Sam Bankman-Fried testifies that lawyers were involved in key FTX decisions

NEW YORK, Oct 26 (Reuters) – FTX founder Sam Bankman-Fried testified before a jury in his fraud trial on Thursday as prosecutors at the now-bankrupt cryptocurrency exchange make key decisions at the center of the case. To distance himself from responsibility for any wrongdoing.

Bankman-Fried took the witness stand hours after the prosecution rested its 12-day trial and gave testimony relevant to the defense’s argument that she acted in good faith when operating FTX, which collapsed in November 2022 following a wave of customer withdrawals. .

Under cross-examination by prosecutors, prosecutors often struggled to point to specific conversations that authorized his actions, calling his answers “I’m not trying to make a definitive legal judgment on what this does or doesn’t do. Say.”

Bankman-Fried, accused of stealing billions of dollars from unwitting customers, has pleaded not guilty to two counts of fraud and five counts of conspiracy. If convicted, he could face decades in prison. Prosecutors said Bankman-Fried used the misappropriated funds to fund Alameda Research, a crypto-focused hedge fund, to make speculative investments and donate more than $100 million to US political campaigns.

The 31-year-old former billionaire, dressed in a gray suit, was called to stand in Manhattan federal court after his lawyers opened the defense case with testimony from two witnesses.

U.S. District Judge Louis Kaplan ruled that Bankman-Fried would initially testify without jurors present so he could decide what parts of it would be admissible as evidence. Prosecutors have said Bankman-Fried should not be allowed to suggest that prosecutors’ involvement in decision-making shows he lacked criminal intent.

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Speaking in a confident tone, Bankman-Fried often gave lengthy answers to defense attorney Mark Cohen’s questions.

Bankman-Fried said FTX’s attorneys were involved in crafting its document retention policies, setting up a system where FTX customers deposited their funds into Alameda bank accounts, and structuring the loans she and other executives received from Alameda.

Prosecutors said Bankman-Fried encouraged employees to use encrypted messaging sites like Slack and Signal and automatically delete their communications to cover their tracks. They said he stole funds from FTX clients by depositing them into accounts controlled by Alameda, who then made loans to FTX executives.

Rocking side to side

Under cross-examination by prosecutor Danielle Sassoon, Bankman-Fried swayed slightly to the side and gestured with her hands as she spoke. He often began his answers with “yes.”

Much of Sassoon’s questioning centered on what FTX attorneys told Bankman-Fried about FTX customers placing funds they intended to transfer into accounts owned by Alameda, which Bankman-Fried testified happened for a while before FTX owned them yet. Bank account.

When Sassoon asked if he ever talked to the attorneys about “permission” to spend the Alameda deposits, Bankman-Fried paused for a few seconds and said, “I don’t recall any conversations that were contemporaneous and phrased that way.”

The judge sent jurors home after Bankman-Fried’s lawyers said they planned to get testimony from the defendant about FTX lawyers’ involvement in key company decisions.

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Legal experts have said Bankman-Fried had little to lose by bucking conventional wisdom and testifying to a jury, after weeks of testimony against her that insiders painted an unflattering portrait of her character. Bankman-Fried’s direct testimony to the jury could last up to five hours, Cohen said, giving prosecutors a chance to cross-examine her.

Former close FTX colleagues who testified at trial told the jury that Bankman-Fried diverted client funds to Alameda and directed them to commit crimes by lying to investors and lenders. Bankman-Fried’s risky decision to testify gives prosecutors a chance to cross-examine her on those claims.

Three of her former colleagues have pleaded guilty and agreed to cooperate with prosecutors, her attorneys said, framing their testimony to incriminate Bankman-Fried in hopes of getting a lenient sentence. Bankman-Fried said that while he made mistakes in running FTX, he never intended to steal funds.

The case rested after calling one final witness – FBI agent Mark Troiano, who told jurors about his use of the Bankman-Fried signal. The defense’s first two witnesses were: Crystal Roll, Bankman-Fried’s lawyer in the Bahamas; and database specialist Joseph Pimple.

Reporting by Luke Cohen and Jodi Godoy in New York; Editing by Will Dunham and Nolene Walter

Our Standards: Thomson Reuters Trust Principles.

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Reports on New York Federal Courts. Previously worked as a correspondent in Venezuela and Argentina.

Jody Godoy reports on banking and securities law. Reach her at [email protected]

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