On Monday, October 30, local time in the United States, the SBF case entered the third day of SBF’s testimony. Today is the real highlight. The prosecution lawyer will question SBF for about half a day after the defense. The questions are very sharp, involving various details about Caroline, FTX, Alameda, etc., and once asked SBF himself until he was speechless. , answered several “don’t know”s like on the first day. Let's take a look at what today's trial testimony looks like.
Odaily Planet Daily adds here the summary:
During court hearings in the SBF case, FTX’s chief technology officer Gary Wang and former Alameda Research executive Caroline Ellison disclosed internal misconduct by FTX and Alameda, including the misappropriation of FTX customer funds and the submission of false financial statements at the direction of SBF accusations. It is alleged that SBF may have exploited its position to engage in opaque and irregular transactions. During the trial on the sixth day, star witness Caroline Ellison stated in detail how SBF was operating FTX in terms of Alameda’s misappropriation of FTX customer funds, Alameda’s false financial statements, CZ’s Twitter response, etc. illegal. In the second week of the trial, Nishad Singh, a close partner of SBF and the chief of the engineering team, also began to testify. His testimony related more to the inside story of FTX, including scandals such as political donations and misappropriation of funds, involving celebrities such as Hillary Clinton and DiCaprio.
During the questioning of SBF last week, SBF frequently answered "I don't know" and "I don't remember" on key questions, so that the judge even said helplessly, "I think the witness has a very interesting way of answering questions." Later, the defense lawyer and SBF (that is, SBF and his own lawyer) had a dispute because the lawyer believed that SBF did not need to answer certain questions. The scene was very chaotic for a while. Last Friday, in the presence of a jury, the defense lawyer (that is, SBF's own lawyer) questioned him in a more friendly manner. However, today's order was made by the defense and the prosecution cross-handedly: many of the questions were very direct, pointing directly to the core process and false information of the collapse of the FTX exchange.
If there are readers who want to directly watch the most acute questions, they can go directly to the second part of the prosecution's questioning below.
Odaily compiled the testimonies from today’s scene as follows:
Questioning by the defense (SBF side)
Background Information
SBF attorney Mark Cohen: As CEO, do you prepare a list of priorities?
SBF: Yes.
SBF: I post these so that employees know what I’m doing.
Cohen: What is this?
SBF: This is a priority list for late September to early October 2022.
Cohen：DX 5
Judge Kaplan: Allowed.
Cohen: I'm not going to review all 16 items, just a few of them. Number one, data. What is that?
SBF: The FTX team is building a database so that it is accessible to non-developers, including myself. We are trying to speed up transactions.
Cohen: How much time do you spend on these tasks each day?
SBF: About 12 hours. I manage the people working on these projects.
Cohen: How much revenue do these items relate to?
AUSA Danielle Sassoon: Objection, in an inappropriate manner.
Judge Kaplan: Affirmed.
Cohen: How much revenue will be increased through this?
SBF: From $1 billion to $2 billion per year.
Cohen: Does FTX try to manage risk?
SBF: Yes. If one client goes negative, it can lead to overall losses. So we have a risk engine.
"The problem was that Caroline didn't hedge well."
Cohen: Did you have any discussion about hedging?
SBF: Yes, with Caroline Ellison and Sam Trabucco.
Cohen: Where was this discussion with Ms. Ellison?
SBF: In the study in the Orchid apartment.
SBF: I organized this conversation. After Bitcoin fell to $20,000. Alameda's net worth is about $10 billion-
AUSA Sassoon: Objection!
Judge Kapan: Agreed. All of these will be expunged.
COHEN: What did she say?
SBF: She started crying.
SBF: She (Caroline) agreed and said Alameda should hedge. She offered to resign.
COHEN: How do you respond?
SBF: I responded point by point. On the last point, I said it was her decision. On the others, I said the focus should be on hedging.
SBF: In September, I asked her again about the hedge. I asked her what the size was. She gave me that number. I told her I was happy with it—but it should be a bigger number, at least two times more. She sent me some spreadsheets.
Cohen: Anything else?
SBF: She agreed.
SBF's view of the entire process from Coindesk publishing an article to bankruptcy
Cohen: Let's continue with November. Gx 1047, the calendar for November 2022. What happened on the 11th?
SBF: FTX filed for bankruptcy.
Cohen: What happened on November 2nd?
SBF: The Coindesk article, they leaked an old balance sheet from Alameda Research.
Cohen: How did you react?
SBF: I reached out to Caroline to see if she wanted to respond. We decided to do a tweet.
Cohen：GX 875 。
SBF: That’s the tweet. November 6th.
Cohen (read tweet: We have $10 billion in assets that are not reflected there).
Cohen: Let's go ahead and say November 6th. GX 874.
SBF: This is from CZ.
Cohen: He wrote that we are clearing the FTT on our books, correct?
SBF: Right. Caroline and I discussed whether we should respond to a tweet. On November 6, customer withdrawals increased to $1 billion. I was concerned.
SBF: I'm worried about a bank run.
Cohen: What is that?
SBF: Let’s say you have a bank—
AUSA Sassoon: Objection.
Judge Kaplan: I agree.
COHEN: How did you respond?
SBF: Caroline sent out a tweet saying we would buy FTT at $22.
Cohen: What were the withdrawals that you observed on November 7th?
SBF: They have increased. On November 7, net withdrawals were $4 billion, 100 times the daily average. We may be facing a liquidity crisis.
SBF’s tweets (including a lot of false information about FTX’s security)
Cohen: Have you seen GX 878 before?
SBF: The tweet about slow responses to withdrawal requests. Gary told me at the time that Bitcoin withdrawals had dropped to an hour, not seconds or minutes. We had hit a roadblock. Gary was rewriting it.
Cohen: How about this (another twitter from SBF): False rumor and everything is fine with FTX and assets are fine.
SBF: I think Binance is targeting us for working with regulators and paying people on Twitter—
AUSA Sassoon: No. There is no basis for this.
Judge Kaplan: I agree. Delete.
Cohen: You tweeted that "assets are normal." What do you mean?
SBF: My point is that there is no problem with the exchange, and there is no problem with the assets.
Cohen: You said here that FTX will continue to process withdrawal requests…
SBF: FTX does not use customer assets for any investments.
Cohen: And then?
SBF: Alameda assets collapsed. We had very little margin.
Cohen: What is the impact of hedging?
SBF: Very little. I deleted that Twitter thread.
Cohen: You resigned on November 11th?
SBF: Yes.
Cohen: Have you ever spoken to a reporter?
SBF: Yes.
Cohen: Why did you do that?
SBF: I want to explain what I know.
Cohen: Did you talk to George Stephanopoulos from GMA?
SBF: Yes, I want to apologize.
Cohen: Have you spoken to the Securities Commission of the Bahamas?
SBF: Yes, my father was there.
Cohen: And then?
SBF: Gary and I were instructed to transfer assets. I helped in any way I could.
COHEN: Thank you, Mr. Bankman-Fried. I have no further questions.
Prosecutor's questioning
Prosecutor: You have such high authority that you can even tell Caroline what cryptocurrency to buy, but you are not the actual controller of Alameda?
AUSA Sassoon: Mr. Bankman-Fried, do you own 90% of Alameda?
SBF: Yes.
AUSA: Can it be said that FTX and Alameda are affiliated companies?
SBF’s lawyer Cohen: Objection, formally.
AUSA Sassoon: Are you a billionaire?
SBF: Yes.
AUSA Sassoon: You're not going to say you had no involvement in the Alameda deal at all?
SBF: It depends on what you mean by a deal.
AUSA: Have you been receiving information about Alameda during 2022?
SBF: Yes.
AUSA: You were not quarantined, were you?
SBF: That’s right.
AUSA Sassoon: Did you meet with Caroline Ellison and Sam Trabucco?
SBF: Yes.
AUSA: You get to have a say in trading decisions, right?
SBF: Yes.
AUSA: Are you in a chat group called Vertex?
SBF: Yes.
AUSA Sassoon: You tell Caroline when to buy certain cryptocurrencies, right?
SBF: I’m not sure what you’re talking about.
AUSA: Show the witness GX 1630. You, Ms. Ellison, and Sam Trabucco, January 25, 2022 - You referred to Alameda as "we," correct?
SBF: Yes.
AUSA Sassoon: You place a trade and Caroline responds, sounds good; you respond, LOL.
SBF: Yes.
AUSA Sassoon: Did you tell her to trade Japanese government bonds?
SBF: Yes.
AUSA: She sent you a spreadsheet on the hedge, that was the trade, correct?
SBF: Yes.
AUSA Sassoon: You were arrested in December, correct?
SBF: Yes.
AUSA: You were interviewed, right?
SBF: Yes.
AUSA: You know it’s important to tell the truth, right?
SBF: I try my best.
Prosecutor: You can keep saying you don't remember, but your testimony is inconsistent.
AUSA: We offer (Exhibit Number) GX 2508 and 2508 T.
Judge Kaplan: Received.
Audio playback: (SBF said) I deliberately did not participate due to concerns about conflicts of interest.
AUSA Sassoon: That's your voice, right?
SBF: Sounds like me.
AUSA: Have you spoken to the Financial Times?
SBF: I don’t remember.
AUSA: GX 2503. Mr. Bankman-Fried, have you seen this article dated December 4, 2022?
SBF: I see.
AUSA Sassoon: (Reading) FTX founder insists he has quarantined himself. Did you see that?
SBF: Yes. (Contradictory to the previous claim that he was not isolated)
AUSA: Was this before you knew you were being charged?
SBF: Yes.
AUSA: Do you think your information has been automatically deleted?
SBF: Some of them.
AUSA Sasoon: Look at this, you didn't know Caroline Ellison would work with the government, did you?
SBF: Yes.
AUSA: Were you unaware that the government had a search warrant for your Google account?
SBF: I have my doubts.
AUSA Sassoon: You saved a copy of Caroline Ellison’s guilty plea petition to your Google Drive, correct?
SBF: Yes. (Contradictory to the previous statement that I didn’t know)
AUSA: Did you review the files on Caroline’s Google Drive?
SBF: Yes.
Prosecutor: You have always claimed that FTX is safe, here is the evidence
AUSA Sassoon: Would you agree that you know how to tell a good story?
SBF: It depends on what criteria you use.
AUSA: You raised money by pitching dozens of times, right?
SBF: Yes.
AUSA: Did you mention the liquidation agreement?
SBF: Yes.
AUSA Sassoon: Did you make recommendations to Congress?
SBF: I gave testimony.
AUSA: Did you fly to DC on a private jet?
SBF: Yes.
AUSA: Are you familiar with the phrase “Crypto Twitter”?
SBF: Yes.
AUSA: Does this include customers?
SBF: Yes.
AUSA Sassoon: Do you play well with the media?
SBF: Definitely, compared to what I expected.
AUSA: FTX received $15 billion from customers, excluding Alameda?
SBF: That sounds possible.
AUSA: How have you told the public FTX will operate?
SBF: Yes.
AUSA Sassoon: Do you want customers to think FTX is safe?
SBF: That would be great.
AUSA: Make them trust you and give you their money?
SBF: Yes.
AUSA: Have you ever claimed that FTX is safe?
SBF: I don’t remember, but I may have (repeatedly).
AUSA Sassoon: You were on the FTX podcast and said
[PLAY RECORDING] SBF: All things considered, it worked pretty well.
AUSA: Is that you?
SBF: Yes.
AUSA: Do you promote FTX as being more secure than other exchanges?
SBF: FTX US, yes.
AUSA Sassoon: You describe FTX as safe?
SBF: I’m not sure what you mean.
Judge Kaplan: Mr. Bankman-Fried, that is not what she referred to, but that is what you remember.
AUSA: You said you always allowed withdrawals?
SBF: Yes.
AUSA Sassoon: In October 2022, you said that the core of cryptocurrency is owning your own assets?
SBF: I don’t remember.
AUSA: Did you know about the $8 billion debt?
SBF: Yes.
AUSA Sassoon: In October [2022], you publicly stated that the customer is more important than anything else?
SBF: I probably did.
AUSA: Do you want FTX customers to trust you?
SBF: That would be ideal, yes.
Prosecutors: You testified before Congress, but you cursed regulators behind their backs
AUSA Sassoon: The key principles that you told Congress, you reviewed them, right?
SBF: Yes.
AUSA: Were you involved in drafting it?
SBF: I don’t remember being involved in drafting it.
AUSA: You submitted it under oath?
SBF: Yes.
AUSA Sassoon: Will you read this?
SBF (in dramatic voice) We offer this today.
AUSA: The next item says, proper disclosure.
SBF: Yes.
AUSA: There was also a press release, right?
SBF: Yes.
AUSA: You said on Twitter that your support for regulation depends on protecting customers?
SBF: I don’t remember.
AUSA: But privately you say, F**k the regulators, right?
SBF: I said that once.
AUSA: You said it was PR.
SBF: I said something similar.
AUSA Sassoon: You call people on crypto twitter “stupid assholes”?
SBF: Some of them, yes.
AUSA: Don’t you think regulation will help you take market share from Binance?
SBF: That would be an advantage. But there would also be disadvantages.
Prosecutor: Read what you said yourself. You said that Alameda's account is no different from other people's accounts, but only Alameda can borrow unlimited money without being liquidated.
AUSA Sassoon: You can't deposit $10 and take out $1 billion, right?
SBF: It depends on the circumstances.
AUSA: Are you claiming that the risk engine holds custody of the collateral?
SBF: Yes.
AUSA: Is this how you market FTX?
SBF: Sometimes.
AUSA Sassoon: You testified that FTX’s risk model would work well in the United States?
SBF: Some aspects of it.
AUSA Sassoon: Were you interviewed by Andrew Ross Sorkin of the New York Times about the borrowing facility?
SBF: I don’t remember exactly what I said.
AUSA: Read this. Look up at me when you're done.
SBF: Okay.
AUSA: Customers can have negative balances, correct?
SBF: Yes.
AUSA Sassoon: But a typical customer can't hold an overall negative account balance for more than a few days, they'll be liquidated?
SBF: In most cases.
AUSA: For a typical customer, what they can borrow corresponds to the collateral, right?
SBF: And there are lines of credit.
AUSA Sassoon: Do you remember making sure Alameda followed the same rules?
SBF: I’m not sure what you mean.
AUSA: You said, “Their accounts are the same as everyone else’s.”
SBF: I did say that.
AUSA Sassoon: This is an email from March 2022, right?
SBF: Yes.
AUSA: It doesn’t mention pre-market manipulation?
SBF: Not directly mentioned.
AUSA Sassoon: You didn't claim in 2022 that Alameda was a completely separate entity?
SBF: More or less.
AUSA: You call FTX a neutral market infrastructure?
SBF: I don't remember saying that. I may have said that.
Prosecutor: You made a lot of decisions and held 90% of the stock. Are you saying that you were mistakenly a director of Alameda?
AUSA: Do you deny that Alameda had some accounts with the “Negative Balance Allowed” sign?
SBF: No.
AUSA: Are you denying that Alameda could withdraw billions without the risk of being liquidated?
SBF: That may be true.
AUSA: You don’t deny it.
SBF: No, I don’t deny it.
AUSA Sassoon: Was it you who decided to buy Binance’s stake in FTX for $2 billion?
SBX: Yes.
AUSA: You think the investment in the cryptocurrency mining company Genesis Digital Assets is worthwhile, right?
SBX: Yes, if it is properly hedged.
AUSA Sassoon: You bought Storybook Brawl for about $20 million?
SBF: Yes.
AUSA: Did you buy a condo in the Bahamas for the CEO of The Block?
SBF: I don’t remember…
AUSA: Do you remember financing it?
Cohen: It’s been asked and answered!
AUSA Sassoon: Did you instruct Modulo Capital to make the investment?
SBF: Yeah, I think that’s actually correct.
AUSA: Do you instruct investments in K5?
SBF: I indicated an investment, but not necessarily this one.
AUSA: Was investing in Robinhood a decision you made?
SBF: Yes.
AUSA Sassoon: Are you the only member of the board of directors of Alameda Research Limited?
SBF: It makes me seem like I'm one of them. But that's not my intention.
Judge Kaplan: You own 90% of the stock. Is your position that you were mistakenly made a director?
SBF: No.
Prosecutor: You knew that repayment would be risky, but you still asked Caroline to do it; and we have metadata that shows you lied about not having seen the financial statements
AUSA Sassoon: While Alameda was paying off her debts, did you have Caroline pay the lenders?
SBF: Yes.
AUSA: Are you aware that doing this would put the FTX exchange at risk?
SBF: No, I didn't. I didn't think that was a very likely scenario at the time.
AUSA Sassoon: Were you aware of the risks?
SBF: There is always a risk.
AUSA: Taking money out of FTX and paying it back to the lender is not margin trading, right?
SBF: I’m not sure I agree.
AUSA: Do you understand the risk of a “hole”? (i.e. risk exposure)
SBF: There may be “holes”.
AUSA Sassoon: Did you know that Alameda couldn't pay?
SBF: I kind of knew it at that time. I don't remember the exact order.
AUSA: OK, let's look at the spreadsheet. Which one do you see?
SBF: Alt 7. Not the main one.
AUSA Sassoon: Do you remember receiving the 8 tabs from Caroline?
SBF: I’m not sure.
AUSA: Multiple tabs?
SBF: Maybe.
AUSA: Were you aware that prosecutors had Google metadata showing that you accessed these eight alternative spreadsheets?
Cohen: Objection!
Judge: Denied.
AUSA Sassoon: We can undo that. You went on to direct other ventures and travel to the Middle East to try to raise money, correct?
SBF: Other things besides that.
AUSA: Are you considering closing Alameda and replacing it with Modulo?
SBF: That’s what I mean.
The trial of this case will end within the week, and Odaily will continue to follow up for you.
