The fifth week of the high-stakes trial that has captivated the cryptocurrency world started with Sam Bankman-Fried (SBF) resuming his testimony on the stand earlier than a radical cross-examination by the prosecution.
SBF was hit with intense questioning about his position because the CEO of FTX and the internal workings of the crypto alternate in each periods and recounted among the key choices he made within the weeks main as much as the collapse of FTX and Alameda Analysis.
Choose Kaplan opened the day’s proceedings by addressing the jury and informing them that it was unsure if the trial would conclude by Nov. 2 and requested if any of them had vital points with persevering with into Nov. 3.
Not one of the jury members objected to the proceedings taking longer, and the proceedings started with SBF resuming his testimony from the prior week.
Remaining testimony
In the course of the direct examination, protection lawyer Mark Cohen delved into SBF’s obligations because the CEO of FTX. The previous billionaire revealed that he ready precedence lists to tell staff about his actions and the corporate’s strategic targets.
The protection subsequently submitted a “precedence checklist” from late September 2022 to early October 2022 into proof as a key exhibit to additional help the statements.
Cohen highlighted key priorities, beginning with the significance of knowledge. SBF defined that the FTX group was engaged on a database to make buying and selling sooner and extra accessible for non-developers. SBF’s dedication to those initiatives was evident as he talked about spending roughly 12 hours each day on them, managing the groups concerned.
Cohen aimed to uncover the income potential of those initiatives, however an objection from AUSA Danielle Sassoon on the type of the query was sustained by Choose Kaplan. However, SBF mentioned he believed the initiatives might double FTX’s annual income from $1 billion to $2 billion.
The dialogue then shifted to danger administration at FTX, and SBF instructed the courtroom that he was at all times dedicated to danger administration and highlighted the presence of a danger engine to deal with potential points.
Cohen then explored discussions about hedging, notably with Caroline Ellison and Sam Trabucco, who had been serving as co-CEOs of Alameda Analysis.
SBF revealed that these conversations befell within the Orchid condo examine; nevertheless, when requested a few particular second involving Alameda’s web asset worth (NAV) and Bitcoin’s worth, an objection from the prosecution was sustained — hanging the testimony.
SBF disclosed that in one dialog, Caroline Ellison acknowledged the necessity for Alameda to hedge and even supplied to step down. Nonetheless, his response was to give attention to placing on the hedges as an alternative of punishing errors.
SBF mentioned he urged for a extra substantial hedging effort in subsequent discussions with Ellison and Trabucco, emphasizing the significance of managing danger successfully.
Cohen additionally inquired a few journey SBF took to the Center East in October 2022, revealing his in depth journey schedule, typically spending 100 days a yr on the highway, primarily to Washington, D.C.
SBF revealed that he had been invited to Dubai for a convention and had met with some sovereign wealth funds. He added that he had been cautious of the conferences since they could upset Binance — its direct rival within the area— however had gone by means of with them finally.
Cross-Examination
The cross-examination, carried out by Assistant U.S. Lawyer Danielle Sassoon, started with the prosecution difficult SBF on varied statements he had made.
Sassoon started by confronting SBF about his stance on cryptocurrency regulation. She referred to a Twitter publish the place he seemingly urged that his help for regulation was contingent on safeguarding clients.
Whereas SBF couldn’t recall the precise tweet, he admitted to creating an announcement akin to “F*ck regulators” in personal, implying that it may need been a public relations tactic.
The cross-examination then delved into SBF’s alternative of phrases on Crypto Twitter. SBF conceded to utilizing derogatory language, referring to a subset of Crypto Twitter customers as “Dumb motherf*ckers.”
Sassoon probed additional, questioning whether or not SBF believed regulation might present FTX with a aggressive benefit over Binance. SBF acknowledged that there have been each professionals and cons to this attitude.
The questioning then turned to an exploration of SBF’s claims relating to FTX’s danger mannequin and its suitability for the U.S. market. SBF mentioned that some features of FTX’s danger mannequin would work nicely within the U.S., highlighting nuances in his earlier statements.
The cross-examination additionally touched upon SBF’s interview with The New York Occasions’ Andrew Ross Sorkin relating to FTX’s borrow lending facility. SBF couldn’t recollect the specifics of the interview however agreed to assessment it later.
Sassoon additionally raised considerations about clients going unfavourable and questioned whether or not typical clients might keep unfavourable account balances for prolonged intervals with out being liquidated, emphasizing the correlation with collateral and features of credit score.
Sassoon introduced an e-mail from March 2022 that didn’t point out entrance working, difficult SBF’s assertion that Alameda performed by the identical guidelines as different contributors. SBF’s response revealed uncertainty, and Sassoon probed additional into his characterization of Alameda Analysis Restricted as a separate entity and his reference to FTX as a impartial market infrastructure. SBF’s recollections had been combined on these issues.
All through the cross-examination, SBF acknowledged sure factors, resembling Alameda having accounts with the “Permit Unfavourable” flag and the power of shoppers to withdraw substantial sums with out dealing with liquidation dangers. He didn’t dispute these claims.
The questioning additionally prolonged to SBF’s involvement in varied monetary transactions, together with the acquisition of Binance’s fairness stake in FTX for $2 billion, investments in Genesis Digital Property, and the acquisition of Storybook Brawl for $20 million. Sassoon additionally raised questions on an actual property transaction involving the CEO of The Block, which SBF initially couldn’t recall.
The cross-examination continued with Sassoon delving into SBF’s involvement in varied funding choices. SBF acknowledged directing the funding in Modulo Capital however was extra cautious in his response when questioned about his position in investing in K5, stating that he directed “AN funding,” however not essentially the precise one in query. Nonetheless, when requested about his determination to spend money on Robinhood, SBF affirmed that it was certainly his alternative.
The prosecution then turned its consideration to SBF’s position on the board of administrators of Alameda Analysis Restricted. Sassoon challenged SBF by asking if he was the one director on the board.
SBF responded:
“This makes it look like I used to be as of then. It wasn’t my intention to be.”
Choose Kaplan intervened as a result of confusion attributable to SBF’s response, stating that SBF owned 90% of the inventory, and questioned whether or not he grew to become a director by mistake. SBF firmly replied, “No.”
AUSA Sassoon launched an affidavit that SBF had signed, however the cryptocurrency entrepreneur didn’t seem to acknowledge the doc. Sassoon questioned SBF’s determination to file the affidavit with out studying it.
The questioning then turned to SBF’s possession of Robinhood shares and whether or not he was conscious that many purchasers couldn’t entry their funds throughout a selected interval. SBF acknowledged being conscious of the problem however denied contemplating calling Robinhood to amass shares.
Sassoon additionally probed SBF on his involvement in directing funds to pay lenders whereas Alameda was repaying its money owed. SBF conceded that he directed these funds however argued that he didn’t consider it posed a big danger to the FTX alternate.
The prosecution emphasised the danger inherent in taking cash from FTX to repay lenders and inquired whether or not SBF understood the potential for a monetary gap rising. SBF acknowledged the inherent danger however didn’t totally agree with characterizing the motion as margin buying and selling.
Because the direct examination progressed, the main focus shifted to spreadsheets and the sequence of occasions main as much as SBF’s data of Alameda’s incapacity to pay. SBF talked about another spreadsheet, Alt 7, because the one he had seen.
AUSA Sassoon pressed additional, asking SBF if he recalled receiving a number of tabs from Ellison.
SBF appeared unsure however admitted that there could have been a number of tabs. Sassoon then launched Google metadata, indicating that SBF had accessed another spreadsheet.
Regardless of objections from SBF’s protection, Choose Kaplan overruled and allowed the road of questioning to proceed.
The proceedings for the day concluded with questions on SBF’s involvement in directing enterprise investments and his efforts to boost funds within the Center East. SBF confirmed his participation in these actions.
Courtroom adjourned
The prosecution instructed Choose Kaplan that it intends to proceed the cross-examination for an additional two hours when the courtroom reconvenes on Oct. 31.
As soon as that concludes, the protection will get one other probability for a direct examination to deal with the problems and considerations raised in the course of the cross-examination.
The prosecution additionally confirmed that it has two rebuttal witnesses ready to take the stand within the coming days.
