The one-time crypto mogul Sam Bankman-Fried is testifying in his own blockbuster crypto trial again Monday, with his defense concluding its direct examination and the prosecution’s sharp cross-examination beginning. He appeared to have had a haircut over the weekend, just in time for a prosecutor to grill him about whether his famously unkempt hair was part of a deliberate, anti-style “tech genius” persona.
On Friday, Bankman-Fried took the stand in his own defense, admitting that he made “large mistakes” but denying that he defrauded any customers of FTX, his failed cryptocurrency exchange. On Monday, he was being cross-examined on his many public claims and media interviews about FTX, as well as some perceived contrasts between his public and private statements.
Within moments of Bankman-Fried returning to the witness stand for continued direct examination, it appeared that his attorney, Mark Cohen, was trying to show that the entrepreneur tried his best to make FTX better and safer – and once again laid the blame on his ex-girlfriend and Alameda Research CEO Caroline Ellison, as he did during her cross-examination. As they did on Friday, Cohen and Bankman-Fried discussed hedging, specifically their contention that Ellison did not take positions that would have insulated Alameda from the dramatic crash of crypto in spring 2022, which imperiled the hedge fund.
Bankman-Fried gave details of the day FTX endured billions in customer withdrawals, eventually going bankrupt after a brief flirtation with a potential acquisition by Binance. During questioning, Bankman-Fried’s attorneys sought to shift blame for the exchange’s collapse to Binance, which sold its position in FTX’s cryptocurrency FTT, effectively issuing a vote of no confidence in FTX, and to what Bankman-Fried described as Ellison’s failure to hedge the financial positions of Alameda.
Testifying is a risky move, exposing him to cross-examination by federal prosecutors. After Bankman-Fried’s lawyers ended their questioning, the assistant US attorney Danielle Sassoon launched into pointed cross-examination about Bankman-Fried’s persona and wooing investors. Ellison has testified that his unkempt boy genius look was an act.
Today in court, Bankman-Fried wore a light grey suit and purplish tie, his trademark crazy mane now trimmed into a more conventional style.
“Mr Bankman-Fried, would you agree that you know how to tell a good story?” Sassoon asked.
Bankman-Fried deflected, saying, “I don’t know, it depends on what metric you use.”
Sassoon grilled him about his sartorial choices, asking him about a colleague who told the New York Times that had he had said cutting his hair would have a negative value for him because “I think it’s important for people to think I look crazy,” he was quoted as saying. Ellison likewise testified that Bankman-Fried carefully curated his unglamorous image.
“I don’t think I said that in that way,” Bankman-Fried said. He had previously testified that he did not cut his hair because he was busy and lazy, not as a strategic decision.
When Sassoon asked him if he recalled telling another investor, who asked him to wear a suit, that “a T-shirt and shorts” were part of his brand, Bankman-Fried said he did not recall the comment.
As well as focusing on Bankman-Fried’s presentation and branding, Sassoon focused on the former CEO’s intelligence. Bankman-Fried’s defense attorney has attempted to portray him as overwhelmed and out of his depth, a young man who “made mistakes” while attempting to lead a rapidly expanding venture.
“You think of yourself as a smart guy?” the prosecutor asked.
“In many ways, not all ways,” Bankman-Fried replied.
“And as CEO of FTX, you thought highly of yourself?” she asked.
“I did,” he said.
In another line of questioning, Sassoon also asked if Bankman-Fried owned both FTX and Alameda, taking aim at his assertions that it was Ellison’s decision and responsibility to hedge Alameda’s positions; he said he maintained substantial stakes in both.
Sassoon also questioned Bankman-Fried about what he had done to reassure potential customers that FTX was transparent and safe, and asked him if his planned December 2022 congressional testimony in support of regulation was “just for PR”, which Bankman-Fried denied. He was arrested before he could testify.
“In private you said things like ‘fuck regulators’?” Sassoon asked.
“I said that once,” Bankman-Fried admitted.
Bankman-Fried’s defense attorneys have, through their lines of questioning, painted him as an overwhelmed “math nerd” who never expected to be rich or famous and certainly never meant to plunder billions of dollars.
“I made a number of small mistakes and a number of large mistakes,” he said on Friday. When asked if FTX had a risk management department, he answered, “We sure should have but no, we did not.”
Bankman-Fried was expected to begin testifying last Thursday. Judge Lewis Kaplan, however, called an evidentiary hearing just before Bankman-Fried, accused of seven counts of wire fraud and conspiracy to launder money, was set to testify before the jury. Kaplan sent the jury home as he deliberated what topics would be admissible during Bankman-Fried’s testimony. The former CEO has pleaded not guilty.
Bankman-Fried founded the cryptocurrency exchange FTX, which went belly-up as the crypto industry crashed in late 2022. He was arrested in December 2022 in the Bahamas and extradited to the US. If convicted, he faces decades in prison. On Thursday, he said on the witness stand that he believed FTX’s terms of service allowed Alameda Research, the hedge fund closely associated with the cryptocurrency exchange, to take FTX customer funds.
Federal attorneys allege Bankman-Fried “misappropriated and embezzled” billions of dollars from FTX into Alameda for his own ends – $100m in political contributions, celebrity endorsements and a $40m Bahamas penthouse where he lived with Ellison and other FTX executives.
Ellison testified against him earlier in the trial, saying that she had committed crimes as the CEO of Alameda, always at his direction. Gary Wang, a co-founder of FTX, testified that Bankman-Fried knew of the illegal movement of money that led to FTX’s $8bn shortfall when customers attempted to withdraw their crypto.
