The founder of FTX denied stealing $10 billion from customers as he made the risky decision to testify in his fraud trial today.
Sam Bankman-Fried admitted he made some “big mistakes” and said “a lot of people got hurt” when the crypto exchange collapsed last November.
He blamed “significant oversights” in risk management but claimed he had never taken anyone’s money.
Facing 115 years in prison, Bankman-Fried decided to testify after being blamed for the collapse of FTX by its three largest former employees who had all testified against him.
Sam Bankman-Fried was back on the stand Friday to testify in his own defense after being blamed for the collapse of FTX
He admitted he made some “big mistakes” and said “a lot of people got hurt” but blamed “significant mistakes” in risk management
The stock market was worth $32 billion at its peak and Bankman-Fried appeared on the cover of Forbes magazine, which touted him as the future of finance.
But the ‘house of cards’ collapsed in November last year. Crypto prices plummeted due to fears of a recession.
Bankman-Fried, 31, was arrested at his penthouse in the Bahamas – where FTX was based – and extradited to the US to face charges.
Prosecutors alleged he “lied to the world” and squandered $10 billion on real estate purchases, political donations and paying himself huge sums of money.
Kicking off his testimony, Bankman-Fried’s attorney Mark Cohen asked him what his “vision” for FTX was.
He responded, “We thought we might build the best product on the market.”
Bankman-Fried said the aim was to “combine elements of traditional financial products” with crypto and “advance the ecosystem.”
Cohen asked, “Did it turn out this way?”
Bankman-Fried said, “No. It actually turned out to be the opposite. Many people were injured, and customers lost their money.
Cohen asked, “Did you scam anyone?”
Bankman-Fried said: ‘No, I didn’t.’
Cohen asked, “Did you take money from customers?”
Bankman-Fried said, “No.”
Cohen asked, “Did you make any mistakes along the way?”
Bankman-Fried said: ‘I’ve made some little mistakes and some big mistakes.
‘The biggest mistake by far was not having a dedicated risk management team. We had a number of people who were involved to some extent, but no one was committed to it and there were significant mistakes.”
The stock market was worth $32 billion at its peak and Bankman-Fried appeared on the cover of Forbes magazine, which touted him as the future of finance.
Bankman-Fried faces 115 years behind bars if found guilty of fraud and conspiracy
SBF appears front and center in a group photo with his arm around Caroline Ellison as men in curly wigs – believed to be mocking his signature hairstyle – pose around them. They are pictured with FTX co-founder Gary Wang (left)
Bankman-Fried described clearly and in a nasally voice how he grew up in Palo Alto, California, home to big tech companies like Meta, and attended MIT.
While living there, he met Gary Wang, with whom he would later co-found FTX.
Bankman-Fried told the court he lived with 25 other people in a ‘nerdy’ student house where no one drank.
After graduating, he worked at Jane St Capital and in 2017 started Alameda Research, the predecessor to FTX that would become FTX’s sister company.
Bankman-Fried said he knew “basically nothing” about crypto, but looked at the money-making opportunities and thought they were “so big I wasn’t sure I even believed it.”
The beginning was messy and they rented an Airbnb in Berkeley, California for their office.
Bankman-Fried said it was listed as a two-bedroom house, but they used the attic as a third bedroom and the living room as a fourth bedroom because it had a couch.
The rest of the house was the office, which they “packed with desks and computers and boxes from Amazon.”
“Ultimately we had to deal with the cardboard box problem quite quickly,” says Bankman-Fried.
The name ‘Alameda Research’ was because Berkeley is in Alameda County and because they wanted to be ‘under the radar’ and thus not alert competitors to what they were doing
Bankman-Fried said: “I didn’t want to call it Sam’s crypto trading company. It was much better than the internal name Wireless Mouse.
Bankman-Fried was asked what happened to the money deposited with Alameda that subsequently appeared in their FTX wallets.
FTX had this arrangement because it was initially unable to obtain its own bank accounts, the court heard.
Bankman-Fried said, “I wish I understood it better than I do.”
When asked if FTX had the money, Bankman-Fried said: “I wasn’t quite sure what was going on.
“What I believed was that the money was just sitting in a bank account and not being used or moved, or that it was somehow sent to FTX, or that Alameda borrowed money and used it.”
Bankman-Fried said he thought FTX’s risk management systems were “better” than other crypto exchanges.
He told the jury it was something he had “devoted a lot of thought and time to.”
The key witness for the prosecution is Caroline Ellison, Bankman-Fried’s ex-girlfriend who headed Alameda Research, FTX’s sister company.
FTX co-founder and former chief technology officer Gary Wang took a plea deal and testified earlier this month
Nishad Singh (pictured arriving at court with girlfriend Claire Watanabe) testified that the company spent millions on celebrity partnerships in early 2022 – as prosecutors tried to show how Bankman-Fried wasted customer money to boost its status
Wang was one of three associates and was soon followed by Caroline Ellison and Nishad Signh, the three who testified against Bankman-Fried at the trial.
They eventually rented an office space and then moved Alameda to Hong Kong because it felt like there were more opportunities there.
In 2019, Bankman-Fried talked to Wang about starting their own crypto exchange and they founded FTX, he told the court.
Bankman-Fried said that when he founded FTX in 2019, he gave himself only a 20 percent chance of lasting more than a few months.
He said he initially planned to sell the exchange to a rival company because he had no idea how to attract customers.
But after a few friends signed up, the news spread ‘organically’ and on social media and more and more people signed up.
In 2019, daily trading volume reached tens of millions of dollars per day, and by 2022 that number would reach $10 billion to $15 billion per day.
Bankman-Fried has denied 13 charges between 2019 and 2011, including bank fraud, money laundering and violations of campaign finance laws.