FTX's Sam Bankman-Fried Tells Court, But Not Jury, That He Acted In Good Faith On Legal Team's Advice

FTX’s Sam Bankman-Fried Tells Court, But Not Jury, That He Acted In Good Faith On Legal Team’s Advice

Updated: 27 October 2023

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FTX founder Sam Bankman-Fried (SBF) took to the witness stand yesterday in his trial for fraud and conspiracy but there was no jury as the judge mulled which parts of his testimony could be heard by jurors.

Bankman-Fried defended his actions in the unravelling of his crypto empire, arguing that he’d acted in good faith on the advice of his legal team.

A Testimony in the Making

The 31-year-old former crypto mogul, who has pleaded not guilty to deceiving investors and misappropriating funds from his now-bankrupt cryptocurrency exchange, began by justifying his decisions, citing the presence of lawyers during key financial moves.

He argued that legal counsel led him to believe he was acting within the bounds of the law, despite the prosecution’s claims of extravagant spending on investments, donations, and a lavish lifestyle.

Bankman-Fried’s lawyer, Mark Cohen, asked if he felt reassured by the way lawyers structured loans. Bankman-Fried replied that he had confidence in his legal team’s capability to prepare the necessary bank account applications. He believed they were appropriately done.

[SBF without jury present]SBF: I told them of an investment I wanted to make. Sometimes instead of Alameda being the investor, I would be. I was thinking about it from a business perspective.
Cohen: Did you take comfort in that the lawyers structured it?
SBF: Yes

— Inner City Press (@innercitypress) October 26, 2023

Bankman-Fried Made Controversial Choices

Assistant U.S. Attorney Danielle Sassoon questioned Bankman-Fried about his hiring of a general counsel who had previously been associated with a criminal insider trading scandal. The FTX founder’s response that he’d wanted a legal team that would allow “reasonable risks,” raised eyebrows and prompted objections from his defence attorney.

Sassoon also inquired about his general counsel’s alleged use of illegal narcotics with Bankman-Fried’s employees, leading to an objection and a ruling set for the following day.

During his testimony, Bankman-Fried experienced a constant stream of questions from Sassoon, which led to him offering sometimes hesitant and unclear answers. His replies often included statements like, “I wouldn’t phrase it that way.”

“Listen to the question and answer directly,” Judge Kaplan instructed Bankman-Fried at one point.

Lack of Clarity From Bankman-Fried

Throughout his testimony, Bankman-Fried appeared uncomfortable and often appeared unaware of how his companies were functioning, requesting documents that were either unavailable or did not exist. When asked about the contents of a document allowing him to borrow or spend customer funds, he remained silent for minutes, leading to objections from the prosecution.

Prosecution’s Objections and Judge’s Dubious Outlook

Prosecutors have objected to Bankman-Fried’s claims that he acted based on legal advice, asserting that the attorneys were not fully informed and that it is irrelevant.

Judge Lewis Kaplan refrained from an immediate ruling on which parts of Bankman-Fried’s testimony will be admissible as evidence, but he has expressed scepticism about some of the arguments put forward.

The trial resumes today with Judge Kaplan set to rule on the admissibility of SBF’s statements.

If found guilty, Bankman-Fried faces the possibility of a life sentence in prison.