The first three hours of his testimony Friday covered familiar territory — his upbringing, his college years and early success — as his lawyers worked to bolster a narrative Bankman-Fried has promoted since the November collapse of the FTX crypto exchange and Alameda: Mistakes were made, but he always acted in good faith.
During the morning session, he gave long, rambling answers to the questions posed by defense attorney Mark Cohen. On multiple occasions, U.S. District Judge Lewis A. Kaplan asked him to stop talking. At other times, Kaplan rephrased Cohen’s questions to elicit more direct answers from Bankman-Fried.
At one point, Kaplan admonished Bankman-Fried for trying to provide his own definition of market manipulation. “You will take what I say manipulation means,” the judge told him and the jury.
Bankman-Fried is the only witness being called by the defense team. His testimony is scheduled to run through midday Monday, followed by prosecutors’ cross-examination through Tuesday, and then closing statements from the lawyers. If everything goes as planned, jury deliberations will start before the end of the week.
The defendant has pleaded not guilty to seven criminal counts, including fraud and money laundering related to the use of customer funds from FTX. Bankman-Fried, 31, could spend decades in prison if convicted.
After a lunch break, Bankman-Fried’s defense team turned to questions about FTX’s marketing expenditures, including naming rights for the Miami Heat’s arena and endorsements from celebrities such as star athletes Tom Brady and Stephen Curry.
Bankman-Fried said the name recognition from those partnerships justified the cost, particularly for stadiums in cities with a certain level of cachet such as Miami.
“I didn’t want to be known as the Kansas City Royals of crypto exchanges,” he said.
He also characterized political donations as a justifiable expense. The primary goal, Bankman-Fried said Friday, was to help shape a regulatory framework for crypto trading that would allow FTX U.S., the exchange’s American arm, to eventually offer futures trading.
Jurors have spent weeks hearing testimony from the fallen crypto king’s top deputies. They consistently depicted their former boss and friend as the architect of a sweeping scheme to siphon billions of dollars in customer funds from FTX, and spend them on risky investments, lavish personal expenditures and political contributions.
Prosecutors have backed up that testimony with reams of documentary evidence. The defendant’s own lawyers have appeared to struggle to raise serious doubts about the credibility of the government’s witnesses or their version of events.
But Bankman-Fried on Friday said no one told him about the account that Alameda used to spend FTX funds until he saw references to it in “a database.” He said he had to check with developers to make sure it was real and was surprised to find out Alameda’s net asset value was far lower than he had assumed.
He also recounted his recollection of events in May 2022, when the price of bitcoin crashed and Alameda veered toward bankruptcy. Bankman-Fried said he blamed members of his inner circle for trying to prop up Alameda.
The jury was shown a memo he sent to Alameda executives Nishad Singh and Gary Wang, in which Bankman-Fried advocated shutting down the investment firm and said its CEO, his former girlfriend Caroline Ellison, “is not a natural leader, and probably never will be.”
Wang and Singh, Bankman-Fried said, responded that closing Alameda was a bad idea.
Friday’s proceedings started with a setback for the defense team, when the judge barred it from contending that Bankman-Fried had relied on the advice of lawyers in making critical business decisions. Kaplan’s ruling came after a Thursday hearing in which Bankman-Fried testified without jurors present so the judge could gauge whether the testimony should be admissible.
Bankman-Fried’s attorneys had signaled they would make legal advice a centerpiece of their case, painting Bankman-Fried as a well-intentioned entrepreneur whose business grew more quickly than his ability to manage it. But Kaplan said Friday that such testimony would be “confusing and prejudicial.”
Instead, he limited the defense’s blame-the-lawyers strategy to decisions made around the collapsed cryptocurrency exchange’s document retention policies.
Bankman-Fried spent the first hour of Friday’s testimony recounting his upbringing, which included summer math camps and living in a college fraternity that was “co-ed, nerdy and dry.” He told of his time working as a trader for Jane Street, and the early days of founding his Alameda Research hedge fund out of an Airbnb filled with cardboard boxes.
At another point during the testimony, Cohen showed the jury a picture of his client working in front of six computer monitors. Bankman-Fried smiled while talking about how many tasks he would work on at once, and for as long as 22 hours a day.
Bankman-Fried said he handed the reins of Alameda to Ellison and Sam Trabucco in the summer of 2021, when he became too busy with FTX to manage the hedge fund’s day-to-day operations. Bankman-Fried said he envisioned Ellison as the people manager and Trabucco as the risk manager, but when Trabucco left the firm soon after for an “early retirement,” Ellison was left managing both.
Recounting a technical malfunction at Alameda that lost the firm millions of dollars, Bankman-Fried blamed not his associates but the processing power of his computers.
“Once the humans realized what was happening, we shut it down,” Bankman-Fried said.
When Cohen asked whether FTX had a risk management team, Bankman-Fried said, “We sure should have, but no we did not.”
Parts of his testimony were at odds with Ellison’s recollections. In her testimony earlier in the trial, she said Bankman-Fried regularly called the shots and made important decisions for her even after he left his position as CEO of Alameda.
Bankman-Fried launched FTX in 2019, positioning it as an accessible way for consumers to invest in digital assets. The trading platform received hefty backing from well-known investment firms such as Sequoia Capital, SoftBank and others; it was valued at $32 billion in early 2022 before imploding in November. Bankman’s net worth, once estimated by Bloomberg to be as high as $26 billion, is now near zero.
For many Americans, FTX became the mainstream face of crypto: Celebrities such as NFL star Tom Brady, supermodel Gisele Bündchen and comedian Larry David touted the exchange in Super Bowl commercials.
Newmyer reported from Washington.