2023-10-27 18:12:05
Former iconic cryptocurrency personality Sam Bankman-Fried admitted Friday to management errors but not fraud, during a hearing expected to be a highlight of his federal trial in New York.
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“I made several small mistakes and also big mistakes,” replied the accused, to a question from one of his lawyers, Mark Cohen.
“By far the biggest was not having a risk management team in place,” he continued.
“Have you defrauded anyone?” asked his advice. “I didn’t do that,” replied “SBF,” dressed in a charcoal gray suit.
“Did you steal money from clients?” continued Mark Cohen. “No,” said Sam Bankman-Fried.
“SBF” is on trial for having organized the illegal use of funds deposited on FTX without the knowledge of clients.
Up to $14 billion was siphoned off to fund Alameda Research’s often risky investments.
At the time of FTX’s bankruptcy in November 2022, some $8 billion was missing.
The majority has since been recovered by liquidators and is expected to be returned to customers in early 2024.
Outdated entrepreneur
During the first three hours of Sam Bankman-Fried’s hearing, his lawyer’s questions allowed the accused to portray himself as a young entrepreneur drowning in work, carrying out dozens of tasks at once, bombarded with thousands of emails each day.
As FTX grew, “it became untenable for me to manage both companies,” explained the thirty-year-old, who handed over management of Alameda to two executives at the end of 2021.
From then on, “I was no longer involved in the day-to-day running of Alameda,” the defendant said.
Still in response to targeted questions from its council, “SBF” also justified several decisions that allowed Alameda to borrow massively from FTX.
Alameda notably benefited, according to him, from an increase in the ceiling of its credit line mainly because the company was a market maker on FTX, which means that it offered users the guarantee of being able to buy or sell an asset at any time.
A failure of Alameda, due to lack of sufficient credit line, “would have had disastrous consequences for the platform” FTX, justified the former manager.
The limit was eventually raised to $65 billion, a sum far greater than all the assets deposited on FTX.
At the same time, Sam Bankman-Fried detailed a series of measures put in place on FTX to prevent clients from exposing the entire platform to losses in the event of losing bets on the cryptocurrency market, even if Alameda deliberately avoided to these mechanisms.
Arriving in the cryptocurrency landscape in 2019, Sam Bankman-Fried quickly won over the industry, but also well beyond, with his clear and educational speech, the American Congress requesting him, on several occasions, for hearings.
But since the opening of this federal trial for fraud and criminal conspiracy, the stature of “SBF” as a facetious genius of cryptocurrencies has imploded.
At the hearing, the accused put aside his famous shorts and T-shirt for a smart suit, and swapped the abundant curly mane that made his legend for a short, all-purpose haircut.
In the Manhattan federal court where the proceedings are taking place, three key witnesses, former collaborators, undermined his defense which consisted of accusing his former subordinates, accused of incompetence or thoughtlessness.
Alameda co-founder Gary Wang and former chief executive Caroline Ellison claimed, with supporting documents produced by the prosecution, that “SBF” was fully informed of the company’s financial situation and did not had done nothing to change its trajectory.
Defendants in criminal trials in the United States often choose not to testify, to avoid incriminating themselves, particularly during cross-examination by the prosecution.
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