Sam “SBF” Bankman-Fried, the CEO of FTX and Alameda Research, took the stand this week in his ongoing criminal trial in the Southern District Court of New York. Bankman-Fried denied any wrongdoing between the two companies but acknowledged making “big mistakes” during their fast-paced growth. His official testimony began on October 27, after a hearing the previous day without jurors present, during which he struggled to answer questions from government attorneys but appeared better prepared the following day.
Bankman-Fried denied allegations that he directed former co-CEO Ryan Salame and former director of engineering Nishad Singh to funnel millions of dollars in contributions to political campaigns. He acknowledged that lobbying in Washington, D.C. played a role in his efforts to push a regulatory framework for crypto firms in the United States but denied using customer funds from FTX for political campaign contributions. Bankman-Fried claimed that FTX had more than $1 billion in revenue in 2021 and that the political donations were made from the exchange’s own funds.
Bankman-Fried also discussed the “The New York Times test,” a guideline for employees’ communication at FTX and Alameda Research. According to this test, employees should not write anything they wouldn’t be comfortable seeing on the front page of the newspaper. Bankman-Fried explained that even harmless messages could look bad out of context, so employees were advised to always provide sufficient context in their written communications. He mentioned that the autodelete feature on Signal, which permanently deleted messages after a week, was used for daily communication within the companies, while official communications and regulatory paperwork were handled through other channels like Slack or email.
Bankman-Fried provided details about Alameda’s role as FTX’s payment provider for wire transactions and its role as the primary liquidity provider and market maker for FTX. He explained that Alameda would step in and cover customer losses if FTX’s risk engine failed, and that Alameda could borrow funds from FTX and use them for trading. The defense argued that Alameda’s line of credit with FTX grew along with the crypto industry during the bull market.
Bankman-Fried also discussed the lack of hedging strategies in place for Alameda and mentioned notes shared by Caroline Ellison, the former CEO of Alameda Research, which revealed Bankman-Fried’s concerns about hedging. Without appropriate hedging, Alameda suffered significant losses due to the Terra ecosystem collapse and decline in crypto prices.
The defense is expected to conclude Bankman-Fried’s examination on October 30, followed by the prosecution’s cross-examinations and closing arguments from both sides. Prosecutors hinted at a possible rebuttal witness next week to prove the testimony of another witness false or inaccurate. Cointelegraph’s on-the-ground coverage of Bankman-Fried’s testimony provides a detailed account of the trial.