Sam Bankman-Fried Admits to ‘Significant Oversights’ in Collapse of Crypto Exchange FTX

Sam Bankman-Fried testified for hours in his criminal trial Friday, acknowledging there were 'significant oversights' in his stewardship of cryptocurrency exchange FTX while denying he stole customer funds or committed fraud.

Under questioning from his own defense lawyer, Bankman-Fried's testimony was smooth, confident and knowledgeable, a marked contrast to his halting and shaky performance a day earlier during a hearing before Judge Lewis Kaplan. Kaplan dismissed the jury to decide what they would and wouldn't hear from Bankman-Fried, who has yet to face questioning from prosecutors. His defense team plans to keep him on the stand all day Friday into Monday morning.

Shortly after taking the witness stand Friday morning, Bankman-Fried denied committing fraud or taking FTX customer funds. "Did you defraud anyone?" his lawyer, Mark Cohen, asked him. "No," Bankman-Fried responded. "Did you take customer funds?" Cohen asked. "No," Bankman-Fried said.

As to the collapse of FTX, Bankman-Fried said: “I made a number of small mistakes and a number of large mistakes … There were significant oversights.”

Bankman-Fried faces seven counts of fraud stemming from the collapse of FTX alleging he defrauded customers, lenders and investors. Prosecutors from the Manhattan U.S. Attorney’s Office presented three weeks of evidence before resting their case Thursday. Bankman-Fried's former colleagues and friends, including ex-girlfriend Caroline Ellison, told jurors he oversaw massive withdrawals of customer funds through a hedge fund he ran, Alameda Research, and used the funds to finance an array of investments in other digital currency companies, Bahamas real estate and political campaign contributions.

His testimony laid the groundwork for placing blame for FTX's collapse on a lack of risk management controls at FTX, which he cited repeatedly as a shortcoming of the exchange, as well as former deputies who have testified against him as cooperators for the prosecution. He also sought to explain away issues raised by the prosecution, such as his enabling of auto-deletion features in company communications, saying he didn't want innocuous written communications to look bad when taken out of context.

He also sought to provide alternative explanations for potentially problematic evidence, such as a manual override on the exchange that permitted Alameda to continue trading with negative balances. Prosecutors say that allowed him to withdraw billions of dollars of customer funds. He said the feature was enabled to ensure Alameda would be able to continue facilitating customer trades on the exchange and avoid malfunctions that could close out its account.

Bankman-Fried also testified at length about how little he knew of the shaky condition of Alameda's finances and that his on-again-off-again girlfriend, Caroline Ellison, was more directly responsible for its condition. He told jurors about a dramatic encounter on FTX's Bahamas campus amid the crypto market crash in June 2022 in which Ellison told him she feared Alameda had just gone bankrupt. He said it surprised him, since he believed it should have had about $10 billion in assets. But ultimately he said he was told the losses were overstated by a bug in the system's computer code, and that they still had $8 billion to $10 billion on hand.

He also said he thought the money used to buy big sponsorships and celebrity endorsements came from FTX's corporate accounts, not customer funds. He said he settled on naming rights for the Miami Heat arena after considering other venues for the New Orleans Saints, Kansas City Chiefs and the Kansas City Royals. But “I didn’t want to be known as the Kansas City Royals of crypto exchanges, so we passed on that one,” he said.

In a key piece of testimony, he also said there were no restrictions on how customers on the exchange were allowed to use money they borrowed from its collateral pool — and that included his own firm, Alameda. The testimony was intended to counter a key assertion of the prosecution's case, that he wrongfully withdrew money to spend on an array of corporate investments, luxury real estate and political contributions.

He said he funded his political contributions with loans he took from Alameda, in an attempt to counter prosecution assertions that the program was funded with FTX customer funds.

He also sought to undercut a key piece of testimony from a witness against him, who said he monitored Alameda's ballooning negative balance on the FTX exchange on one of the six monitors looming over his desk. Referring to a photo of himself at the desk, Bankman-Fried ran through the windows he kept open on his monitors but said he did not have a "balances page" open and displayed on his screen.

Judge Kaplan opened Friday's session by saying he would largely limit Bankman-Fried's use of a defense strategy called advice of counsel, where he claims innocence because he was following his lawyers' advice. Kaplan said he had failed to provide enough specifics to justify claiming that he relied on legal advice for actions he took that are now the subject of the case.