Former FTX CEO Sam Bankman-Fried Testifies in Criminal Trial
Sam Bankman-Fried, the former CEO of the now-defunct FTX crypto exchange, appeared in court for his criminal trial. His lawyer, Mark Cohen, concluded the direct examination that began the previous week. Bankman-Fried recounted the events of November 2021 when users started withdrawing funds from the exchange. He expressed his belief that both FTX and Alameda Research, its sister trading firm, could still be saved.
The “Fine” Tweet and Contact with Binance CEO
Bankman-Fried referred to a tweet where he claimed that FTX assets were “fine.” He clarified that he meant there were no asset deficiencies. Additionally, he mentioned being in touch with Changpeng Zhao, the CEO of rival exchange Binance. Binance had initially agreed to acquire FTX but later backed out of the deal.
Bulk of Alameda Assets Valued at $10 Billion
In October 2022, Bankman-Fried compiled a list of all Alameda accounts at FTX and discovered that their net asset value was approximately $10 billion. At that time, he did not consider Alameda’s liabilities to be catastrophic. He stated that if they had been larger, he would have regarded it as a crisis.
CoinDesk Article and Missing Assets
Bankman-Fried mentioned a CoinDesk article published on November 2nd, 2021, which raised concerns about FTX’s balance sheet. He believed the article did not include a comprehensive list of assets available to the firm. For example, it did not account for FTX equity owned by Bankman-Fried through an entity called Paper Bird. He also noted that Alameda had already hedged some of its positions, which the leaked document failed to reflect.
Differing Perspectives: Bankman-Fried vs. Former Subordinates
Throughout his testimony, Bankman-Fried’s account of the situation at FTX differed from that of his former subordinates. He emphasized that he had been proactive in preventing a liquidity crisis at Alameda. He claimed to have instructed former CEO Caroline Ellison to hedge the firm’s trading positions as early as summer 2022.
Inadequate Hedges and Market Crash
Bankman-Fried revealed that despite hedging positions in bitcoin and other coins, Alameda had not hedged SOL and FTT. When these coins experienced a significant price drop in early November, Alameda did not have the necessary safeguards in place.
Cross-Examination Focuses on Solvency Claims
Danielle Sassoon, the U.S. assistant attorney, began the cross-examination by questioning Bankman-Fried about his repeated assurances of FTX’s solvency. Despite being presented with evidence such as tweets, emails, and interview excerpts, Bankman-Fried claimed not to remember making such statements.
Hot Take: Bankman-Fried’s Testimony Raises Questions About Communication and Risk Management
Sam Bankman-Fried’s testimony in his criminal trial sheds light on the challenges faced by FTX and Alameda Research during their tumultuous period. The differing perspectives between Bankman-Fried and his former subordinates highlight potential communication gaps within the company. Furthermore, inadequate risk management measures resulted in significant losses when certain coins experienced a market crash. As the trial continues, it remains to be seen how these factors will impact the outcome and any potential legal consequences for Bankman-Fried.
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