Rather than the rambling answers he gave during his initial cross-examination, SBF’s responses were more brief but he often said “I’m not sure.”

Record: Bloomberg

Translated by: angelilu, Foresight News

TL;DR：

• Rather than giving the kind of rambling answers he did during initial cross-examination Thursday in front of the jury, SBF was much more brief.

• When answering prosecutors' questions, SBF often said he didn't remember what he had said, with "I'm not sure" becoming his standard response. Sometimes he didn't answer questions directly, prompting Judge Lewis Kaplan to tell him at one point to "just answer the questions."

• Prosecutors sought to poke holes in SBF’s credibility by pointing out discrepancies in his accounts of FTX risk management and his involvement with Alameda before and after the exchange’s collapse.

SBF returns to the witness stand

After a few days of interruption in the trial, FTX co-founder SBF returned to the witness stand on October 30 for the fraud trial against the collapsed cryptocurrency exchange FTX. In his testimony last week, SBF tried to emphasize that although he was the CEO of FTX, he did not always understand how the company operated. He blamed former colleagues Nishad Singh and Gary Wang for Alamede's almost unlimited credit line at FTX.

SBF will continue to testify in court for the rest of the week until Tuesday local time, with a so-called charging conference with lawyers on Wednesday, closing arguments likely on Thursday and a jury likely to hear the case on Friday.

On October 30, the trial began with direct questioning by SBF's defense attorney, Mark Cohen, and then by Assistant U.S. Attorney Danielle Sassoon, which will continue until Tuesday local time. Bloomberg recorded and reported on this in detail. Foresight News compiled the Chinese version for readers as follows, with a Bloomberg reporter's first-hand perspective on the trial scene.

There was a long line to get into the courthouse security, where SBF's parents stood with those who attended the jury on Monday and bystanders. SBF began to sit in his usual seat in the middle of the third row of the courtroom, flanked by lawyers. When the trial began, SBF returned to the witness stand to await the jury's verdict.

SBF defense attorney Mark Cohen directly questioned SBF

As the case began, Cohen asked SBF whether he had prepared a list of priorities during his tenure as CEO of FTX in September and October 2022?

SBF replied yes, saying that he regularly prepares lists of priorities and showed one of the lists for September/October 2022, one of the priorities being to increase the speed at which FTX matches and executes cryptocurrency trades for users.

SBF explained that during busy periods with high market volatility, FTX's large systems are backlogged, and large customers have said that if they can place more orders during busy periods, they will make more trades. There is another item on the priority list called "correct accounting at FTX." SBF explained that this project requires developers, finance, and accounting teams to spend months before the data can be displayed on FTX Finance.

SBF also said that he spends about 30 minutes to an hour a day working on each item in the priority list. SBF estimates that if all priorities are completed, FTX's revenue could increase from $1 billion per year to $2 billion per year. But not all priorities have been completed.

SBF says it tries to manage risks associated with client borrowing

Cohen asked if FTX tried to manage the risks associated with customer borrowing. SBF explained that if all customer assets were less than all customer liabilities, it could create a hole on the FTX exchange, and this is a risk that FTX manages.

Cohen asked SBF about hedging issues between June and September 2022, during which time SBF said he discussed hedging with Caroline Ellison, Sheben, and Sam Trabuco. SBF recalled telling Ellison, “I said I was very concerned that its net asset value had dropped to $10 billion from $40 billion the previous year” and that it was still not properly hedged.

He also said he told her that if the market fell another 50 percent, Alameda could go bankrupt. SBF said he called a meeting with Ellison and told her, "I'm very concerned about Alameda," especially its current market exposure. She agreed that Alameda should be hedged. She also said the company shouldn't be taking so many risky investments. She said she was concerned about that, too, and she offered to resign. In response to her offer to resign, he said, "I said it was her decision if she wanted to." SBF said she then began to cry. "Caroline ultimately agreed that Alameda should be more hedged, and Alameda did so," SBF said.

Earlier in Ellison's own testimony, she recalled that SBF yelled at her in August 2022 for not hedging Alameda's investments. Ellison testified that she kept a list of "things that scared SBF." One of the items on that list was hedging Alameda's portfolio risk.

Alameda's debt exceeds $10 billion

Cohen then asked about the size of Alameda’s liabilities around September 2022, when SBF wrote the memo about considering shutting down Alameda. SBF said he remembered the liability figure being slightly higher than the $10 billion in liabilities discussed at the time. He also found an account with a Korean name that had liabilities of about $8 billion. “Alameda’s total liabilities to FTX are about $10 billion,” SBF said. “If Alameda went bankrupt, it would be a very serious problem in my opinion,” SBF said. “This is similar to the hours before the statutory repair. My view is that its net asset value is about $10 billion.”

SBF’s attorney, Mark Cohen, argued in his opening statement that SBF had become concerned about wild swings in cryptocurrency prices months before Alameda’s bankruptcy and had urged Caroline to hedge against further losses, but she had not done so.

SBF said he went to the Middle East with Ramnik Arora, former head of product at FTX, to meet with sovereign wealth fund investors. He said he took the trip because he "believed Alameda was solvent and FTX was solvent and had good liquidity." SBF considered the investment meeting very successful, and although Binance, the largest cryptocurrency exchange, is headquartered in the Middle East, investors showed interest and planned to conduct more due diligence.

SBF held at least four meetings with senior White House officials in 2022 as part of an effort to influence cryptocurrency policy and build connections in Washington before his FTX empire ultimately collapsed.

SBF was asked about the day FTX filed for bankruptcy. He said that after CoinDesk published FTX’s leaked balance sheet, he contacted Caroline Ellison and asked if she would like to comment on it.

SBF said he believed her claims in the tweet were “true” given the stakes SBF and Gary Wang hold in the Paper Bird entity. SBF owns a majority stake in Paper Bird. “In addition to this, Paper Bird’s assets far exceed this amount, mainly holdings in FTX equity, which are not reflected on the balance sheet,” he said.

What happened when CZ planned to sell FTT

Then came the event where CZ planned to sell FTT, when Binance CEO Changpeng Zhao "announced that they would sell FTT from the FTX acquisition, valued at approximately $500 million." SBF said that after CZ's tweet, customer withdrawals "increased significantly." "I'm worried that this is a sign that I think there could be a run and liquidity crisis at the bank," he said. SBF said that customer withdrawals were reaching $1 billion per day, almost 10 times more than any other day he had ever seen. SBF said he was concerned because FTX is a margin exchange, which means there is lending and leverage. "This would be an extreme 100% full withdrawal situation," he said. SBF said the only way to return all the funds would be to liquidate all margin positions on the exchange and shut down the business.

SBF said that on Monday, November 7, customer withdrawals "not only continued at the pace of Sunday, but actually increased further." He said that on that day, FTX withdrew about $4 billion from the platform, about 100 times more than usual. He was worried that "we may be a few days away from a liquidity crisis." SBF said that Gary Wang told him at the time that FTX's Bitcoin withdrawals were backlogged. Because of this, FTX "began to see slowdowns in the code" and Wang rewrote it to make it faster.

When SBF was asked to explain FTX’s official tweet on November 7 regarding the delay, he provided reasons for the processing delay. He stated that banking hours also contributed to the delay.

Gary Wang testified earlier this month that SBF's (SBF) reassuring tweets before its bankruptcy were lies.

SBF was asked about a tweet he posted in November about a competitor trying to spread false rumors. He said it referred to Binance. “So my view at the time was that the exchange was OK, there were no vulnerabilities in terms of assets,” he said. SBF said that at the time, Alameda’s net asset value (NAV) was $10 billion, FTX had no vulnerabilities, and customer assets had not been attacked. But once customer withdrawals reached $4 billion a day, “we were on the verge of a liquidity crisis,” SBF said.

“From what I understand, the value of assets associated with Alameda has dropped dramatically. FTT dropped about 80% in about 12 hours. Solana dropped about 50%. Overall, that caused Alameda’s assets to plummet by about 50%, and it was that 50% plunge that caused its net asset value to… just above zero. That means Alameda is still solvent, but it has very little margin for error.” SBF said that with the collapse of FTT, that meant Alameda was at risk of a solvency crisis. “The market crashed on the night of November 7th and into the morning of November 8th,” he said. SBF said that’s when he began calling potential investors and actually began to liquidate Alameda. SBF tried to describe what happened at FTX as a “bank run.” This drew objections from prosecutors. “Customers were demanding billions of dollars in withdrawals immediately,” he said. “If we don’t want to have delays—significant delays financially—it’s going to require a lot of external capital.”

“I contacted Binance CEO CZ to discuss the possibility of acquiring FTX,” SBF said. “Later that day, they signed a letter of intent to acquire FTX… About a day later, they backed out.” Cohen continued his questioning, asking SBF about his contact with Binance that week.

When asked how many hours he worked per week, SBF responded, "About 22 hours a day, 23 hours a day."SBF said he had a phone discussion with potential investor Apollo about FTX's emergency funding issues and provided Apollo with a spreadsheet. He said the spreadsheet included $8 billion in liabilities.SBF said Apollo decided whether to inject billions of dollars, but had serious questions about the compliance framework for legal accounts. So he took a walk with FTX General Counsel Can Sun to ask how to respond to Apollo. SBF said they walked outside because the work area was "overcrowded" at the time.

In testimony earlier in the trial, Can Sun, FTX’s former general counsel, recounted FTX’s final days, saying Apollo declined to rescue FTX at the last minute after learning that billions of dollars in customer funds were unaccounted for and the exchange could not provide a legal basis for the shortfall.

FTX's former engineering director Nishad Singh is suicidal

SBF recounted a conversation he had with Nishad Singh, FTX's former director of engineering at the time. Singh said he wanted to get rid of personal loans. Recalling Singh's behavior, SBF said: "He was suicidal. He made that clear to us and others." SBF said they had a therapist session with Singh. He wanted to make sure Singh wouldn't do anything to hurt himself. Singh admitted during his testimony that he was in "severe emotional distress." He detailed a volatile relationship with SBF, which sometimes made him feel "humiliated," and that he had suicidal tendencies as the company collapsed. SBF was asked about a chat conversation with Singh in which Singh asked him to tell others that only a small number of people - not including Singh - were involved in the events that caused the crisis. SBF said he agreed with part of it and that he thought it might be easier to work with Singh if people knew he was not involved.

The context of these questions was to show that SBF responded in the private chat, as he had done to Singh in the final days of his collapse, out of concern for Singh’s mental health, not as an admission of guilt.

SBF was interviewed by several media outlets after FTX collapsed

After FTX collapsed last fall, lawyers urged SBF not to talk to anyone because anything he said could be used against him. But he gave interviews to multiple media outlets and spoke at the 2022 DealBook Summit. SBF said he spoke to reporters after resigning as CEO because "I felt I should do so" to explain what he knew.

Before Cohen concluded his direct examination, SBF was asked one final time why he continued to meet with Bahamian regulators and liquidators after November. He responded: “I was trying to help the clients, help the bankruptcy process, help in any way I could.”

Prosecutors question SBF

In the afternoon, Assistant U.S. Attorney Danielle Sassoon served as prosecutor and cross-examined SBF.

Sassoon tried to ask if that meant Alameda was an affiliate of FTX, but the defense objected. Judge Kaplan asked her to ask the question differently. Sassoon then asked if SBF had no involvement in the 2022 Alameda trade at all. He responded, “Depends on how you define trading.” SBF said, “I wouldn’t say I wasn’t involved in any way.” SBF said he was “not involved in principle” in day-to-day trading but was involved in higher-level discussions. He acknowledged that Ellison would provide updates and provide input on trading decisions.

Sassoon asked SBF if he gave Ellison instructions on the Japanese government bonds. He said yes, and that it was related to the hedging. Sassoon asked SBF if he remembered saying in a post-bankruptcy podcast that he was not involved in the Alameda trade. SBF said he did not remember. Prosecutors are now playing a recording to the jury. In the audio, SBF can be heard saying, "I'm not very involved in Alameda. I haven't been involved in the trading - for several years" because he was concerned about a conflict of interest. SBF acknowledged that it was him in the audio.

SBF also frequently said "I don't remember" when testifying before the judge on Thursday.

FTX raised about $2 billion, and FTX.US raised about $400 million

“Do you agree that you know how to tell a good story?” Sassoon asked. “I don’t know, it depends on what metric you use,” SBF responded. Sassoon then asked SBF if he would be willing to tell a story to potential investors during a pitch meeting. “I’ll tell what I believe to be the truth about the company,” SBF responded. SBF then admitted that he did raise billions of dollars from some of the most respected venture capital funds. FTX raised about $2 billion from investors and FTX.US raised about $400 million.

SBF Assures Investors that FTX is Safe

Asked if he had spoken on Twitter about how to handle customer assets, SBF, who has 1 million followers on X (formerly Twitter), said: “I don’t quite remember, but I suspect so.” SBF has 1 million followers on X (formerly Twitter). “Do you want your customers to trust you with their money?” Sassoon continued. “Yes,” SBF replied.

When asked if he specifically promoted FTX as “secure” compared to other cryptocurrency exchanges, SBF said, “I don’t quite remember, and I’m not sure.” Sassoon: “Have you described the FTX platform as secure over and over in public forums?” SBF: “I’m not sure what specifically you were referring to, but I may have.” Sassoon: “Yes or no: Do ​​you recall publicly stating that FTX is a secure platform?” SBF: “Yes.” SBF was admonished for dodging Judge Kaplan’s questions after answering a question about FTX’s security.

Sassoon asked SBF to read aloud excerpts from FTX’s key principles document submitted under oath to Congress. The 10 principles detail a plan that, if enacted, would enable policymakers to effectively regulate digital assets while maximizing the potential for growth and innovation. Sassoon asked SBF if his Oct. 19, 2022 tweet about his support for regulation was contingent on the protection of customer assets being good for PR. SBF said, “Yes.”

Sassoon pressed SBF, asking if customer collateral had to be listed on the exchange. SBF did not answer directly. Sassoon pointed out that when SBF was marketing FTX, didn’t he claim that FTX’s risk engine worked because FTX custodyed the assets on the platform? SBF responded, “Sometimes.” Sassoon asked if a typical customer was allowed to post outside investments as collateral. SBF said, “Sometimes.” Sassoon then asked for an example. SBF said, “A company called Crypto Lotus does this, and it’s associated with Three Arrows Capital.”

SBF’s defensive strategy in answering these questions seemed to be designed to show that he was only involved in the management of FTX and Alameda at a high level and was not aware of many details, such as the terms of Alameda’s partnership with FTX.

SBF admits Alameda’s credit line at FTX is $65 billion

Sassoon: “Do you deny that Alameda could use the line of credit to withdraw billions of dollars from the FTX exchange without complying with the automatic liquidation agreement?” SBF: “That may be true.” Sassoon: “You don’t deny it?” SBF: “I don’t deny it, no.”

Prosecutor Danielle Sassoon appeared to have successfully poked holes in SBF's credibility by showing him evidence that directly contradicted his testimony. SBF didn't give the same rambling answers he gave during initial cross-examination Thursday outside the presence of the jury. He was also more brief in his responses, often saying he couldn't remember what he said in certain situations.

SBF was asked whether he thought donations to charity would be good public relations for FTX. “I think some donations could have positive public relations value,” he said. “That’s separate from the content of my testimony.”

Sassoon noted that SBF testified last week that FTX could do better at risk management. This contradicts his public statements before the collapse. In this congressional testimony in February 2022, SBF talked about FTX's "risk engine" and mentioned "risk management" 20 times. In his opening statement, SBF's lawyer Mark Cohen explained that although FTX has 350 employees, it has not yet established a risk management team, and SBF and other executives make hundreds of decisions every day, which means that "something is overlooked."

"Do you consider yourself an intelligent person?" Sassoon asked. "In many ways, but not all," SBF said. "Do you think highly of yourself?" Sassoon asked. "I do," SBF said.

Prosecutors may try to show that SBF was involved in all operations in detail and even made decisions about specific ventures.

The questioning turned heated when Sassoon asked SBF if he knew about Alameda’s line of credit with FTX, leading the prosecutor to ask a series of follow-up questions:

• Sassoon: “You did know that Alameda had a line of credit with FTX during your tenure as CEO, correct?

• SBF: “Yes.”

• Sassoon: “Don’t most of FTX’s customers have no credit lines?”

• SBF: “Yes, that’s right.”

• Sassoon: “You’re allowing Alameda to borrow money without requiring it to post collateral to the exchange?”

• SBF: “As far as I know, many market makers have credit lines.”

SBF acknowledged that Alameda’s credit line was $65 billion, more than $64 billion more than other market makers. “Since the early days of FTX, Alameda has been allowed to exceed FTX’s normal borrowing limits, yes or no?” Sassoon asked. “I’m not sure,” SBF replied.

Sassoon also asked about the MobileCoin incident, in which a vulnerability was exploited by customers, resulting in huge losses for FTX. When asked if he remembered Alameda losing money in that incident, SBF said: “I’m not going to say I don’t have memory… I can take a wild guess if you want me to.” “I don’t want you to speculate,” Sassoon said.

SBF investment related issues

SBF was asked if it had financed an apartment for the CEO of media site The Block. “I don’t quite remember,” he said. It was revealed that The Block CEO Michael McCaffrey had used part of a $16 million loan from Alameda to buy an apartment in the Bahamas. Michael McCaffrey subsequently resigned.

Sassoon also asked SBF about a range of investments, including the acquisition of a stake in the company that makes the video game Storybook Brawl, cryptocurrency news site The Block, and Modulu Capital. She asked whether investing in them was SBF’s decision.

SBF was asked if he was the only member of Alameda’s board. He responded that it was “some entities of Alameda, not others,” and that he did not intend to be the sole director. Asked if he agreed that Alameda’s venture capital was too large, SBF said, “Given that they had not hedged it, yes.” “When Alameda repaid its lenders, did you know that Alameda had not hedged?” Sassoon asked. “I knew it at the time,” he said. “I don’t remember the exact date.”

Alameda's seven balance sheets

Sassoon asked SBF if he remembered receiving a spreadsheet with seven tabs from Caroline Ellison. "I don't remember receiving that document specifically from her," SBF said. "I remember receiving a document that looked like at least one of the tabs on it." SBF said, "I don't remember receiving that document specifically from her. I remember receiving a document that looked like at least one of the tabs on it." When asked which tab it was, he said, "When I saw the 7th tab, at least it looked like the thing I received." The balance sheet "alt 7" was eventually sent to Genesis. In this version, the "Exchange Borrowing" item (referring to Alameda's borrowing of $9.9 billion from FTX) was deleted. Sassoon noted that the government had received Google metadata indicating that SBF reviewed the spreadsheet on June 19, 2022.

The court was adjourned for the day, and Sassoon expected to finish his cross-examination by lunch time on October 31. That means there might only be two hours left.