Sam Bankman-Fried, the founder of FTX, continued his defense in the ongoing criminal fraud trial, laying the blame on several of his former colleagues for the cryptocurrency exchange's fall. As the trial edges towards its conclusion, the testimony offers a revealing look at internal strife and the immense pressures on high-profile crypto entities.
Bankman-Fried, facing potential life imprisonment over fraud charges related to the downfall of FTX and its affiliate hedge fund, Alameda Research, emphasized his concerns about Alameda's dwindling net asset value, which had plummeted from $40 billion to $10 billion. He painted a picture of a firm on the brink, stating that if the market dropped another 50%, insolvency was imminent.
His narrative seemed to center around Caroline Ellison, the former head of Alameda and also his ex-girlfriend. He recalled confronting her about whether Alameda was adequately hedged against the declining crypto prices. Ellison, cooperating with the government after striking a plea deal, apparently agreed with his concerns.
"She started crying," Bankman-Fried informed the jury, implying the gravity of the situation they faced.
This testimony highlighted the inner workings of a firm struggling with a rapidly changing crypto landscape. Bankman-Fried's discussions with Ellison in September further emphasized this, where he suggested their hedging could have been more aggressive, a sentiment she later agreed with.
However, Bankman-Fried's earlier appearance in court saw him distancing himself from accusations of fraud. He argued that large expenses, like buying naming rights for a sports arena, were financed from the company's profits.
Throughout the trial, prosecutors painstakingly went through the actions of Bankman-Fried, which allegedly led to significant client losses in 2022. Several witnesses against him, former business leaders under his umbrella, have already pleaded guilty and are now cooperating with authorities.
The defense continued to navigate through the complexities of the final days leading up to FTX's collapse. Notably, Bankman-Fried mentioned FTX's engineering director, Nishad Singh, who reportedly faced personal financial difficulties, to the extent of having a therapist on standby due to suicidal tendencies. Singh's fragile state was cited as a potential factor contributing to the company's challenges.
Another figure, Can Sun, the former general counsel of FTX, was indicated as providing potentially misleading information about an $8 billion liability, further deepening the company's problems. This, combined with escalating customer withdrawal requests, painted a dire picture of FTX's final days. Bankman-Fried described this as akin to a "run on the bank," expressing concerns over meeting withdrawal demands.
Regarding his tweets aimed at calming the storm, especially the one asserting that "assets are fine," he defended his stance by stating that he believed the exchange was solvent and that there were no discrepancies in their assets.
However, as the prosecution took over, the narrative took a turn. Assistant U.S. Attorney Danielle Sassoon's cross-examination displayed evidence, like tweets and emails, that seemed to contradict some of Bankman-Fried's claims, raising questions about the integrity of his defense.
As the case nears its end, it's evident that the rise and fall of FTX and its affiliates is a cautionary tale in the volatile world of crypto finance. Whether Bankman-Fried's defenses will hold up remains to be seen, but the implications of this trial will undoubtedly shape industry discussions for years to come.
