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Sam Bankman-Fried’s Testimony in Fraud Trial: Alameda Research’s Borrowing Rights

SBF’s Testimony Without Jury: The Fraught Fraud Trial

Disgraced FTX founder Sam Bankman-Fried made his first appearance on the stand in his high-profile fraud trial, with the jury absent.

Contentious Evidence and Jury Deliberation

The prosecution and defense presented conflicting evidence and testimonies, leading Judge Kaplan to dismiss the jury early on Thursday. This was to allow time to determine which arguments could be presented to the jury.

Security Concerns and Encrypted Messaging

During the defense’s direct examination, Bankman-Fried acknowledged using encrypted messaging due to “security threats” and worries about the potential exposure of sensitive information. He mentioned, “There were constant attempts to hack FTX.”

He also disclosed FTX’s document retention policy, which mandated the preservation or deletion of specific information. He claimed to have followed this policy by enabling Signal’s auto-deletion feature but later disabling it due to regulatory concerns following FTX’s collapse.

Missing Document Raises Questions

When asked about the whereabouts of a critical document, the prosecution admitted they didn’t possess it, despite Bankman-Fried emphasizing its importance in his testimony.

Terms of Service Controversy

Bankman-Fried revealed that FTX faced difficulties obtaining a bank account and had to utilize Alameda Research and its subsidiaries under a “payment agent agreement.” He also asserted that Alameda Research had the right to borrow FTX funds in numerous circumstances according to the company’s terms of service.

However, he acknowledged overlooking certain aspects of FTX’s terms of service, largely placing responsibility on FTX’s general counsel when questioned by the prosecution about his conversations with legal counsel.

Challenging Cross-Examination

Assistant U.S. Attorney Danielle Sassoon conducted a comprehensive cross-examination that prompted Bankman-Fried to hesitate on contentious points. When asked about Alameda Research’s use of customer funds, he responded affirmatively after a nuanced question.

Judge Kaplan intervened when the prosecution raised the issue of embezzling customer funds and suggested that Bankman-Fried didn’t need to answer. Still, he chose to respond. Throughout the testimony, Judge Kaplan expressed frustration with Bankman-Fried’s use of vague responses.

Upcoming Jury Testimony

Bankman-Fried’s formal testimony before the jury is expected to commence when the trial resumes the following morning.

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