(New York) The former darling of cryptocurrencies Sam Bankman-Fried, on trial in New York, attempted a counterattack on Friday on the first day of his hearing, notably charging his former collaborator Caroline Ellison.
“SBF” is on trial for having organized, without the knowledge of clients, the illegal use of funds deposited on its cryptocurrency exchange platform FTX, which went bankrupt in November 2022.
Up to $14 billion was siphoned off to fuel the often risky activities of his investment company Alameda Research.
During much of the five hours that lasted the first part of his hearing on Friday, Sam Bankman-Fried sought to escape the black and white picture painted by the prosecution, which presented him as the mastermind of a manipulation.
The native Californian notably tried to justify the privileges enjoyed by Alameda, authorized to borrow up to 65 billion dollars from FTX, what’s more without providing the guarantees requested from ordinary clients.
The company, of which “SBF” was the main shareholder, was a market maker, he explained, meaning that it offered FTX users the guarantee of being able to buy or sell an asset at any time.
PHOTO AMR ALFIKY, REUTERS ARCHIVES
Sam Bankman-Fried
A failure of Alameda, due to lack of sufficient credit line, “would have had disastrous consequences for the platform” FTX, justified the former manager.
The young thirty-year-old also, indirectly, blamed the failure of Alameda, which led to that of FTX, on the mistakes of the woman he had placed at his head during the summer of 2021, Caroline Ellison.
As FTX grew, “it became untenable for me to run both companies,” said the former billionaire, whose fortune soared as his companies crashed.
From then on, “I was no longer involved in the day-to-day running of Alameda,” the defendant said.
“Critical error”
He nevertheless claimed to have asked Caroline Ellison, from the end of 2021, that Alameda cover itself financially against a possible collapse of the cryptocurrency market.
“She was less enthusiastic than me” about this initiative and never put these protections in place, despite repeated requests regularly, according to Sam Bankman-Fried, who had an affair of several months with Caroline Ellison.
In the spring of 2022, the cryptocurrency industry was rocked by a series of failures, which caused the value of almost all digital currencies and that of Alameda’s assets to plummet.
“The fact that we did not cover ourselves cost us more than Alameda has ever won or will ever win,” Sam Bankman-Fried will write during the summer of 2022, according to an internal document produced at the hearing.
On Friday, he estimated the cost of this failure at “probably more than ten billion dollars”.
“This is the kind of critical error that is bound to happen if I am not in charge,” the contractor also communicated to Alameda executives.
Sam Bankman-Fried also claimed to have believed that the funds he borrowed from Alameda for donations to political candidates or equity investments in companies came from revenues generated by FTX and not from customer deposits.
He also assured that the exact amount of Alameda’s debt to FTX had been hidden from him until fall 2022.
Suit
At the hearing, the accused had put aside his famous shorts and T-shirt for a smart suit, and swapped the abundant curly mane that made his legend for a short, all-purpose haircut.
The one who embodied, until a year ago, the face of cryptocurrencies, admitted to having made “several small mistakes and also big mistakes”, in response to a question from one of his lawyers, Mark Cohen.
“By far the biggest was not having a risk management team in place,” he continued.
“Have you scammed anyone?” », asked him for his advice. “I didn’t do that,” “SBF” replied.
“Have you stolen money from customers?” », continued Mark Cohen. “No,” said Sam Bankman-Fried.
Since the opening of this federal trial for fraud and criminal conspiracy, three key witnesses have affirmed that “SBF” was fully informed of the financial situation of the company and had done nothing to change its trajectory.
The “SBF” hearing will continue on Monday, followed by cross-examination. Attorney Mark Cohen told federal Judge Lewis Kaplan that his client would be the last witness to be heard.