Sam Bankman-Fried blames everyone but himself for FTX’s approach to risk management, including a trillion-dollar trading disaster

After an unusual hearing with out jurors current on Thursday, which noticed the FTX founder placed on a disastrous efficiency below cross examination by Division of Justice prosecutors, he acquired a do-over on Friday.

His resolution to testify in any respect is atypical, with most defendants selecting to not take the stand for worry of self-incrimination. Nonetheless, prosecutors’ unrelenting case—together with three star witnesses, all members of Bankman-Fried’s internal circle who testified they committed fraud at his path—compelled his group to tug what some are describing as a authorized “Hail Mary.”

Bankman-Fried’s attorneys proposed quite a few subjects that the choose overseeing the case, Lewis Kaplan, stated might not be admissible in entrance of a jury. Chief amongst these was Bankman-Fried’s protection that most of the trade’s missteps had stemmed from the bad advice of earlier legal professionals.

After a dry run on Thursday that noticed the protection and prosecution perform their questions with no jury current, Kaplan dominated on Friday that a lot of the testimony shouldn’t be heard by jurors, together with whether or not FTX legal professionals had signed off on monetary promissory notes and phrases of service.

Regardless of the setback, Bankman-Fried retook the stand.

‘Smaller errors…bigger errors’

With Bankman-Fried’s capacity accountable earlier legal professionals severely restricted, he sought out different targets. His attorneys—and private writings—indicated that he would shift responsibility to Caroline Ellison, his one-time girlfriend and the previous CEO of Alameda Analysis, FTX’s related buying and selling agency.

On the onset of his testimony, below protection lawyer Mark Cohen, Bankman-Fried supplied some contrition.

“I made quite a few smaller errors and quite a few bigger errors,” he stated, sporting a boxy swimsuit that appeared outsized on his slighter body.

The problems, Bankman-Fried stated, stemmed from FTX’s lack of threat administration. And although he admitted to some fault, his solutions made clear that others had dedicated errors, albeit below his free strategy to administration.

In a single incident from 2020, Bankman-Fried recalled how FTX’s lagging threat engine and Alameda’s position as a backstop liquidity supplier—in different phrases, its duty to soak up losses from different customers—brought on the buying and selling agency to wrack up a unfavorable stability within the trillions of {dollars}, triggering your entire operation to close down.

Alameda served an vital position to FTX as a market maker—facilitating trades between customers—and at one level early on was accountable for 50% of all quantity on the trade. To guarantee that Alameda may proceed to grease the engine and function a backstop liquidity, Bankman-Fried stated that two of his key deputies—CTO Gary Wang and engineering chief Nishad Singh—instituted a number of fixes, with out his specific data.

These ultimately included two options that might result in Alameda’s downfall, together with one which allowed it to wrack up unfavorable balances, and one other that put its line of credit score on FTX above $60 billion. In his testimony, Bankman-Fried implied that he was vaguely conscious of the options, however allowed Wang and Singh to function on their very own. Each testified that that they had made the modifications below Bankman-Fried’s path.

‘Higher understanding’

Bankman-Fried stored repeating the identical excuse: Whereas he was nominally in control of FTX, he was pulled in too many instructions to know what was occurring.

“I want I had a greater understanding than I had,” he stated, responding to Cohen when requested about monitoring property on the trade.

He stated that he labored wherever from 12 to 22 hours a day. Regardless that he was the founder, majority proprietor, and one-time CEO of Alameda, he put Ellison and Sam Trabucco in cost in mid-2021. They’d complementing abilities, with Trabucco adept at hedging methods and Ellison higher at managing staff. Trabucco quickly “drifted” towards early retirement, stated Bankman-Fried, laying all duty on the toes of Ellison. Bankman-Fried stated he was not concerned within the “day-to-day.”

His felony trial revolves across the allegation that Alameda stole billions of {dollars} of buyer property, which Bankman-Fried denied firstly of his testimony. His direct examination will proceed into Monday, his lawyer stated, at which level prosecutors can have the chance to poke holes in his story—this time, in entrance of a jury.