SBF Trial – Week 4 concludes with SBF telling jury he was blindsided by $8B shortfall SBF Trial – Week 4 concludes with SBF telling jury he was blindsided by $8B shortfall
Almost the entirety of the day was dedicated to SBF's testimony, which gave the courtroom further insights into the inner workings of FTX and Alameda from his perspective.
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Updated: Oct. 28, 2023 at 2:14 am UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
Sam Bankman-Fried (SBF) took the stand again on Oct. 27 — this time in front of a jury — and told the courtroom that he had been blindsided by the $8 billion shortfall that led to FTX and Alameda Research’s collapse.
The former billionaire testified and went through a thorough cross-examination on Oct. 26 without a jury present after the government raised concerns about certain aspects of SBF’s testimony.
However, Judge Lewis Kaplan ruled that SBF’s testimony could be heard live by the jury, and the process will now repeat in front of them.
Almost the entirety of the day was dedicated to SBF’s testimony, which gave the courtroom further insights into the inner workings of FTX and Alameda from his perspective. He is expected to continue testifying for the first half of the proceedings on Oct. 30.
Lawyers’ concerns
The day commenced with Judge Kaplan addressing concerns raised by the prosecution, specifically referring to disruptions in the gallery during the trial.
The judge firmly cautioned that any further disturbances would result in the removal of the individuals responsible. Additionally, the prosecution requested an instruction to the jury, emphasizing that any perceived impoliteness should not affect their judgment.
The first order of business when the trial resumed was the defense team’s request for a standing objection to the use of statements made during the previous day’s cross-examination.
Judge Kaplan noted the potential for misleading impressions arising from these statements but ultimately allowed them to be used as evidence. He informed the defense that there is no provision for such an objection in the Federal Rules and instructed SBF’s lawyer, Mark Cohen, to make his objections on record as needed.
Judge Kaplan also ruled on the admissibility of evidence related to legal opinions sought by SBF and his legal team. While the judge permitted the introduction of evidence concerning data protection policy, he declined to admit plain vanilla legal opinions drafted by the defense lawyers.
He emphasized the relevance of such evidence to the case and indicated that he would elaborate on this matter in the event of a conviction.
The trial then turned to a discussion of omnibus wallets on the blockchain, with Judge Kaplan expressing confusion about their relevance to the case. The defense counsel requested a morning break to confer with the prosecution.
With these preliminary matters addressed, SBF took the stand before a jury eager to listen to his side of the story.
Blindsided by shortfall
The defense commenced the examination with a seemingly straightforward query, asking the former billionaire what FTX stood for. SBF immediately responded that it meant “Futures Exchange,” setting the stage for a thorough exploration of FTX’s origins and ambitions.
SBF’s testimony shed light on FTX’s foundational principles and mission. He described how the company had been driven by an unwavering commitment to creating the preeminent futures exchange globally.
This ambition was underpinned by the company’s belief in the transformative potential of cryptocurrencies and its determination to deliver a platform that surpassed competitors through innovation and cutting-edge technology.
In meticulous detail, SBF elaborated on FTX’s financial management practices, underscoring their dedication to regulatory compliance and the protection of user funds. He offered jurors a glimpse into the intricate procedures established to thwart unauthorized withdrawals and maintain the exchange’s integrity.
However, the core of his testimony revolved around the gradual discovery of an $8 billion shortfall that ultimately caused the collapse of FTX. SBF recalled the moment when he was first made aware of the colossal deficit, a revelation that had left him genuinely shocked and deeply concerned about the potential ramifications.
SBF told the courtroom that the revelation had not been a sudden shock, but rather, the truth was uncovered gradually. He detailed the extensive efforts FTX’s team undertook to trace the origin of the deficit and address the situation with diligence and urgency.
Throughout his testimony, SBF conveyed an unwavering commitment to resolving the issue responsibly and said he had tried to cooperate fully with regulatory authorities. He emphasized that his primary concern had always been the welfare of FTX’s users and the preservation of the cryptocurrency industry’s reputation.
Verdict in November
SBF is slated to retake the stand and continue his testimony when the trial resumes on Oct. 30. The defense previously stated that it has two more witnesses to present in the case. The proceedings are expected to continue well into November before a verdict is reached.
The prosecution told Judge Kaplan that it intends to pursue an even more detailed cross-examination of SBF after he concludes his testimony. They added that it could take more than a day and a half of proceedings to go through it.
The prosecution only spent two hours on its initial cross on Oct. 26 and mainly focused on finding inconsistencies in the statements made by SBF. It is unclear which aspects of the testimony the prosecution intends to challenge next week.
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Assad Jafri
AJ, a passionate journalist since Yemen's 2011 Arab Spring, has honed his skills worldwide for over a decade. Specializing in financial journalism, he now focuses on crypto reporting.
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FTX
FTX is a defunct cryptocurrency exchange, currently in bankruptcy proceedings, that was founded by Sam Bankman-Fried and Zixiao “Gary” Wang in May 2019.
Alameda Research
Alameda Research was once a principal trading firm, operating as an arm of the failed crypto exchange, FTX.
Sam Bankman-Fried is the former CEO, and co-founder of defunct crypto exchange FTX and Alameda Research.