes in managing FTX, admitting to a series of minor and major mistakes, with his primary regret being the absence of a dedicated risk management team. Bankman-Fried stated that he had, however, not engaged in any fraudulent activities or misappropriated customers’ funds when questioned by his attorney, Mark Cohen.
Bankman-Fried shared that he had minimal knowledge of cryptocurrencies before launching FTX. He admitted to a lack of understanding regarding how they operated but recognized their potential for trading. As FTX rapidly expanded from a few million dollars in daily trading in 2019 to tens of billions in 2022, he became overwhelmed. Similarly, he expressed feeling overwhelmed by the growing media attention, admitting that he had never intended to become a public figure.
Bankman-Fried’s testimony came after the prosecution presented a dozen days of evidence, including testimonies from former business partners and Caroline Ellison, his ex-girlfriend, who led the FTX-affiliated hedge fund Alameda Research.
The defense attempted to portray Bankman-Fried more humanely, explaining the company’s unorthodox practices, such as employees living together. They also addressed Bankman-Fried’s relationship with Ellison, who has become a key witness for the prosecution. Ellison alleged that Bankman-Fried orchestrated substantial fraud and that his disheveled, boy-genius appearance was a carefully crafted facade.
In his testimony, Bankman-Fried disclosed that their on-and-off dating began in 2020 and ultimately ended in spring 2022. He attempted to shift the blame for FTX’s downfall onto Ellison, claiming that she consistently refused to hedge Alameda Research funds against potential losses, leading to Alameda-held assets mirroring the market decline when the cryptocurrency market crashed in 2022.
Bankman-Fried contended that despite multiple attempts to advise Ellison on safeguarding the funds, she repeatedly declined. He highlighted advising Ellison to shut down the company as it faced an $8 billion debt, but she refused. However, testimonies from other FTX members, including Gary Wang and Ellison, contradicted some of Bankman-Fried’s assertions.
As with Ellison, Wang had reached plea agreements with federal prosecutors, admitting to wire, securities and commodities fraud. In contrast, Bankman-Fried pleaded not guilty and was arrested in the Bahamas, later extradited to the United States following the collapse of FTX.
Bankman-Fried faces seven counts of wire fraud and conspiracy to launder money, charges that could lead to lengthy prison sentences if convicted. He has consistently denied allegations of embezzling FTX customers’ funds for personal use, including acquiring a $40 million penthouse in the Bahamas, securing endorsements from A-list celebrities and contributing $100 million to political causes.
Closing statements are expected to start soon, as the federal judge overseeing the trial hinted during the recent session that the jury would begin deliberating on the case early next week.
The admission by Sam Bankman-Fried that he made management mistakes provides a warning to all players in the crypto space, such as Riot Blockchain Inc. (NASDAQ: RIOT), to continually strengthen their management systems so that their operations aren’t hampered by lapses that could even lead to company collapse.
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