NEW YORK, Oct 26 (Reuters) – FTX founder Sam Bankman-Fried testified on Thursday at his criminal fraud trial outside the jury’s presence that lawyers at his now-bankrupt cryptocurrency exchange were involved in key decisions that are at the heart of the case, as he sought to distance himself from responsibility for any wrongdoing.
Bankman-Fried, taking the witness stand hours after the prosecution rested its case presented over 12 days, gave testimony that fit with the defense argument that he acted in good faith while running FTX, which collapsed in November 2022 following a wave of customer withdrawals.
He has pleaded not guilty to two counts of fraud and five counts of conspiracy. If convicted, he could face decades in prison. Prosecutors have said Bankman-Fried used the misappropriated funds to prop up his crypto-focused hedge fund, Alameda Research, make speculative venture investments and donate more than $100 million to U.S. political campaigns.
The 31-year-old former billionaire, clad in a gray suit, was called to the stand in federal court in Manhattan after his lawyers kicked off the defense case with testimony from two other witnesses.
U.S. District Judge Lewis Kaplan decided Bankman-Fried would initially provide testimony without jurors present so he could decide which portions of it, if any, would be admissible as evidence. Prosecutors have said Bankman-Fried should not be able to suggest that the involvement of lawyers in decision-making showed he lacked criminal intent.
Speaking in a confident tone, Bankman-Fried often gave lengthy responses to questions posed by defense lawyer Mark Cohen. Bankman-Fried said FTX’s lawyers were involved in crafting its document retention policies and crafting loans that Bankman-Fried and other executives took from Alameda.
Prosecutors have argued that Bankman-Fried encouraged employees to use encrypted messaging platforms such as Slack and Signal and auto-delete their communications to hide their tracks. They have said the loans from Alameda, which in turn borrowed from FTX, were an important way that customer funds were stolen.
“Did you take comfort from the fact that the lawyers had structured the loans?” Cohen asked.
“Yeah, of course,” Bankman-Fried replied.
The judge sent the jurors home for the day following a lunch break, instructing them to return on Friday morning. The unusual move came after Bankman-Fried’s lawyers said they planned to elicit testimony from the defendant about the involvement of FTX lawyers in key company decisions like document retention and in crafting of loans to executives that prosecutors have said was one way Bankman-Fried stole funds.
Cohen said Bankman-Fried’s direct testimony could last close to five hours, before prosecutors get a chance to cross-examine him.
PROSECUTION RESTS
Legal experts have said Bankman-Fried has little to lose by bucking conventional wisdom and testifying, given weeks of the testimony against him by insiders painting an unflattering portrait of his character.
Former close FTX colleagues who testified for the prosecution told the jury Bankman-Fried directed them to commit crimes by diverting customer funds to Alameda and lying to investors and lenders. Bankman-Fried’s risky decision to testify gives prosecutors the chance to cross-examine him on those claims.
His lawyers have said three of his former colleagues, who have pleaded guilty and agreed to cooperate with prosecutors, tailored their testimony to implicate Bankman-Fried in the hopes of receiving lenient sentences. Bankman-Fried has maintained that while he made mistakes running FTX, he never intended to steal funds.
Bankman-Fried took the stand after the defense presented its first two witnesses: Krystal Rolle, Bankman-Fried’s lawyer in the Bahamas; and database expert Joseph Pimbley.
Rolle testified that the day after FTX declared bankruptcy on Nov. 11, 2022, authorities in the Bahamas – where FTX was based – directed Bankman-Fried to hand over remaining assets to regulators in the Caribbean country.
The defense could argue that Rolle’s account undercuts prosecution testimony from Gary Wang, FTX’s former chief technology officer, that Bankman-Fried told him he transferred assets to the Bahamas because “they seemed more likely to let him stay in control of the company, compared to the U.S.”
Pimbley testified that most FTX customers had a type of account that allowed their funds to be lent to other users. Bankman-Fried’s lawyers could argue that shows that Alameda’s use of FTX customer funds was not improper.
The final prosecution witness, FBI agent Marc Troiano, testified about Bankman-Fried’s use of the encrpyted messaging application Signal when the trial resumed on Thursday morning after a week-long break.
Reporting by Luc Cohen and Jody Godoy in New York; Editing by Will Dunham and Noeleen Walder
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