MANHATTAN (CN) — Disgraced cryptocurrency mogul Sam Bankman-Fried stepped down from the witness stand on Tuesday morning, ending his four-day testimony and overall defense case in his criminal fraud trial.
“That concludes the presentation of evidence in this case,” U.S. District Judge Lewis Kaplan told jurors shortly after noon on Tuesday before sending them home for today.
Closing arguments will begin Wednesday morning.
Prosecutors have accused the 31-year-old former billionaire of committing fraud “on a massive scale” by deliberately funneling billions of dollars of customers’ deposits on the FTX digital cryptocurrency marketplace platform straight into bank accounts belonging to the Alameda Research hedge fund he founded in 2017.
He faces the possibility of decades in prison if convicted on counts of wire fraud, money laundering and securities fraud conspiracy.
Bankman-Fried’s defense centered on a good faith argument: that he made honest mistakes as a startup founder and his lieutenants failed to hedge against volatile market conditions.
“You didn’t tell your employees ‘Don’t spend FTX customer deposits,’” Assistant U.S. Attorney Danielle Sassoon asked Bankman-Fried during cross-examination on Tuesday morning.
“I didn’t,” Bankman-Fried replied. “I deeply regret not taking a deeper look at it,” he added stiffly.
Sassoon asked Bankman-Fried to acknowledge that FTX customer funds were being spent without their knowledge at the same time he was giving Congressional testimony about safeguarding customer deposits.
“Yep,” he conceded.
Prosecutors also raised Bankman-Fried's attempts curry favor with Bahamian regulators in order to “regain control” of the exchange, including by allowing FTX customers in the Bahamas to withdraw funds while the function was shut off in the rest of the world.
“You did that, correct?” Sassoon asked.
“Briefly,” Bankman-Fried admitted. “For a short period.”
During rebuttal defense testimony on Tuesday, Bankman-Fried’s attorney asked how he had worked to achieve FTX’s purported key principles of ensuring customer and investor protections.
“Though thinking about equitable access for customers — thinking about, in particular, letting all users of FTX to have direct trading access, rather than having to go through a number of intermediaries and encountering a number of logistical hoops along the way,” the former FTX CEO said.
“We put a lot of work into the risk engine on FTX. Ultimately also we had a very large oversight and mistake related to risk management, but at the time I felt like we had done a good job of that, and we put work into the digital security of assets on FTX.”
Bankman-Fried testified during rebuttal testimony that the oft-mentioned $65 billion line of credit on the FTX cryptocurrency exchange granted to solely to his own Alameda was only ever a "theoretical limit" and the actual maximum he ever drew on that line of credit was "in the the range of $2 billion."
At the conclusion of his defense testimony, Bankman-Fried said he had engaged in bankruptcy and liquidation proceedings with Bahamian regulators quickly after the collapse of FTX to aid in distributing FTX proceeds back to customers whose accounts were frozen by the exchange’s implosion and insolvency.
“I wanted to help the customers. I wanted to help the company,” he said. “I wanted to make the customers as whole as possible.”
During cross-examination on Monday, Sassoon grilled Bankman-Fried about private messages with a Vox reporter in which the FTX CEO vented about his disappointment with the progress of federal regulation of cryptocurrency. “Fuck regulators,” he told the reporter in the messages, which also appeared in the November 2022 Vox article, five days after the crypto exchange filed for bankruptcy.
Bankman-Fried attempted contextualize the “fuck regulators” during rebuttal testimony on Tuesday, explaining his frustration with the apparent result of months of pushing Washington lawmakers to establish FTX-friendly legislation and bring the cryptocurrency industry into the mainstream.
He said he traveled from the Bahamas to Washington frequently in 2022 — that year he spent “more than a month there, in aggregate” — to meet with lawmakers.
“I had become skeptical about whether I’d been able to really attempt to get good regulation, and not bad regulation," he said. "Especially in that moment, I was somewhat frustrated; felt like all of the work I’d done to work with regulators might have ended up [encouraging] bad regulation as much as good regulation in retrospect.”
On his first full day on the witness stand, Bankman-Fried blamed insufficient attention to risk management for the mistakes and “significant oversight” that caused FTX’s collapse in November 2022.
“I made a number of small mistakes and a number of large mistakes,” he said on Friday.
“By far, the largest mistake was we did not have a dedicated risk management team, did not have risk officers,” he specified.
Bankman-Fried was the third and final witness called to testify in his direct defense case. He was preceded by his Bahamian attorney Krystal Rolle and database expert Joseph Pimbley.
In his instructions to the jury, U.S. District Judge Lewis Kaplan will explain how jurors should consider Bankman-Fried’s good faith defense.
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