Sam Bankman-Fried’s Second Day of Testimony

FTX founder Sam Bankman-Fried concluded his second day of testimony in his high-profile fraud case in a Manhattan federal court.

Challenging Cross-Examination

During the cross-examination led by U.S. Assistant Attorney Danielle Sassoon, Bankman-Fried provided concise answers. He often claimed not to recall specific pieces of evidence and testimony from earlier proceedings.

Bankman-Fried appeared nervous on the witness stand, occasionally swaying in his chair and speaking with a softer tone, sometimes stumbling over words.

Recollection and Metadata

In one instance, he stated he couldn’t recall receiving a doctored finances spreadsheet from Alameda Research CEO Caroline Ellison to present to investors. However, the prosecution presented metadata from his Google account, confirming that he had indeed opened the spreadsheet.

At times, Bankman-Fried’s repeated claims of not recalling prompted a quip, “I could take a wild guess if you want me to.”

Understanding Margin Trading

The prosecution revisited events from mid-June 2022, alleging that Bankman-Fried allowed Ellison to repay the trading firm’s third-party loans, even though he needed to borrow more from FTX to do so.

When asked to clarify whether taking money from FTX for loan repayments constituted margin trading, Bankman-Fried initially stated it “very well could be a margin trade.” However, he quickly labeled his response as “speculative.”

Alameda Research’s “Special Privileges”

In September 2022, Bankman-Fried sent a memorandum suggesting Alameda Research should shut down and be replaced by Modulo Capital, a rival trading firm. Bankman-Fried had significant undisclosed investments in Modulo Capital.

He justified this decision by stating that Modulo Capital had a much lower PR cost than Alameda Research. Bankman-Fried admitted to spending billions on PR for his crypto empire but could not close Alameda Research due to the debt it owed to FTX.

FTX’s Risk and Alameda’s Credit Line

Bankman-Fried declined to admit that repaying Alameda Research’s loans by borrowing from FTX would put the exchange at significant risk. The prosecution revealed Bankman-Fried’s knowledge of Alameda Research’s $65 billion line of credit in FTX’s database. However, he distanced himself from intimate involvement, claiming to have given “suggestions” to the technical team.

Upcoming Testimony

Bankman-Fried is expected to conclude his testimony soon. The prosecution will present two witnesses, an FBI agent and an Apollo Crypto employee, in their rebuttal. If convicted, Bankman-Fried faces potential life imprisonment.