Sam Bankman-Fried on the witness stand faces grilling by the feds in Manhattan fraud trial

NEW YORK — Sam Bankman-Fried — the one-time millennial magnate accused of siphoning billions from customers of his bankrupt cryptocurrency exchange — faced a grilling on cross-examination by the feds Monday.

Facing more than a century in prison if convicted, Bankman-Fried decided last week to take the unusual step of testifying in his own defense. Lawyers typically advise against it because of the risks defendants face on cross-exam.

The 31-year-old Palo Alto, California, man, was the subject of glowing magazine profiles for planning to give away 99% of his wealth before facing allegations it was all stolen in late 2022. He testified before Congress about making digital currency trading more accessible and transparent than traditional markets for everyday folk.

Assistant U.S. Attorney Danielle Sassoon grilled Bankman-Fried about his public statements before and after his precipitous downfall when he assured customers of his crypto trading platform FTX that their trust and financial safety were tantamount.

“Mr. Bankman-Fried, (it’s) fair to say that you wanted FTX’s customers to trust you?” Sassoon asked.

“That would have been ideal, yeah,” Bankman-Fried said.

“You even tweeted that lying to customers breaks sacred rules of conduct everyone knows to follow, didn’t you?” Sassoon asked.

“I may have, but I don’t recall that,” Bankman-Fried replied.

The Massachusetts Institute of Technology grad’s alleged scheme has been characterized by Manhattan U.S. Attorney Damian Williams as one of the largest financial frauds in history. Prosecutors say that as he touted himself as a “savior of the cryptocurrency industry,” FTX customer deposits were being siphoned to his sister hedge fund Alameda Research to spend on risky bets and its own private spending.

They allege the money was funneled through two mechanisms: bank accounts secretly controlled by Alameda where FTX customers were directed to deposit their funds and through a hidden portal built into the exchange’s code allowing Alameda “to spend and withdraw unlimited amounts of money.” The feds say many FTX customers were not of means.

Responding to most of Sassoon’s questions with a curt, “Yep!” or “I don’t recall,” a nonchalant Bankman-Fried denied he made trading decisions at Alameda though acknowledged he wasn’t “walled off.”

“Sitting here today, Mr. Bankman-Fried, do you deny that Alameda was the only FTX customer that accepted FTX customer fiat deposits directly into its own bank accounts?” Sassoon asked.

“I’m not sure,” he said, then added, “I’m not confident” when asked if he could identify a single other one.

Bankman-Fried founded FTX in 2019 and it took off at lightning speed, becoming the world’s second-largest crypto trading platform worth $32 billion at its peak. Forbes declared him“the richest twentysomething in the world” about a year before his companies went up in smoke.

When Alameda’s balance sheets were leaked and rumors began circulating about the state of FTX in November 2022, a surge of customers sought to withdraw billions in vain and the walls came crashing down.

Prosecutors played footage from April 2021 of Bankman-Fried saying Alameda was given a vague name to ward off concerns about crypto by banks.

Williams’ office says Bankman-Fried used the stolen cash to live lavishly in the Bahamas, pay back Alameda’s lenders, court celebrity endorsements and funnel $100 million to politicians in both parties through straw donations to further his agenda in Washington.

Jurors have seen photos of “SBF” chilling in sweats on a private jet and heard how he used it to ferry Amazon packages to the Bahamas, where FTX was based out of a $35 million luxury compound. They’ve also seen photos of him hobnobbing with celebs and on one occasion with New York Mayor Eric Adams at Osteria La Baia shortly before FTX’s collapse.

Prosecutors have presented a mountain of incriminating documents and damning testimony from convicted Alameda CEO and Bankman-Fried’s on-again-off-again girlfriend, Caroline Ellison.

Ellison, 28, who pleaded guilty to wire fraud and related charges shortly after her ex’s arrest, told jurors Bankman-Fried continuously directed her to secretly pay off Alameda’s sky-high debts through a backdoor line of credit from FTX and had her draw up dishonest balance sheets when Alameda’s lenders asked to see its books. His lawyers have sought to cast blame on the woman he put in charge for not hedging against market crashes.

The jury has also heard from two more of his convicted associates — FTX co-founder Gary Wang and FTX head of engineering Nishad Singh— who, like Ellison, are cooperating in the hopes of receiving lenient prison terms. They also said “SBF” directed them to carry out crimes. Prosecutors plan to call one mystery rebuttal witness.

Bankman-Fried has pleaded not guilty to seven counts, including wire fraud, conspiracy to commit money laundering, and conspiracy to commit securities fraud. He also faces civil charges from the Securities and Exchange Commission and potentially a second trial next spring.

The one-time wunderkind was arrested in the Bahamas in December and extradited to the U.S. Judge Lewis Kaplan revoked his $250 million bond in August after the judge learned he’d leaked Ellison’s personal writings to The New York Times.

He acknowledged previously calling FTX as the most regulated crypto exchange by far. Asked about a statement he made after FTX’s collapse, when he told a Vox reporter, “F–k regulators,” Bankman-Fried told the jury, “I said that once.” He acknowledged privately talking publicly about good regulations was just a PR strategy and that he’d called “a specific subset” of crypto Twitter, including FTX customers, “dumb motherf—–s.”

“Mr. Bankman-Fried, would you agree you know how to tell a good story?” Sassoon asked Bankman-Fried during one line of questioning, prompting a long pause.

“I don’t know,” he replied. “It depends what metric you use.”

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