Shortly after taking the witness stand in Manhattan federal court, Bankman-Fried said he made “a number of small mistakes and a number of larger mistakes” while running the now-bankrupt exchange. The biggest mistake, he said, was not implementing a dedicated risk management team.
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“We thought that we might be able to build the best product on the market,” Bankman-Fried said. “It turned out basically the opposite of that. A lot of people got hurt – customers, employees – and the company ended up in bankruptcy.”
Prosecutors accuse Bankman-Fried of using FTX customer funds to prop up his crypto-focused hedge fund, Alameda Research, make speculative venture investments and donate more than $100 million to U.S. political campaigns. He also faces charges of scheming to cheat Alameda’s lenders and FTX investors.
He has pleaded not guilty.
Bankman-Fried’s trial, which began on Oct. 3, is drawing to a close nearly a year after FTX collapsed amid a wave of customer withdrawals. The company declared bankruptcy in November 2022 and Bankman-Fried was indicted the following month.
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His testimony marked the first time the dozen jurors and five alternates have heard directly from the 31-year-old former billionaire after 12 trial days. Bankman-Fried, who was jailed in August after U.S. District Judge Lewis Kaplan found he likely tampered with witnesses, wore a suit and spoke with two water bottles placed in front of him on the witness stand. The former mogul once known for wearing shorts and T-shirts and sporting an unkempt mop of curly locks cut his hair before his trial began.
Responding to questions posed by his defense lawyer Mark Cohen, Bankman-Fried spoke in calm, measured tones and gave long-winded, complex explanations of cryptocurrency trading and how exchanges manage risk as he described founding Alameda in 2017 and FTX in 2019.
He described playing “lots of board games” when he lived in an alcohol-free, “nerdy” fraternity house at the Massachusetts Institute of Technology, where he graduated with a physics degree in 2014 – part of an effort to push back on what his lawyers have termed prosecutors’ portrayal of him as a “cartoon of a villain.”
Jurors have heard from three of his closest confidantes at FTX and Alameda, all of whom have pleaded guilty and agreed to cooperate with prosecutors. They testified earlier this month that they committed financial crimes at Bankman-Fried’s behest.
For criminal defendants, taking the stand is a risky proposition because it opens them up to potentially probing cross-examination by prosecutors.
But given Bankman-Fried’s penchant for risk, legal experts say he likely viewed taking the stand as his best shot to counter the allegations made by members of his inner circle, which were backed up by spreadsheets the three said demonstrated how customer funds were stolen and text messages in which they discussed FTX’s shortfall of funds with Bankman-Fried.
Prosecutors will have the chance to cross-examine Bankman-Fried when Cohen finishes his questioning.
They may ask why he did not disclose to FTX customers that Alameda had special trading privileges on the exchange, and why he posted on social media amid the run on customer deposits last November that FTX was “fine” when he knew it was short billions of dollars.
Closing arguments and jury deliberations are expected to begin next week.
(Reporting by Jody Godoy and Luc Cohen in New York; Editing by Daniel Wallis)
