"I Don't Recall": SBF Decision to Take Stand Backfires in FTX Fraud Trial

In a high-stakes gamble, Sam Bankman-Fried, the founder of the cryptocurrency exchange FTX, took the stand in his own defense during his trial on criminal fraud charges.

The trial, which has captivated the financial world, saw Bankman-Fried facing off against prosecutor Danielle Sassoon, who previously served as a clerk to the late Justice Antonin Scalia, and a formidable litigator. Overall, The trial was a highly anticipated spectacle, attracting a crowd of journalists, curious onlookers, and crypto enthusiasts who gathered in front of the courthouse in Lower Manhattan hours

Over the course of eight hours, Sassoon grilled Bankman-Fried, also known as SBF, with a barrage of questions. Sassoon moved swiftly, digging in whenever the defendant hesitated.

Bankman-Fried, for his part, seemed to struggle with recalling key conversations and meetings, often responding with "I don't recall." The former FTX CEO and co-founder of the crypto trading firm Alameda Research vacillated between giving curt "yes" and "no" answers and rambling on. At several points, Judge Lewis Kaplan had to admonish Bankman-Fried to pay attention and answer the question at hand.

Bankman-Fried's Defense

As the trial wore on, Bankman-Fried appeared increasingly irritated, often disagreeing with how Sassoon characterized his past comments, both in trial testimony and in media reports. At times, he seemed resigned, slumping in front of the microphone and reading his prior statements aloud with unmistakable reluctance.

Bankman-Fried and his attorneys in a courtroom sketch. Source: Forbes

Sassoon's goal was to dismantle Bankman-Fried's claims that he was simply overwhelmed by the rapid growth of FTX and failed to recognize the extent of its troubles, including the misuse of customer funds. Instead, she sought to portray him as someone who directed his subordinates to funnel billions of dollars from FTX users to Alameda Research to cover the company's losses and fund his lavish lifestyle. FTX's expansion included investing in luxury real estate and leveraging private air transport to deliver Amazon packages from the US to their Bahamian headquarters.

During the trial, jurors were shown a different side of Bankman-Fried, including a statement in which he referred to a group that included FTX customers as "dumb motherf******s." Sassoon was well-prepared, confronting Bankman-Fried with evidence in the form of emails, tweets, and interview excerpts whenever he claimed not to remember.

Bankman-Fried Guilty on All Counts

On November 2nd, 2023, the verdict was finally delivered: Sam Bankman-Fried was found guilty on all seven criminal fraud counts against him . The month-long trial had seen former members of Bankman-Fried's inner circle take the stand to testify against him, ultimately leading to his conviction.

The charges against Bankman-Fried stemmed from the collapse of FTX and its sister hedge fund, Alameda Research, last year. The jury ultimately agreed with the prosecution, finding Bankman-Fried guilty of wire fraud and conspiracy to commit wire fraud against FTX customers and Alameda Research lenders, as well as conspiracy to commit securities fraud, commodities fraud and money laundering.

The trial was notable for the testimony of Caroline Ellison, Bankman-Fried's ex-girlfriend and the former head of Alameda and Gary Wang, the co-founder of FTX and a childhood friend of Bankman-Fried. Both Ellison and Wang had pleaded guilty to multiple charges in December and cooperated with the prosecution as key witnesses.

$10 Billion Missing

Assistant U.S. Attorney Nicolas Roos told the court in his closing argument that there was "no serious dispute" that $10 billion in customer money had gone missing from FTX's crypto exchange. The question, he said, was whether Bankman-Fried knew that taking the money was wrong. "The defendant schemed and lied to get money, which he spent," Roos said.

The verdict represents a significant milestone in the unfolding drama surrounding FTX and Alameda, and it is expected to have a profound impact on the broader cryptocurrency industry.

The case has drawn parallels to the high-profile trial of Elizabeth Holmes, the founder of Theranos, who was convicted of defrauding investors in early 2022 and sentenced to over 11 years in prison.

The outcome of the FTX case is likely to send a strong message to players in the cryptocurrency space, emphasizing the need for transparency, accountability, and ethical business practices.

Image Source: Financial Times