United States v. Bankman-Fried

Ellison is the former CEO of Bankman-Fried's company Alameda Research. In her testimony, she described how Bankman-Fried had "directed" her to "commit crimes" during her time at Alameda.[27] Ellison, who has pleaded guilty to seven counts of fraud and conspiracy as part of a cooperation deal with prosecutors, told the court that she had sent "dishonest" balance sheets to Alameda lenders to conceal billions of dollars from FTX customer accounts.[28]

During the cross-examination, Ellison admitted to telling prosecutors that Bankman-Fried "might not know" about some of the customer funds in Alameda bank accounts and that there were "periods of time when he wasn’t paying attention to Alameda".[29]

Wang, a long-time friend of Bankman-Fried's and FTX's former chief technology officer, also has a plea deal with the government and is hoping to serve no prison time. According to Wang, when FTX was facing "an $8 billion shortfall in customer assets" and there was a "surge" in customer withdrawals, Bankman-Fried gave the false assurance on Twitter that "FTX is fine. Assets are fine." Then when Bankman-Fried made the decision a few days later to hand over some remaining assets to Bahamian regulators, his motivation allegedly was that Bahamian authorities were more open to letting him retain control of FTX than U.S. authorities were.

Wang also testified that, at Bankman-Fried's direction, he had given Alameda privileges that no other FTX customer had, but granted that those privileges were a necessary part of Alameda providing the exchange with liquidity.[30] And despite Wang claiming that he didn't know if Ellison had properly hedged, the defense was able to highlight a statement made by Bankman-Fried in a September 2022 memo about potentially shutting down Alameda: "The fact that we didn’t hedge as much as we should have alone cost more in EV [expected value] than all the money Alameda had ever made or ever will make, and that’s the kind of critical mistake we’re likely to make if I’m not actually running the show there."[31][32]

Former head of engineering Singh was the third FTX executive to enter a plea bargain with the prosecution. He testified that Bankman-Fried had "profligately" spent "huge sums of money" on real estate, investments, campaign donations, and celebrity endorsements. Singh condemned the spending as "evil" and reported how he had described one investment as "value extractive" to Bankman-Fried.

On cross-examination, the defense drew attention to the $3.7 million that Singh borrowed from FTX to buy a house after he claims to have become aware of the misuse of customer funds.[33][34]

Other witnesses for the prosecution include FTX customer Marc-Antoine Julliard, FTX general counsel Can Sun, FTX software engineer Adam Yedidia, Alameda software engineer Christian Drappi, BlockFi CEO Zac Prince, accounting professor Peter Easton, investigative analyst Shamel Medrano, FBI agent Marc Troiano, Eliora Katz, and Cory Gaddis.[35][36][37][lower-alpha 2]

There was speculation on whether Bankman-Fried would take the stand, since the restrictions on his prescribed medication for ADHD while in jail have ostensibly been hindering his ability to "meaningfully participate" in the trial.[39] However on October 26, his lawyers announced that he would testify as a witness for his own defense.[40]

Bankman-Fried initially testified to Judge Kaplan without the presence of the jury, so that Kaplan could determine how much of the testimony he would permit them to hear.

Kaplan was told that Chief Regulatory Officer Dan Friedberg put together FTX’s documentation-retention policy, that formal business communications — including regarding regulation and compliance — would take place via channels without auto-deletion, and that in November 2022, Bankman-Fried disabled auto-deletion “on any place I found it”. Under cross-examination, Bankman-Fried said that he did not consider Ellison’s seven drafts of an Alameda balance sheet to be formal business documentation and that business-related spreadsheets were informally shared with lawyers over Signal. However, he said that he no longer has access to the policy, even though “[w]e’ve requested it numerous times”.

The defense also showed Kaplan the application form for the Alameda bank account that allowed FTX to use Alameda as a payment processor before FTX was able to get its own; Bankman-Fried confirmed that Dan Friedberg was the name on the form. During cross-examination, Bankman-Fried said that he did not remember having any conversations about Alameda spending FTX customer funds deposited directly into their bank accounts, but that both he and Friedberg had been part of discussions about Alameda being used to receive customer deposits.

Regarding venture investments, Bankman-Fried explained that since some people did not want investments to come directly from Alameda, lawyers had suggested he get a loan from FTX and make the investment himself. He further testified that as far as he was aware, every centralized exchange used omnibus wallets and that it would have been too unwieldy to have kept individual customer assets in specific wallets. Regarding FTX’s terms of service, Bankman-Fried claimed that he had believed FTX Ventures’ $2 billion fund to be operating under an earlier version and that he generally believed, based on the terms of service, that Alameda was allowed to borrow funds in “many circumstances”. When the prosecution pressed him on his awareness of the special privileges granted to Alameda as an FTX customer, he only conceded that he had "believed that it was permissible for there to be borrowing from assets FTX was holding that were acting as security or collateral".[41] On October 26th, SBF testified in the absence of jurors that attorneys were involved in key FTX decisions with Judge Kaplan evaluating if he would allow to present this defense in front of the jury the following day.[42]

Krystal Rolle is a Bahamas-based attorney who has previously represented Bankman-Fried on non-criminal matters. She testified that the day after FTX declared bankruptcy, Bahamian authorities ordered Bankman-Fried to transfer remaining assets to the Securities Commission of the Bahamas and that he had cooperated.[37][26]

Joseph Pimbley, an expert in financial risk management, testified that most FTX customers had the kind of account that permitted their funds to be lent to other customers.[37][26]

The prosecution objected to the initial list of seven witnesses proposed by Bankman-Fried's team and attorneys representing the Department of Justice moved in August 2023 to disqualify them. In September, the judge sided with the government's position and rejected the defense's list of the seven witnesses.[43] One of them, English barrister Lawrence Akka, was meant to testify that “[FTX’s terms of service] did not contain a declaration of trust over any fiat currency, but gave rise only to a contractual creditor-debtor relationship” according to an August 29 court filing from US attorneys. The judge accepted that Akka would only be offering "legal opinions as to the meaning of the contract terms at issue," so his testimony would not qualify under the US Code’s Rule 702, which states that a witness can opine in the courtroom if their expertise can assist in the jury’s understanding of matters of fact.[44] Other proposed witnesses included consultant Thomas Bishop and data analytics expert Brian Kim, who would both testify on topics relating to FTX’s financials, its software, and document metadata. The judge rejected their presence as well, on the same grounds.[43]