FTX founder Sam Bankman-Fried has said he “deeply regrets not looking deeper” into his sister firm Alameda Research’s spending of $8 billion on customer deposits.
During his fourth day of testimony in a Manhattan federal court, the alleged crypto fraudster struggled to directly answer questions from prosecutor Danielle Sassoon about the November 2022 collapse of his bitcoin empire.
He is accused of committing one of the largest financial frauds in American history: using FTX customer deposits to back risky investments in the fledgling hedge fund Alameda, which he ran with his ex-girlfriend Caroline Ellison.
The 31-year-old billionaire has pleaded not guilty to two counts of fraud and five counts of conspiracy. He has admitted to making mistakes that led to FTX’s bankruptcy, harming customers and employees, but denies stealing money from customers.
He was asked Tuesday how much he knew about the $8 billion “hole” in his company’s finances, who was responsible for it, and his “cozy” relationship with Bahamian officials.
Disgraced FTX founder Sam Bankman-Fried (pictured) is back in court for another day of cross-examination in his $10 billion fraud case
Bankman-Fried pictured in a courtroom sketch during his Oct. 31 grilling
Bankman-Fried struggled to answer a barrage of questions about who was behind the movement of customer funds from FTX to Alameda.
The crypto boss said he has “no recollection of any particular employees” involved in sending the FTX customer deposits to Alameda, and that no one was fired over the disappearance of $8 billion in customer funds.
But he also disagreed with Sassoon’s summary of his position, which was that “as CEO of Alameda, some unknown people spent $8 billion without your knowledge.”
Bankman-Fried insisted “that’s not my testimony,” but offered no alternative story during cross-examination.
The billionaire admitted that he did not pay enough attention to the daily transactions of his companies. “I deeply regret not having gone into more detail,” he told the court.
“When I was CEO of Alameda, I was responsible for the overall risk management of Alameda and its entire portfolio,” Bankman-Fried added.
“As CEO of FTX, I paid attention – although not nearly as closely as I should have – specifically to the risk management of Alameda accounts at FTX.”
Crypto’s former golden boy admitted to knowing about the $8 billion liability in October 2022, and shared a tweet the following month to “reassure” FTX customers that their funds were safe.
Bankman-Fried appeared in court on Monday charged with two counts of fraud and five counts of conspiracy as he was questioned by prosecutors.
Bankman-Fried’s parents pictured themselves walking to a federal courthouse in Manhattan on October 30
He also said he remembered “nice” responses from some customers saying they didn’t want to withdraw money.
Prosecutors began questioning the 31-year-old billionaire in a Manhattan court on Monday, and he gave evasive answers during the hearing, saying he thought his company was “okay” before the collapse.
They attacked his credibility by highlighting public statements he made before and after the FTX cryptocurrency exchange he founded filed for bankruptcy late last year when it could no longer process withdrawals.
Sassoon confronted Bankman-Fried with examples where he had promised customers that their belongings would be safe and that they could demand that those belongings be returned at any time.
Repeatedly, Bankman-Fried answered the series of questions with “Yes.”
The Californian entrepreneur rose to fame from 2017 to 2022 when he founded the Alameda Research hedge fund and FTX, building a cryptocurrency empire worth tens of billions of dollars.
For a time, he seemed to transform the nascent industry by conforming to his publicly stated vision of a more regulated and safe environment for users.
FTX founder Sam Bankman-Fried is sworn in as he testifies in his fraud trial on October 27
Through her questions, Sassoon attempted to show that Bankman-Fried’s public statements were false and that he promised customers their accounts were safe while he looted them.
At the same time, he spent lavishly on real estate, celebrity-studded promotions, investments and political contributions, she said.
In one instance, Sassoon asked him if he had used profanity when talking about regulators — even as he tried to convince Congress to give more legitimacy to the cryptocurrency industry by creating a regulatory framework.
“I’ve said that before,” he replied when she gave a concrete example.
And when Sassoon asked if his push for regulation was just an attempt to gain positive public relations, he replied: “I said something related to that, yes.”
Before cross-examination began Monday, Bankman-Fried testified that he believed his companies could withstand the daily withdrawal of billions of dollars in assets until several days before they could no longer do so.
Bankman-Fried was arrested last December on fraud charges.
Initially released on a $250 million personal recognizance bond to live with his parents in Palo Alto, California, he was jailed in August when Judge Lewis A. Kaplan became convinced that he had attempted to tamper with potential witnesses.
He started testifying on Thursday. Kaplan has told jurors the trial could end as soon as this week.