In the midst of his own criminal fraud trial in Manhattan, Sam Bankman-Fried, the crypto luminary, made quite the attempt to put some daylight between himself and the decisions that led to the tumultuous downfall of FTX, the crypto exchange, and its sibling entity, Alameda Research. Why this courtroom drama matters is simple: SBF only needs to sow the seeds of reasonable doubt in the jury’s minds when it comes to his involvement in the alleged misstatements and mismanagement of funds within his companies.
So, what did he do to accomplish this? He skillfully presented himself as not having his hands in the nitty-gritty of pivotal decisions. For instance, Alameda Research had a credit line with FTX, but SBF claimed he wasn’t keeping tabs on its everyday usage. He casually mentioned being “aware of roughly” how much was being used, but no minute details.
Furthermore, regarding the unconventional practice of FTX exchange customers wiring money to an Alameda bank account, he pleaded ignorance about how the hedge fund was managing the liabilities, stating, “I wasn’t entirely sure what was happening.” It appears that the mysterious “fiat@ftx.com” account on the exchange only caught his attention when a crisis in June 2022 forced engineers to scrutinize its inner workings.
When confronted with the decision made in October 2022 to keep Alameda afloat during a solvency crisis, he left it up to the leadership to decide, stating that he didn’t feel he got a clear explanation. In response to whether he defrauded customers or misappropriated customer money, he answered with a clear “no.” Yet, he didn’t shy away from admitting that the lack of institutionalized risk management at FTX had its price, and it wasn’t just monetary; “A lot of people got hurt. Customers. Employees.”
In the courtroom, SBF’s typically high-energy demeanor appeared more composed, and he made an effort to show respect for the court proceedings. However, he needed gentle reminders from Judge Lewis Kaplan to stay on topic and answer questions directly.
As his counsel inquired about various FTX departments and their roles, he was asked if FTX had a risk management department. His response was candid: “We sure should have, but no, we did not.”
The spotlight is still on SBF as he’s anticipated to take the stand again and face cross-examination by prosecutors. The plot thickens in the unfolding legal drama in the world of crypto.