Sam Bankman-Fried, co-founder of the now-bankrupt crypto derivatives exchange FTX and the crypto hedge fund Alameda Research, took the witness stand in his criminal fraud trial, a pivotal moment in a case dubbed one of the most significant fraud trials since Bernie Madoff.
Judge Lewis Kaplan had the jury dismissed for the day, signaling his intent to rule on the admissibility of various aspects of Bankman-Fried’s testimony. Bankman-Fried, recognized by Time Magazine as one of the top 100 most influential people in 2022, appeared in court in a gray suit to provide his testimony.
Judge Kaplan emphasized that there were contested areas in Bankman-Fried’s testimony, noting, “There are areas of testimony that the Government contends the jury should not hear.”
This development followed the prosecution resting its case, accusing Bankman-Fried of embezzling billions from customers, investors, and lenders. The defense, in response, presented its first two witnesses, including Bankman-Fried’s lawyer in the Bahamas, Krystal Rolle, and database expert Joseph Pimbley.
Bankman-Fried’s decision to testify marked the first instance in the trial where the court could hear his perspective on the charges against him, as he had only taken notes on a laptop before this, during the presentation of the prosecution’s case.
Opting to have the defendant testify is regarded by many as an unconventional move, especially after the prosecution called witnesses with intimate knowledge of the issues, including individuals from Bankman-Fried’s inner circle.
The 31-year-old MIT graduate has entered guilty pleas to two counts of fraud and five counts of conspiracy, potentially facing a lengthy prison sentence if found guilty.
Bankman-Fried’s testimony is set to continue for the remainder of the day, with the prosecution scheduled to cross-examine him on the following day.
During his initial testimony, Bankman-Fried discussed the communication platforms employed by FTX and explained the exchange’s experience with a “hack” that exposed data vulnerabilities. He emphasized the significance of encryption and the use of Signal for security purposes. Furthermore, he alluded to “security concerns” during their time headquartered in Hong Kong and suggested the possibility of “former employees having data to sell to a competitor.”
When questioned about FTX being hacked, Bankman-Fried clarified, “Never a core breach. But third parties were hacked.”
In response to criminal defense lawyer Mark Cohen’s inquiry regarding his role with both FTX and Alameda, Bankman-Fried explained, “I was CEO of both at that time. FTX didn’t have a bank account.” Cohen probed further, asking whether he believed that accepting FTX deposits through Alameda was legal, to which Bankman-Fried replied in the affirmative, stating, “I did.”