SBF Testifies That Alameda Only ‘Borrowed’ Customer Funds

Sam Bankman-Fried testified before a jury for the first time on Friday saying he did not defraud FTX customers or take their funds, according to Bloomberg’s live reporting of the trial. The FTX and Alameda’s founder said that Alameda “borrowed” them, but admitted “a lot of people got hurt.”

After the jury was unexpectedly sent home Thursday by Judge Kaplan, Bankman-Fried testified to the judge and media reporters. The jury was able to hear a similar testimony from SBF Friday.

The FTX founder painted himself as being largely unaware of the massive fraud occurring at his companies, and at best, an ignorant founder and CEO. His claims of ignorance, however, are disputed by the sworn testimonies of former FTX and Alameda executives.

SBF claimed to be only “somewhat aware” of the unlimited line of credit Alameda could borrow from FTX’s customer funds. The testimonies of former FTX executives Nishad Singh and Gary Wang refute SBF’s claims of ignorance. The director of engineering and the chief technology officer both say Bankman-Fried was completely aware, and the amount borrowed from customers eventually grew to $10 billion. The funds allegedly “borrowed” from customers have still not been returned in full, and the company is negotiating a sale or revamp to pay customers back.

The defense’s claims that SBF was an ignorant CEO and founder spread far and wide. Bankman-Fried says he only loosely understood cryptocurrency when he started the company. The founder also says he only loosely skimmed over FTX’s terms of service, and that he wasn’t sure of the extent they allowed Alameda to take customer funds. With regard to Alameda’s balance sheets, SBF says he only saw some iterations of them.

The defense seems to have found a strategy, ignorance, because the punishment for being a dumb CEO is less than the punishment for being an evil CEO. These claims of ignorance, however, contradict testimonies from Alameda CEO Caroline Ellison, who said SBF directed her to commit certain crimes. The prosecution’s forensic accountant also pointed to several instances where SBF must have known about the usage of customer funds.

SBF will continue to testify on Monday morning of next week. The prosecution anticipates a “significant cross-examination,” potentially coming on Tuesday. Judge Kaplan says the case will likely not go to the jury until Thursday or Friday.