Sam Bankman-Fried, the founder and former CEO of FTX, has testified in his ongoing criminal trial in the United States District Court for the Southern District of New York. Here are some key points from his testimony:
- Political Donations: Bankman-Fried denied directing his inner circle to make political donations in 2021. The prosecution had alleged that he used customers’ funds to make more than $100 million in political campaign contributions ahead of the 2022 U.S. midterm elections. Bankman-Fried claimed that the donations were made from the exchange’s own funds.
- The New York Times Test: Bankman-Fried explained the “The New York Times test” as a guideline for employee communication. It meant that employees should not write anything they wouldn’t be comfortable seeing on the front page of a newspaper. This is why more than 200 channels on Signal had an auto-delete policy for messages.
- Alameda’s Role on FTX: Bankman-Fried detailed Alameda’s role in FTX’s operations, which included being a payment provider for wire transactions when FTX couldn’t have its own account. Alameda also served as a primary liquidity provider, market maker, and client of FTX. Alameda could borrow funds from FTX and use them for trading.
- Hedging Strategies: Bankman-Fried discussed hedging strategies with Caroline Ellison, former CEO of Alameda Research, to protect the trading platform from a potential market downturn. He asked Ellison to hedge $2 billion in Bitcoin in 2021, but the strategy was never implemented. Without proper hedging, Alameda suffered significant losses when the Terra ecosystem collapsed and crypto prices declined.
Bankman-Fried could face up to 115 years in prison if found guilty of all fraud and conspiracy counts. His testimony is part of an ongoing trial that is expected to include cross-examinations and closing arguments.