FTX founder acknowledges customers, others got hurt

By Ken Sweet and Larry Neumeister | Associated Press

NEW YORK — Sam Bankman-Fried, testifying at his fraud trial, cast himself Friday as a bumbling cryptocurrency visionary who knew nothing about the industry when he started FTX, nothing about marketing when he became the face of his company and not enough about his businesses to realize his company was $10 billion in the hole before it collapsed.

Minutes into a five-hour day on the witness stand in Manhattan federal court, the onetime cryptocurrency golden boy denied he defrauded anyone.

Bankman-Fried, 31, acknowledged some failures, saying he made mistakes, large and small, but he also tried to counter testimony by four former top executives who blamed him for the collapse of his businesses last year when a rush of customers withdrew their money, exposing that billions of dollars were missing.

“We thought we might be able to build the best product on the market” and move the cryptocurrency system forward, he said.

“It turned out basically the opposite of that,” and a lot of customers and others got hurt, Bankman-Fried said.

Asked by his lawyer, Mark Cohen, if he defrauded anyone or took customers’ funds, Bankman-Fried answered, “No I did not.”

Mostly unemotional on the witness stand, Bankman-Fried noted at one point: “I don’t tend to show a lot of freakoutness.”

As the day wore on, testimony focused on what happened as Bankman-Fried’s businesses sank deeper in debt, even as he spent hundreds of millions of dollars on marketing that included a 2022 Super Bowl commercial featuring comedian Larry David, a partnership with quarterback Tom Brady and a firm that linked him to celebrities.

Bankman-Fried said he was “very surprised” to learn Alameda’s debts were so large.

Cohen said after testimony concluded for the day that he expected to continue questioning his client until midday Monday. A prosecutor said cross-examination would likely continue into Tuesday and the judge suggested that the jury might not get the case until Friday or the following Monday.

The California entrepreneur has pleaded not guilty to conspiracy charges accusing him of diverting billions of dollars from his clients and investors to make risky investments, buy luxury housing, engage in a star-studded publicity campaign, and make large political and charitable donations.

His much-anticipated testimony became the centerpiece of a defense that has tried to convey that Bankman-Fried had no criminal intent as he took actions that prosecutors say were directly to blame for the collapse last November of businesses Bankman-Fried began creating in 2017 and eventually ran from the Bahamas.

Bankman-Fried told the jury that when he started his first company Alameda Research, he knew almost nothing about cryptocurrency beyond what a bitcoin was.

He described himself as “somewhat introverted naturally,” but explained that he accidentally became the face of FTX when several interviews “ended up going better than I thought they would.”

He said he testified three times before Congress in an effort to persuade legislators to create cryptocurrency regulations that would allow products to be marketed directly to Americans.

As requests for interviews became overwhelming, “It was too late to find a new public face for the company. I was the public face,” he said.

“I had absolutely no background in marketing. Absolutely no idea,” he said.

Most of Bankman-Fried’s testimony focused on the explosive growth and collapse of FTX, a cryptocurrency exchange, and Alameda, but Cohen occasionally strayed into asking about his client’s personal life and quirks, including his penchant for wearing casual clothing and letting his hair grow long.

Bankman-Fried also blamed himself for the breakdown of his on-and-off romantic relationship with Caroline Ellison, Alameda’s chief executive, saying “I didn’t have the time or the energy to put in what I think she wanted from a relationship.”

“It’s not something I’ve been great at, being able to sustain a romantic relationship for a long period,” he said.

When the jury was shown a photograph of Bankman-Fried with a deck of cards, he explained that he used them to satisfy his urge to “compulsively fidget with things” — a habit from his college years that grew so severe that he said he’d wear out a deck in a week. He has since switched to fidget spinners.

Bankman-Fried, wearing a suit and tie in court and short hair, said he frequently wore shorts and T-shirts because he found them comfortable. As for the scattered long hair he had until weeks ago, he said: “I was busy and lazy and didn’t bother getting haircuts for long periods of time.”