Day 15 of Sam Bankman-Fried Trial: “I’m Not Sure, I Don’t Remember” Became the Catchphrase

Sam Bankman-Fried

After answering the defense lawyer’s questions, Sam Bankman-Fried is now facing questions from the U.S. prosecutor, with his past statements to the media about the former FTX CEO coming back to “haunt” him.

Continuation of the Defense Lawyer’s Cross-examination

On the 14th day of the trial, the defense lawyer continued to ask questions to allow Sam Bankman-Fried to defend himself.

June – September 2022 phase

The former FTX CEO stated that he maintained a list of priority tasks to be done from September to October 2022. One of them was to develop a feature that would allow non-programming personnel (including Sam) easy access to FTX’s database. The purpose of this was to increase the speed of transactions on FTX.

Bankman-Fried asserted in court that, according to estimates, these changes could help FTX generate an additional $1-2 billion in annual revenue. Additionally, FTX had risk management tools to prevent users’ asset liquidation from affecting the exchange.

Returning to the risk management issue, Sam Bankman-Fried mentioned having a conversation with former Alameda Research CEO Caroline Ellison about creating hedge trades for the fund. This action was taken after the LUNA-UST crash, causing Bitcoin to fall to $20,000 and heavily impacting Alameda. Sam said Caroline wanted to resign at that time, so he left the decision to her and only asked Alameda to establish a hedge position to mitigate risks.

In September, Caroline Ellison reported to Sam Bankman-Fried about the hedge trades, but Sam was dissatisfied, believing that the reported value should be doubled. Caroline agreed with Sam’s suggestion.

Also in September, Sam mentioned a work trip to Dubai and the Middle East to attend a conference. When asked if he met with the head of a sovereign wealth fund in the Arab world, Sam Bankman-Fried gave an unclear answer. However, he stated that the business trip was a success as FTX gained market share from Binance, turning Dubai into its headquarters.

Previous witnesses claimed that Sam Bankman-Fried’s visit to the Middle East was to seek investors to rescue FTX from its asset shortfall. The former CEO is also said to have met with Saudi Crown Prince Mohammed bin Salman to discuss investing in the exchange.

Sam Bankman-Fried stated that he usually spends up to 100 days a year on business trips, mainly to the U.S. capital, Washington D.C.

November 2022 – the time of FTX bankruptcy

When asked by the defense lawyer about the days leading up to FTX’s bankruptcy, Sam Bankman-Fried said everything started with a CoinDesk article that revealed Alameda’s balance sheet. However, Sam mentioned that the information in the article was outdated regarding the investment fund.

Subsequently, Binance CEO Changpeng Zhao threatened to sell all FTT, causing the FTX token’s price to plummet on November 6.

Sam Bankman-Fried contacted Caroline Ellison, and they both agreed to speak out to reassure the situation. The former Alameda CEO’s tweet asserted that the fund still had over $10 billion in assets not reflected in the leaked CoinDesk balance sheet.

Nevertheless, pressure had already begun to mount on FTX as, on November 6 alone, users withdrew over $1 billion in assets from the platform.

In response, Caroline Ellison tweeted, declaring the intention to buy back all of Binance’s FTT at a price of $22 USD/token, but it did not improve the situation. By November 7, users had withdrawn $4 billion from FTX.

Nevertheless, pressure had already begun to mount on FTX as, on November 6 alone, users withdrew over $1 billion in assets from the platform.

In response, Caroline Ellison tweeted, declaring the intention to buy back all of Binance’s FTT at a price of $22 USD/token, but it did not improve the situation. By November 7, users had withdrawn $4 billion from FTX.

FTX later announced a delay in the withdrawal process. Sam Bankman-Fried, the CEO, mentioned that the delay for Bitcoin withdrawals could be up to 1 hour, as former FTX CTO Gary Wang informed.

Sam reassured the crypto community on Twitter, stating, “FTX is still fine, assets are still safe,” and debunked rumors about the exchange (this Twitter post has been deleted). The former FTX CEO suggested that Binance may have played dirty because FTX consistently collaborated with authorities. This statement by Bankman-Fried was immediately opposed by U.S. prosecutors and was accepted by the judge.

When questioned by lawyers, Sam Bankman-Fried insisted that at that time, he still believed FTX had no issues, no asset shortfall, and did not use customer funds for other purposes. However, the situation continued to worsen. The cryptocurrency market was plummeting, affecting the value of Alameda’s coins used as collateral. The fund’s protective measures were not as effective as hoped. Recognizing the situation was getting out of control, Sam Bankman-Fried deleted the Twitter post saying “FTX is still fine.”

He then announced the sale of FTX to Binance. Initially, Binance agreed to the acquisition deal. However, after a day of assessment, the exchange reversed its decision, causing further panic in the cryptocurrency market.

The former FTX CEO sought out another investment fund, Apollo Management, preparing financial reports to submit to them. This was also when FTX’s lawyer, Can Sun, was invited to join a meeting between the two parties to justify the shortfall, as stated in his testimony. Sam Bankman-Fried declared that during these days, he worked 22-23 hours a day.

On November 11, 2022, Sam Bankman-Fried announced the bankruptcy of FTX and Alameda Research, stepping down as CEO himself.

In the following days, Sam Bankman-Fried tried to appear in the media to justify FTX’s collapse. The Bahamian authorities (where FTX is headquartered) also contacted the former CEO to clarify the situation. Sam Bankman-Fried and Gary Wang then transferred the remaining assets on FTX to the Bahamian government.

Prosecutor’s Confrontation Session

Sam Bankman-Fried still holds dominance over Alameda despite no longer being the CEO

The prosecutor confirms that Sam Bankman-Fried owns 90% of the shares in Alameda, as stated by the former FTX CEO. In 2022, although no longer the CEO of Alameda, Sam regularly stays informed about the fund’s activities. According to evidence presented in court, Sam Bankman-Fried continues to engage with Alameda’s current CEOs, Caroline Ellison and Sam Trabucco, contributing opinions to transaction decisions.

The prosecutor presented evidence indicating that Sam Bankman-Fried still directs Ellison and Trabucco in their transactions, notably in hedging through investments in Japanese government bonds.

The prosecutor then questioned Sam Bankman-Fried about his efforts to clarify his situation in the media after FTX’s bankruptcy. The prosecutor presented evidence showing that during these interviews, Sam Bankman-Fried consistently asserted that he no longer had any involvement in the operations of Alameda Research, contrary to the earlier statements.

The contrast in statements before the media and behind the scenes at FTX

The U.S. Department of Justice prosecutor continues to challenge Sam Bankman-Fried’s statements on social media in October 2022, asserting that FTX is a secure platform where users can confidently deposit and trade, emphasizing the “core of crypto is owning your own assets,” and FTX will always allow withdrawals at any time. However, at that very moment, the CEO of FTX knew that the exchange was facing an asset deficit of up to 8 billion USD.

During the questioning where the prosecutor presented specific evidence, Sam Bankman-Fried began his responses with phrases like “I’m not sure,” “I don’t remember,” “I guess so”… In the remaining part of the trial, the former CEO of FTX used similar phrases over 150 times.

The prosecutor questioned Sam Bankman-Fried about his input on the draft crypto regulation that he submitted to the U.S. Congress in the fall of 2023. The former CEO of FTX wrote on Twitter that “protecting customers is of the utmost importance” and assured U.S. lawmakers that everything he declared was the truth.

Despite that, in the “revealing the true face” exchange after FTX went bankrupt, Sam Bankman-Fried admitted that engaging with U.S. officials was just a “smokescreen” to polish the exchange’s reputation. In reality, the former CEO showed no respect for U.S. financial regulatory bodies.

SBF Regulators

When questioned by the prosecutor about the contradictions in his statements, Sam Bankman-Fried only admitted that they had occurred without providing further explanation.

Additionally, the prosecutor presented evidence that showed Sam Bankman-Fried had once referred to his Twitter followers and the cryptocurrency community as “fools.” The former CEO of FTX claimed that this was only true for a small portion of them.

Sam Bankman-Fried has made significant political contributions to U.S. officials, hoping that they would take legal action against Binance – FTX’s largest competitor. Sam Bankman-Fried stated that this is only partially true, as there are both advantages and disadvantages to the situation.

The privileges of Alameda on FTX

U.S. prosecutors shifted the focus to the possibility of FTX users withdrawing funds from the platform. Sam Bankman-Fried says FTX has no restrictions on users withdrawing funds.

However, if users collateralize assets for margin trading, Sam Bankman-Fried responds that there is no way for a user to deposit $10 as collateral on the platform, borrow, and then withdraw assets amounting to billions of dollars, as the prosecutor’s example suggests. Additionally, users need to maintain collateral on the platform to borrow other coins. This is an important part of FTX’s usage policy, as well as facilitating the liquidation mechanism in case a user’s position is in deficit.

Sam Bankman-Fried has repeatedly asserted on social media and before the U.S. Congress that FTX’s liquidation mechanism is superior to competitors in the crypto market, ensuring that all users must collateralize assets when trading on margin. This collateral can only be in the form of crypto or cash, not real estate or securities.

When questioned by the prosecutor, Sam Bankman-Fried states that regular users are usually not allowed to maintain a negative balance on the platform for more than a few days, let alone months. Typically, when the value of the position approaches the value of the collateral, their account will be liquidated.

All the above references are constructed by the prosecutor to directly target the privileges of Alameda Research on FTX— privileges that many witnesses have attested to in court, such as the non-liquidation of assets, permission to maintain a negative balance through the ‘allow negative’ feature, borrowing money from FTX users and then withdrawing it from the platform, and collateralizing positions with other assets.

However, Sam Bankman-Fried has repeatedly asserted to the media that Alameda’s trading account on FTX is no different from other FTX users. The prosecutor provides email exchanges and interviews between the former CEO of FTX and reporters from Bloomberg and the Wall Street Journal, in which Sam declares that Alameda Research does not “front run” trades of FTX users and has no special privileges.

Under pressure from the prosecutor, Sam Bankman-Fried couldn’t provide an example of another FTX customer who could receive fiat deposits like Alameda, as well as have a credit limit of up to $65 billion like Alameda. The former CEO also reluctantly admits that only Alameda has an account with the “allow negative” feature, after being pressed by the prosecutor and responding with many “I don’t remember” and “I’m not sure” statements.

Ultimately, the prosecutor presses Sam to answer whether Alameda is allowed to withdraw borrowed funds from FTX without the risk of position liquidation, and the former CEO of FTX nods in agreement.

Sam Bankman-Fried’s lifestyle

To counter Sam Bankman-Fried’s statements earlier in the day that he keeps his hair unkempt out of “laziness” and wears shorts and a T-shirt for “comfort,” the prosecutor dug into the former CEO of FTX’s past media interviews. In these interviews, Sam asserted that he needed to maintain such an image before the public to stay true to his commitment to the “community” and the philosophy of “effective altruism” that he follows. Sam Bankman-Fried had previously stated that he would dedicate a significant portion of his multibillion-dollar wealth to charitable causes. Faced with the evidence, Sam Bankman-Fried claimed not to recall the context of making those statements.

Beyond the public image, prosecutors accuse Sam Bankman-Fried of leading a lavish lifestyle, spending up to $15 million on private jet travel, and even chartering a private plane to transport FTX employees’ Amazon packages from the U.S. to the Bahamas.

Sam Bankman-Fried’s statements continue to “damage” the former FTX CEO

The prosecutor reiterates Sam Bankman-Fried’s courtroom testimony that he “wishes he had managed risk at FTX more carefully,” thereby preventing the collapse of the platform.

However, the prosecutor presents evidence to the contrary, showing that Sam Bankman-Fried once said, “FTX’s model can comply with any legal framework in the world with the highest risk standards.” This statement was even made during a hearing of the former FTX CEO before the U.S. Congress, meaning under oath to provide the truth.

During that late 2021 hearing, Sam Bankman-Fried made assertions like “FTX has risk management measures to protect customers,” “there is a cautious approach to risk management,” “FTX and FTX.US have superior liquidation mechanisms compared to other platforms,”… all of which were subsequently refuted by the prosecutor in court.

Sam Bankman-Fried also admits to instructing Gary Wang and Nishad Singh to adjust FTX’s code so that Alameda’s account would not be liquidated, and then not informing FTX customers, investors, or the U.S. Congress about it. However, Sam claims not to know the details of the adjustments made by these two personnel, despite being the CEO of the platform.

By mid-2022, as the cryptocurrency market faced a liquidity crisis following the collapse of the LUNA-UST model and a series of bankruptcy announcements from many lending companies in the industry, Sam Bankman-Fried participated in several Bloomberg podcasts, where he criticized organizations facing difficulties in the market for not managing risk effectively.

Back to the story of Alameda borrowing money from FTX

The prosecutor revisits the topic of Alameda. They asked the former CEO of FTX to confirm that in May 2022, the fund used some assets not deposited on the platform as collateral for loans. After some evasive answers like “I don’t remember, I’m not sure,” Sam Bankman-Fried admits to making such statements.

Sam says that during his time as the CEO of FTX, he was aware of Alameda Research’s trading account but never accessed the database to view its details. Prosecutors present evidence that after FTX went bankrupt, this account had a borrowing history of up to $65 billion from FTX.

Sam Bankman-Fried responds that he knew about Alameda Research borrowing money from FTX, and only the fund had the privilege to borrow such a large amount. Other market makers on the platform were limited to credit amounts of $150 million or less. Additionally, Sam also does not remember whether Alameda ever signed a loan agreement with FTX like other market makers, but admits that Alameda could have withdrawn the borrowed money outside. The prosecutor emphasizes once again that these privileges have never been disclosed to the public.

The prosecutor also provides evidence from Sam Bankman-Fried’s interviews with the media in December 2022, where the former CEO of FTX said that from the inception of the platform, Alameda had the right to exceed the collateral borrowing limit on the platform for trading, without adhering to the collateral requirements.

In 2021, some investors exploited loopholes in the FTX order liquidation mechanism, profiting from pledging MobileCoin and Bitmax and then trading on the platform. To conceal the losses, Sam Bankman-Fried directed FTX to record the positions in Alameda’s account, causing the fund to bear a loss of $800 million. The former CEO did not want this information to be exposed through FTX’s financial reports because the platform was about to close a $900 million investment round, so the decision was made to hide the losses.

FTX and Alameda’s investments

When questioned by the prosecutor about whether Alameda Research spent several billion USD on investments in the 2021-2022 period, Sam Bankman-Fried confirmed and mentioned that he himself made decisions in some of these transactions. The most notable investments include FTX’s $2 billion acquisition of the exchange from Binance and a $1 billion investment in the mining company Genesis Digital Assets.

Sam explained that at the time of these investment decisions, Alameda Research had not yet implemented precautionary measures in case the cryptocurrency market turned.

In addition, Sam Bankman-Fried also spent $23 million to acquire Storybook Brawl, a digital game he enjoys, as well as secretly investing tens of millions in The Block, a well-known media company in the crypto industry.

The prosecutor then continued to question Sam Bankman-Fried about other investments in Dave, SkyBridge Capital fund, Modulo Capital ($460 million), K5 Global ($700 million), and Robinhood (over $600 million). In the Robinhood investment deal, Sam Bankman-Fried executed it through an intermediary company and later transferred ownership to Alameda Research. In the asset transfer documents, he was the sole signatory identified as a “board member of Alameda Research.”

When accused by prosecutors of having a one-person board of Alameda, with Sam owning 90% of the fund’s shares, the former CEO of FTX stated that he did not intentionally structure the company that way.

After FTX went bankrupt, Sam Bankman-Fried made legal efforts to gain control of the Robinhood shares before being seized by U.S. authorities and sold back to Robinhood.

The prosecutors accused Sam Bankman-Fried of using funds from FTX customers to buy Robinhood stocks, intending to misappropriate these assets for himself when FTX went bankrupt.

There was a time when Sam Bankman-Fried admitted that Alameda’s investments had too much weight in the fund’s asset portfolio, posing a risk when the market declined. However, the CEO did not mention imposing risk mitigation measures.

It was only after May 2022, when the crypto market crashed due to the LUNA-UST collapse, that Sam Bankman-Fried instructed Alameda to hedge positions for the fund’s assets, including “Sam coins” like FTT, Solana (SOL), and Serum (SRM). At the same time, Sam also knew that Alameda had borrowed a significant amount of money to support its investment activities, using “Sam coins” as collateral.

By June 2022, lending institutions requested the recall of credits from Alameda, amounting to billions of USD. Sam Bankman-Fried claimed to have known about this in mid-June. The situation was so tense that Alameda CEO Caroline Ellison mentioned the possibility of the fund going bankrupt. Despite this, Alameda continued to pay creditors by borrowing more money from FTX users. Sam Bankman-Fried told the court that he was unaware of borrowing money from FTX.

The prosecutor then presented evidence from an interview with Sam Bankman-Fried conducted in December 2022, showing that the former FTX CEO discussed borrowing money from FTX to repay debts.

When questioned by the prosecutor about whether, with such borrowing transactions, Sam Bankman-Fried was aware of the risk that Alameda might not be able to repay the money to the platform, the former CEO responded that there is always a certain level of risk.

The prosecutor asked Sam Bankman-Fried whether borrowing money from FTX to repay debts was a margin transaction or not. Initially, the former CEO intentionally avoided answering, but when prompted by the judge, he admitted that it was “not.”

The prosecutor opened a Google Spreadsheet with 7 financial balance sheets that Caroline Ellison claimed to have created to conceal Alameda’s losses under Sam Bankman-Fried’s direction. The documents showed that despite the fund owing the platform $9.9 billion, the bank account had only $525 million. The former FTX CEO denied ever seeing these documents. The prosecutor mentioned having examined metadata from Google, indicating that Sam Bankman-Fried had accessed the spreadsheet on June 19, 2022.

By October 2022, Sam Bankman-Fried admitted to knowing that Alameda owed FTX $10 billion. He considered closing Alameda and replacing it with Modulo Capital, another investment fund also funded and majority-owned by Sam. However, upon reviewing the fund’s situation, Sam Bankman-Fried concluded that dissolving Alameda was not feasible.

The trial will continue on October 31 (US time).

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