MANHATTAN (CN) — Sam Bankman-Fried, the former billionaire who often weighed risky high-dollar financial bets based on probability theory, finally took the witness stand on Thursday for an unusual proceeding without a jury in the courtroom to hear him defend himself against fraud charges over the collapse of his FTX digital trading platform.
After prosecutors rested their case against the disgraced cryptocurrency exec on Thursday morning, his attorneys began to mount their defense case against federal charges of fraud and conspiracy. But when jurors returned from lunch in the afternoon, they were sent home for the day.
Wearing a slightly oversized slate gray suit with a pastel purple tie, Bankman-Fried took the witness seat in U.S. District Judge Lewis Kaplan’s courtroom without the jury present for a hearing that previewed the parameters of his defense for the judge, so that prosecutors could bring their objections without jurors hearing first.
Prosecutors have accused Bankman-Fried of committing fraud “on a massive scale” by deliberately funneling billions of dollars of customers’ deposits on the FTX digital cryptocurrency marketplace platform straight to the Alameda Research hedge fund he founded in 2017 and effectively controlled.
During the rehearsal of his potential defense testimony, Bankman-Fried and his attorney Mark Cohen hastily ran through a spectrum of dense technical topics related to running digital assets trading platform and billion-dollar crypto hedge fund: encrypted chat apps, default autodeletion policies, payment processing platforms, terms of service and omnibus cryptocurrency wallets.
Bankman-Fried explained how the companies' lawyers, including FTX's former chief regulatory officer Dan Friedberg and the Fenwick West firm, had advised him on the companies' document retention policies and drew up convoluted loans that Bankman-Fried and other executives took from Alameda.
“Did you take comfort from knowing that lawyers had structured the loans?” Cohen Gresser attorney Mark Cohen asked.
“Yes,” Bankman-Fried replied.
Bankman-Fried said he believed that, under FTX's terms of service, Alameda Research was allowed in “many circumstances” to borrow funds from customers’ deposits.
“Did you believe you were managing FTX in accordance with the terms of service?” Cohen asked.
“Yes,” Bankman-Fried replied.
Asked by Judge Kaplan whether he had fully read the company’s terms of service, Bankman-Fried admitted that he had skimmed some parts and read others more thoroughly.
During his hourlong dry run of direct testimony, Bankman-Fried appeared prepared and eager to explain technical minutiae but stumbled during the prosecution's rehearsal of cross-examination, often responding, "I don't recall," stammering or taking long hesitative pauses before replying to questions from Assistant U.S. Attorney Danielle Sassoon.
“The witness has an interesting way of answering things," Kaplan observed of Bankman-Fried's responses during prosecutors' questions.
Bankman-Fried was expected to sit as the third witness called to testify on Thursday as part of his defense’s direct case. He was preceded by brief testimony from his Bahamian attorney Krystal Rolle and database expert Joseph Pimbley.
After the prosecution rested earlier on Thursday morning, Bankman-Fried’s defense lawyers immediately asked Judge Lewis Kaplan for acquittal on the grounds that prosecutors had failed to present sufficient evidence. Kaplan, a Clinton-appointee, swiftly rejected the request.
Bankman-Fried’s lawyers said they expect his actual direct testimony for jurors on Friday to last up to five hours.
Kaplan is no stranger to unusual court proceedings. In the case of disbarred environmental lawyer Steven Donziger, the judge drafted contempt counts himself and tapped a private counsel to lead the prosecution against Donziger after the U.S. Attorney’s Office declined to do so.
Follow @jruss_jruss
Subscribe to Closing Arguments
Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.
