Sam Bankman-Fried blames everyone but himself in day two of testimony

FTX founder Sam Bankman-Fried resumed his testimony on Monday, and used his time on the stand to blame his former close friends and colleagues for the downfall of his crypto empire.

As his criminal fraud trial enters what’s expected to be its last week, Bankman-Fried is trying to undermine the prosecution’s key witnesses, who placed the FTX founder at the center of the crypto exchange’s misuse of customer funds and its ultimate demise.

Bankman-Fried, 31, faces a potential life sentence if convicted of fraud charges stemming from the collapse in November of FTX and sister hedge fund Alameda Research. He has pleaded not guilty.

On Monday, Mark Cohen, Bankman-Fried’s lead defense attorney, allowed his client to take aim at Caroline Ellison, who ran Alameda and is also Bankman-Fried’s ex-girlfriend. The primary theme was Bankman-Fried’s concern, expressed in conversations between June and September 2022, about whether Alameda was properly hedged given the crash in crypto prices. He said he was notably concerned about the decline in Alameda’s net asset value from $40 billion the prior year to $10 billion.

The market had already dropped 70% and if it fell another 50%, he was afraid the firm would be insolvent, Bankman-Fried told the jury.

“She started crying,” Bankman-Fried said, regarding Ellison’s reaction when he told her that. “She agreed.”

Ellison, who took a plea deal and is cooperating with the government, also said Alameda shouldn’t have made some venture investments, Bankman-Fried testified. He said she offered to step down and said he told her that this wasn’t about blame or past failures, but that Alameda should urgently be putting on hedges. He said he hadn’t intended for her to resign.

In September, he checked in again with Ellison about the hedging activity, Bankman-Fried testified. She said Alameda had hedged. He asked about the scale of the trades and said his instinct was that they could have been twice the size. After Ellison sent him spreadsheets about the trades, she agreed there was more room to hedge and she did so, Bankman-Fried said.

Bankman-Fried’s testimony on Monday follows his initial appearance on the stand at the end of last week. He told jurors then that he didn’t commit fraud, and that he thought the crypto exchange’s outside expenditures, like paying for the naming rights at a sports arena and its venture investments, came out of company profits.

The majority of the four-week trial so far has been highlighted by prosecutors walking former leaders of Bankman-Fried’s businesses through specific actions taken by their boss that resulted in clients losing billions of dollars last year. Several of the witnesses have pleaded guilty…