Sam Bankman-Fried Takes To The Stand As FTX Trial Continues

Key takeaways

• FTX founder Sam Bankman-Fried was in court last week testifying
• He claims FTX’s collapse happened because of maladministration rather than fraudulently
• Three former colleagues implicated in the scandal have already testified against him

The plot thickened at the blockbuster FTX trial last week as its disgraced founder, wunderkind Sam Bankman-Fried, testified in court. He pleaded ignorance or admitted incompetence over running FTX and its collapse but denied any wrongdoing.

SBF’s defense focuses on pinning the blame on former head honchos Caroline Ellison, Gary Wang and Nashid Singh, all of which have already testified against him. As the trial wraps up and all of the dirty laundry is out there, everything hangs in the balance for the now-infamous foursome.

Here’s the lowdown on Bankman Fried’s testimony, how the others involved shared their side of the story and what’s happening with the wider crypto world lately.

How did SBF’s testimony go?

Sam Bankman-Fried, CEO and founder of the now-defunct crypto exchange FTX and the so-called Crypto King, dropped some bombshells in his testimony last week. SBF was keen to deflect blame onto his underlings and sold the story that FTX collapsed because of idiocy rather than straight-up fraud.

Caroline Ellison, Bankman-Fried’s ex-girlfriend and CEO of partner hedge fund Alameda Research, came under heavy fire during the testimony. He claimed Ellison hadn’t listened to his instructions that Alameda Research should “get shorter” to mitigate financial risk.

Former colleagues, head of technology Gary Wang and CTO Nishad Singh, were also thrown under the bus by SBF. The Crypto King alleged he was more their adviser than calling the shots, with the “allow-negative” feature – also known as using FTX users’ money for whatever the company wanted – was down to them, not him.

It was clear that SBF’s defense team’s strategy was to paint everything in a more hapless light than the prosecutors have, downplaying things like deleting communications and rambling to the point where Judge Lewis Kaplan had to reprimand the crypto darling to answer questions directly.

The jury was sent home during the testimony after the prosecution objected to SBF testifying about lawyers being involved in some of the decisions behind the FTX collapse. Bankman-Fried faces seven charges of fraud and money laundering.

How has the rest of the trial gone?

SBF’s testimony was, naturally, starkly compared to his previous colleagues. The trial has already been going on for a couple of weeks, with Ellison testifying earlier in October with her side of the story.

Ellison went into details over her role as CEO of Alameda and her relationship with SBF, where she repeatedly implicated him in quietly redirecting $10 billion in FTX customer funds to boost Alameda after a crash in crypto. Ellison has pleaded guilty to wire fraud and conspiracy charges.

She also claimed that SBF’s trademark scruffy demeanour was carefully curated to help FTX’s image, their on-again, off-again romantic relationship hurt business communication and that Bankman-Fried blamed her for not hedging Alameda’s position earlier after the crypto crash.

Wang has also given his testimony, having pleaded guilty to four counts of fraud. “He was a friend of mine. I trusted and respected him,” he said, claiming he had no idea FTX was $8 billion short of funds until just before the news broke.

FTX filed for bankruptcy on November 11 last year, with Wang testifying that within hours of the company filing, SBF ordered him to send FTX’s remaining assets to securities regulators in the Bahamas instead of to the U.S. regulator handling the bankruptcy. The reason? SBF thought the Bahamian regulators “seemed more friendly to him”, according to Wang.

Another bombshell from former executive Singh was that FTX made political donations using FTX customer funds, and he wasn’t happy with what he viewed as excessive spending from Bankman-Fried.

How is crypto performing at the moment?

FTX’s financial problems started to mount when the crypto market first crashed in 2022, once it became clear that inflation was rapidly rising and interest rates did the same to try and counter the problem. The bear market saw crypto go from a market cap of $3 trillion to just $904 billion by the end of 2022.

The price of Bitcoin and Ethereum has pretty much languished for most of this year as the SEC continued to slap every major crypto company with a lawsuit, including Binance. But as always, crypto is the comeback kid, and the price has rallied recently to its highest point since the bear market began last year.

Bitcoin has managed to rally 30% and is currently trading around the $34,750 mark after breaching the $35,000 ceiling last week. Some experts believe the price could soon go as high as $40,000. Ethereum has seen a similar situation, gaining 16% since 19 October to reach a price of $1,817.

The rallies are down to renewed optimism that Bitcoin ETFs might get the go-ahead from regulators, giving institutional investors more confidence in the alternative asset. Geopolitical risks have also widened crypto’s appeal as a potential safe haven compared to stocks.

The bottom line

The ongoing FTX trial is set to be with jurors this week, so we’ll find out soon enough what the verdict is and whether SBF has done enough to convince them of his innocence. With three of his former colleagues having pleaded guilty, it’s not looking great.

As for the crypto market’s rally, there’s still hope that the asset class is down, but not out. Further news over the Bitcoin ETFs is expected soon, so we’ll likely see the market either crash or soar depending on the outcome.