(NEW YORK) — Four months before FTX collapsed into bankruptcy, Sam Bankman-Fried told the jury Monday at his federal fraud and conspiracy trial he confronted Caroline Ellison with concerns Alameda Research — his companion hedge fund — could become insolvent.
He testified that he told Ellison, who was then co-chief executive of Alameda and is Bankman-Fried’s ex-girlfriend, that the hedge fund should have hedged against some of its risky investments.
“She started crying,” Bankman-Fried said. “She also offered to step down.”
Part of Bankman-Fried’s defense strategy is to deflect blame for the FTX collapse. Ellison pleaded guilty to criminal charges and testified under a cooperation agreement with federal prosecutors in New York. She has testified that she committed fraud with Bankman-Fried and at his direction.
She also testified earlier this month that Bankman-Fried thought there was a “5% chance he would become president,” and that he believed in utilitarianism and thought rules against lying or stealing inhibited his ability to maximize the greatest benefit for the most people.
Bankman-Fried conceded on the witness stand Monday he made mistakes but testified that he committed no fraud.
“Did you defraud anyone?” defense attorney Marc Cohen asked. “No, I did not,” Bankman-Fried answered.
“Did you take customer funds?” Cohen asked, to which Bankman-Fried responded: “No.”
Bankman-Fried is on trial for what federal prosecutors have described as “one of the biggest financial frauds in American history.” The former crypto billionaire faces seven counts of fraud, conspiracy and money laundering centered on his alleged use of customer deposits on the crypto trading platform FTX to cover losses at his hedge fund, pay off loans and buy lavish real estate, among other personal expenses.
He has pleaded not guilty to all counts. If convicted, he could face a sentence of up to 110 years in prison.
The defense has tried to convince the jury that Bankman-Fried was unaware of how dire his company’s finances were. He testified he traveled to the Middle East in October 2022 because he felt Alameda was solvent and in no danger of going bankrupt. Otherwise, he said, “I would have been in full-on crisis mode.”
Earlier this month, prosecutors explored Bankman-Fried’s unusual living arrangements and the luxurious lifestyle he’d been living in the Bahamas that was allegedly paid for, illegally, with customer and investor money.
Bankman-Fried stepped down from his role at FTX in November 2022 amid a rapid collapse that ended with the company declaring bankruptcy. Prosecutors charged Bankman-Fried the following month with an array of alleged crimes focused on a scheme to defraud investors.
In an interview with ABC News’ George Stephanopoulos in November 2022, Bankman-Fried denied knowing “there was any improper use of customer funds.”
“I really deeply wish that I had taken like a lot more responsibility for understanding what the details were of what was going on there,” Bankman-Fried said at the time. “A lot of people got hurt, and that’s on me.”
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