SBF Trial – Week 5 kicks off with SBF retaking the stand for an intense cross-examination SBF Trial – Week 5 kicks off with SBF retaking the stand for an intense cross-examination
SBF was hit with intense questioning about his role as the CEO of FTX and the inner workings of the crypto exchange in the weeks leading up to their collapse.
5 min read
Updated: Oct. 31, 2023 at 1:22 am UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
The fifth week of the high-stakes trial that has captivated the cryptocurrency world began with Sam Bankman-Fried (SBF) resuming his testimony on the stand before a thorough cross-examination by the prosecution.
SBF was hit with intense questioning about his role as the CEO of FTX and the inner workings of the crypto exchange in both sessions and recounted some of the key decisions he made in the weeks leading up to the collapse of FTX and Alameda Research.
Judge Kaplan opened the day’s proceedings by addressing the jury and informing them that it was uncertain if the trial would conclude by Nov. 2 and asked if any of them had significant issues with continuing into Nov. 3.
None of the jury members objected to the proceedings taking longer, and the proceedings began with SBF resuming his testimony from the prior week.
Remaining testimony
During the direct examination, defense lawyer Mark Cohen delved into SBF’s responsibilities as the CEO of FTX. The former billionaire revealed that he prepared priority lists to inform employees about his activities and the company’s strategic goals.
The defense subsequently submitted a “priority list” from late September 2022 to early October 2022 into evidence as a key exhibit to further support the statements.
Cohen highlighted key priorities, starting with the importance of data. SBF explained that the FTX team was working on a database to make trading faster and more accessible for non-developers. SBF’s dedication to these initiatives was evident as he mentioned spending approximately 12 hours daily on them, managing the teams involved.
Cohen aimed to uncover the revenue potential of these initiatives, but an objection from AUSA Danielle Sassoon on the form of the question was sustained by Judge Kaplan. Nevertheless, SBF said he believed the projects could double FTX’s annual revenue from $1 billion to $2 billion.
The discussion then shifted to risk management at FTX, and SBF told the courtroom that he was always committed to risk management and highlighted the presence of a risk engine to address potential issues.
Cohen then explored discussions about hedging, particularly with Caroline Ellison and Sam Trabucco, who were serving as co-CEOs of Alameda Research.
SBF revealed that these conversations took place in the Orchid apartment study; however, when asked about a specific moment involving Alameda’s net asset value (NAV) and Bitcoin’s value, an objection from the prosecution was sustained — striking the testimony.
SBF disclosed that during one conversation, Caroline Ellison acknowledged the need for Alameda to hedge and even offered to step down. However, his response was to focus on putting on the hedges instead of punishing mistakes.
SBF said he urged for a more substantial hedging effort in subsequent discussions with Ellison and Trabucco, emphasizing the importance of managing risk effectively.
Cohen also inquired about a trip SBF took to the Middle East in October 2022, revealing his extensive travel schedule, often spending 100 days a year on the road, primarily to Washington, D.C.
SBF revealed that he had been invited to Dubai for a conference and had met with some sovereign wealth funds. He added that he had been wary of the meetings since they may upset Binance — its direct rival in the region— but had gone through with them ultimately.
Cross-Examination
The cross-examination, conducted by Assistant U.S. Attorney Danielle Sassoon, began with the prosecution challenging SBF on various statements he had made.
Sassoon began by confronting SBF about his stance on cryptocurrency regulation. She referred to a Twitter post where he seemingly suggested that his support for regulation was contingent on safeguarding customers.
While SBF couldn’t recall the specific tweet, he admitted to making a statement akin to “F*ck regulators” in private, implying that it might have been a public relations tactic.
The cross-examination then delved into SBF’s choice of words on Crypto Twitter. SBF conceded to using derogatory language, referring to a subset of Crypto Twitter users as “Dumb motherf*ckers.”
Sassoon probed further, questioning whether SBF believed regulation could provide FTX with a competitive advantage over Binance. SBF acknowledged that there were both pros and cons to this perspective.
The questioning then turned to an exploration of SBF’s claims regarding FTX’s risk model and its suitability for the U.S. market. SBF said that some aspects of FTX’s risk model would work well in the U.S., highlighting nuances in his previous statements.
The cross-examination also touched upon SBF’s interview with The New York Times’ Andrew Ross Sorkin regarding FTX’s borrow lending facility. SBF couldn’t recollect the specifics of the interview but agreed to review it later.
Sassoon also raised concerns about customers going negative and questioned whether typical customers could maintain negative account balances for extended periods without being liquidated, emphasizing the correlation with collateral and lines of credit.
Sassoon presented an email from March 2022 that did not mention front running, challenging SBF’s assertion that Alameda played by the same rules as other participants. SBF’s response revealed uncertainty, and Sassoon probed further into his characterization of Alameda Research Limited as a separate entity and his reference to FTX as a neutral market infrastructure. SBF’s recollections were mixed on these matters.
Throughout the cross-examination, SBF acknowledged certain points, such as Alameda having accounts with the “Allow Negative” flag and the ability of customers to withdraw substantial sums without facing liquidation risks. He did not dispute these claims.
The questioning also extended to SBF’s involvement in various financial transactions, including the purchase of Binance’s equity stake in FTX for $2 billion, investments in Genesis Digital Assets, and the acquisition of Storybook Brawl for $20 million. Sassoon also raised questions about a real estate transaction involving the CEO of The Block, which SBF initially couldn’t recall.
The cross-examination continued with Sassoon delving into SBF’s involvement in various investment decisions. SBF acknowledged directing the investment in Modulo Capital but was more cautious in his response when questioned about his role in investing in K5, stating that he directed “AN investment,” but not necessarily the specific one in question. However, when asked about his decision to invest in Robinhood, SBF affirmed that it was indeed his choice.
The prosecution then turned its attention to SBF’s role on the board of directors of Alameda Research Limited. Sassoon challenged SBF by asking if he was the only director on the board.
SBF responded:
“This makes it seem like I was as of then. It wasn’t my intention to be.”
Judge Kaplan intervened due to the confusion caused by SBF’s response, pointing out that SBF owned 90% of the stock, and questioned whether he became a director by mistake. SBF firmly replied, “No.”
AUSA Sassoon introduced an affidavit that SBF had signed, but the cryptocurrency entrepreneur did not appear to recognize the document. Sassoon questioned SBF’s decision to file the affidavit without reading it.
The questioning then turned to SBF’s ownership of Robinhood shares and whether he was aware that many customers could not access their funds during a specific period. SBF acknowledged being aware of the issue but denied considering calling Robinhood to acquire shares.
Sassoon also probed SBF on his involvement in directing funds to pay lenders while Alameda was repaying its debts. SBF conceded that he directed these payments but argued that he did not believe it posed a significant risk to the FTX exchange.
The prosecution emphasized the risk inherent in taking money from FTX to repay lenders and inquired whether SBF understood the possibility of a financial hole emerging. SBF acknowledged the inherent risk but did not fully agree with characterizing the action as margin trading.
As the direct examination progressed, the focus shifted to spreadsheets and the sequence of events leading up to SBF’s knowledge of Alameda’s inability to pay. SBF mentioned an alternative spreadsheet, Alt 7, as the one he had seen.
AUSA Sassoon pressed further, asking SBF if he recalled receiving multiple tabs from Ellison.
SBF appeared uncertain but admitted that there may have been multiple tabs. Sassoon then introduced Google metadata, indicating that SBF had accessed an alternative spreadsheet.
Despite objections from SBF’s defense, Judge Kaplan overruled and allowed the line of questioning to proceed.
The proceedings for the day concluded with questions about SBF’s involvement in directing venture investments and his efforts to raise funds in the Middle East. SBF confirmed his participation in these activities.
Court adjourned
The prosecution told Judge Kaplan that it intends to continue the cross-examination for another two hours when the court reconvenes on Oct. 31.
Once that concludes, the defense will get another chance for a direct examination to address the issues and concerns raised during the cross-examination.
The prosecution also confirmed that it has two rebuttal witnesses prepared to take the stand in the coming days.
Mentioned in this article
Author 
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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In this article
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.
Caroline Ellison is the former lead trader and former CEO at Alameda Research.
Sam Trabucco is a quantitative crypto trader and the co-CEO of Alameda Research.
