SBF Trial Records Fully Exposed Blame-shifting, Amnesia, Contradictions

SBF Trial Exposes Blame-shifting, Amnesia, and Contradictions in Fully Detailed Records

Compiled by: Odaily Planet Daily

Organized by: jk

On Monday, October 30th, local time in the United States, the SBF case entered its third day of SBF’s own testimony. Today is the real deal, as the prosecutor’s lawyer will question SBF for about half a day after the defense’s conclusion. The questions are very sharp and involve various details about Caroline, FTX, Alameda, etc. At one point, SBF was left speechless, answering several “I don’t know” just like the first day. Let’s take a look at what today’s testimony is like.

Odaily Planet Daily would like to add some background information:

• The Ever-Evolving Bitcoin: A Whitepaper Worth Celebrating
• How to Thrive as an Artist in the Volatile NFT Market: A Humorous Guide
• Beyond Web 2.0: Enter the Era of Autonomous Worlds

In the court hearing of the SBF case, Gary Wang, CTO of FTX, and Caroline Ellison, former executive of Alameda Research, revealed internal misconduct by FTX and Alameda, including allegations of embezzling FTX client funds under SBF’s instructions and submitting false financial statements. It is alleged that SBF may have engaged in opaque and non-compliant transactions leveraging his position. During the sixth day of the trial, star witness Caroline Ellison detailed how SBF violated the law in running FTX, including the issue of Alameda misappropriating FTX client funds, Alameda’s false financial statements, and CZ’s response on Twitter. In the second week of the trial, Nishad Singh, SBF’s close partner and Chief of Engineering, also began testifying, his testimony primarily focusing on the inner workings of FTX, including political donations and fund misappropriation scandals involving celebrities like Hillary Clinton and Leonardo DiCaprio.

Last week, during the questioning of SBF, he frequently responded to key questions with “I don’t know” or “I don’t remember”, to the point where the judge helplessly said, “I think the witness has an interesting way of answering questions.” Later on, the defense lawyers and SBF (i.e., SBF and his own lawyers) had a dispute because the lawyers believed that SBF did not need to answer certain questions. Things got chaotic on the scene for a while. On Friday, with the presence of the jury, the defense lawyers (i.e., SBF’s own lawyers) conducted a more friendly cross-examination. However, today’s order was determined by the cross-examinations between the defense and the prosecution: many of the questions were very direct and targeted the core process and false information of FTX’s collapse.

If there are readers who want to directly watch the most intense part of the questioning, they can scroll down to the second part of the prosecution’s interrogation below.

Odaily has compiled today’s on-site testimony as follows:

Defense (SBF’s side) interrogation

Background Information

SBF’s lawyer, Mark Cohen: As the CEO, did you prepare a priority list?

SBF: Yes.

SBF: I released these to let the employees know what I was doing.

Cohen: What is this?

SBF: This is a priority list for the end of September to the beginning of October 2022.

Cohen: DX 5

Judge Kaplan: Allowed (as evidence).

Cohen: I don’t plan on reviewing all 16 items, just a few of them. First, data. What is that?

SBF: The FTX team is building a database for non-developers to access, including myself. We’re trying to speed up transactions.

Cohen: How much time do you spend on these matters each day?

SBF: About 12 hours. I manage the personnel working on these projects.

Cohen: How much revenue is associated with these matters?

AUSA Danielle Sassoon: Objection, improper way.

Judge Kaplan: Sustained.

Cohen: How much will the income increase through these?

SBF: From $1 billion per year to $2 billion per year.

Cohen: Does FTX attempt to manage risk?

SBF: Yes. If a client goes into the negatives, it could result in overall losses. So we have a risk engine.

“The problem is Caroline didn’t hedge properly”

Cohen: Do you have discussions about hedging?

SBF: Yes, with Caroline Ellison and Sam Trabucco.

Cohen: Where did the discussion with Ms. Ellison take place?

SBF: In the study of the Orchid apartment.

SBF: I organized the conversation. After Bitcoin dropped to $20,000. Alameda’s net worth was approximately $10 billion-

AUSA Sassoon: Objection!

Judge Kaplan: Sustained. All of this will be stricken.

Cohen: What did she say?

SBF: She started crying.

SBF: She (Caroline) agreed and said Alameda should hedge. She suggested resigning.

Cohen: How did you respond?

SBF: I responded point by point. Regarding the last point, I said it was her decision. Regarding the others, I said the focus should be on hedging.

SBF: In September, I asked her again about hedging. I asked her what the scale was. She gave me that number. I told her I was happy with it – but it should be a larger number, at least twice as much. She sent me some spreadsheets.

Cohen: Anything else?

SBF: She agreed.

The entire process from CoinDesk publishing an article to bankruptcy in SBF’s eyes

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: CoinDesk’s article, they leaked an old balance sheet of Alameda’s research.

Cohen: How did you react?

SBF: I contacted Caroline to see if she wanted to respond. We decided to send a tweet.

Cohen: GX 875.

SBF: That’s the tweet. November 6.

Cohen (reading the tweet: We have $10 billion assets that are not reflected there).

Cohen: Let’s continue on November 6. GX 874.

SBF: That’s from CZ.

Cohen: He wrote, are we settling FTT on the ledger?

SBF: Yes. Caroline and I discussed whether we should respond with a tweet. On November 6, customer withdrawals increased to $1 billion. I was concerned.

SBF: I was worried about a bank run.

Cohen: What’s that?

SBF: Suppose you have a bank—

AUSA Sassoon: Objection.

Judge Kaplan: Overruled.

Cohen: How did you respond?

SBF: Caroline sent a tweet saying we would buy FTT at $22.

Cohen: On November 7, what did you observe about withdrawals?

SBF: They increased. On November 7, net withdrawals were $4 billion, 100 times the average day. We may face a liquidity crisis.

Tweets sent by SBF (including lots of false information about FTX security)

Cohen: Have you seen GX 878 before?

SBF: It was about slow responses to withdrawal requests. Gary told me that the withdrawal speed of Bitcoin had dropped to one hour instead of seconds or minutes. We encountered obstacles. Gary is rewriting it.

Cohen: How about this one (another tweet written by SBF): Rumors and FTX are all fine, assets are also fine.

SBF: I think Binance is targeting us because we cooperate with regulators and pay people on Twitter.

AUSA Sassoon: Objection. No basis.

Judge Kaplan: Sustained. Delete.

Cohen: You tweeted “assets are fine.” What do you mean?

SBF: My point is that the exchange is fine, and there are no issues with assets.

Cohen: Here you say FTX will continue to process withdrawal requests…

SBF: FTX does not use customer assets for any investments.

Cohen: And then?

SBF: Alameda’s assets collapsed. Our margin was very low.

Cohen: What impact did hedging have?

SBF: Very little. I deleted that tweet thread.

Cohen: You resigned on November 11?

SBF: Yes.

Cohen: Did you speak to any reporters?

SBF: Yes.

Cohen: Why did you do that?

SBF: I want to explain what I know.

Cohen: Have you talked to George Stephanopoulos of GMA?

SBF: Yes, I want to apologize.

Cohen: Have you talked to the Securities Commission of the Bahamas?

SBF: Yes, my father is there.

Cohen: And then?

SBF: Gary and I were instructed to transfer assets. I did my best to help.

Cohen: Thank you, Mr. Bankman-Fried. I have no further questions.

Prosecution Examination

Prosecution: You have such high authority that you can even tell Caroline what cryptocurrencies to buy, but you are not the ultimate controller of Alameda?

AUSA Sassoon: Mr. Bankman-Fried, do you hold 90% of Alameda’s shares?

SBF: Yes.

AUSA: Can we say that FTX and Alameda are affiliated companies?

SBF’s lawyer Cohen: Objection, formal.

AUSA Sassoon: Are you a billionaire?

SBF: Yes.

AUSA Sassoon: You can’t say that you have no involvement in Alameda’s transactions, right?

SBF: That depends on what you mean by transactions.

AUSA: During 2022, did you constantly receive information about Alameda?

SBF: Yes.

AUSA: You were not isolated, right?

SBF: Correct.

AUSA Sassoon: Did you meet with Caroline Ellison and Sam Trabucco?

SBF: Yes.

AUSA: You can express opinions on trade decisions, right?

SBF: Yes.

AUSA: Are you in a chat group called Vertex?

SBF: Yes.

AUSA Sassoon: You told Caroline when to buy certain cryptocurrencies, right?

SBF: I’m not sure what you’re talking about.

AUSA: Showing witness GX 1630. You, Ms. Ellison, and Sam Trabucco, January 25, 2022 – you referred to Alameda as “we,” right?

SBF: Yes.

AUSA Sassoon: You gave a trade instruction, Caroline responded saying it sounded good, and you responded LOL.

SBF: Yes.

AUSA Sassoon: Did you tell her to trade Japanese government bonds?

SBF: Yes.

AUSA: She sent you a spreadsheet about hedging, that’s a trade, right?

SBF: Yes.

AUSA Sassoon: You were arrested in December, right?

SBF: Yes.

AUSA: You gave an interview, right?

SBF: Yes.

AUSA: You know that telling the truth is important, right?

SBF: I do my best.

Prosecutor: You can keep saying you don’t remember, but your testimony is contradictory.

AUSA: We present exhibit GX 2508 and 2508T.

Judge Kaplan: Received.

Audio Playback (SBF says): Due to concerns of conflict of interest, I intentionally did not participate.

AUSA Sassoon: That is your voice, right?

SBF: It sounds like me.

AUSA: Have you had conversations with the Financial Times?

SBF: I don’t remember.

AUSA: Exhibit GX 2503. Mr. Bankman-Fried, have you seen this article from December 4, 2022?

SBF: I have seen it.

AUSA Sassoon (reads): FTX founder insists he has isolated himself. Have you seen it?

SBF: I have seen it. (Contradicts previous statement of not being isolated)

AUSA: Was this before you knew you were being indicted?

SBF: Yes.

AUSA: Do you believe your information has been automatically deleted?

SBF: Some of it.

AUSA Sassoon: Look at this, you didn’t know Caroline Ellison would cooperate with the government, did you?

SBF: Yes.

AUSA: You didn’t know the government had a search warrant for your Google account?

SBF: I suspected.

AUSA Sassoon: You saved a copy of Caroline Ellison’s plea agreement on your Google Drive, right?

SBF: Yes. (Contradicts previous statement of not knowing)

AUSA: Did you view the files on Caroline’s Google Drive?

SBF: Yes.

Prosecutor: You have consistently claimed that FTX is secure, here is the evidence.

AUSA Sassoon: Do you agree that you know how to tell a good story?

SBF: It depends on the standards you are using.

AUSA: You raised funds through promotion dozens of times, right?

SBF: Yes.

AUSA: Did you mention a liquidation agreement?

SBF: Yes.

AUSA Sassoon: Did you make recommendations to Congress?

SBF: I testified.

AUSA: Did you fly to DC on a private plane?

SBF: Yes.

AUSA: Are you familiar with the phrase “cryptocurrency Twitter”?

SBF: Yes.

AUSA: Does that include clients?

SBF: Yes.

AUSA Sassoon: Have you had a good relationship with the media?

SBF: Definitely better than I expected.

AUSA: FTX has received $15 billion from clients, not including Alameda, right?

SBF: That sounds possible.

AUSA: Can you tell the public how FTX will operate?

SBF: Yes.

AUSA Sassoon: Do you want customers to think FTX is safe?

SBF: That would be nice.

AUSA: To trust you and hand over their money?

SBF: Yes.

AUSA: Have you ever claimed that FTX is safe?

SBF: I don’t remember, but I might have (repeatedly).

AUSA Sassoon: You appeared on FTX’s podcast and said

[Playback recording] SBF: Considering all factors, it’s operating quite well.

AUSA: Was that you?

SBF: Yes.

AUSA: Did you promote FTX as being safer than other exchanges?

SBF: FTX US, yes.

AUSA Sassoon: Did you describe FTX as safe?

SBF: I’m not sure what you’re referring to.

Judge Kaplan: Mr. Bankman-Fried, she’s not referring to that, but what you remember.

AUSA: Did you say you always allow withdrawals?

SBF: Yes.

AUSA Sassoon: In October 2022, you said owning your assets is crucial for cryptocurrencies?

SBF: I don’t remember.

AUSA: Are you aware of the $8 billion debt?

SBF: Yes.

AUSA Sassoon: In October [2022], you publicly stated that customers are more important than anything?

SBF: I might have.

AUSA: Do you want FTX’s customers to trust you?

SBF: Ideally, yes.

Prosecution: Testifying in Congress while secretly criticizing regulatory agencies

AUSA Sassoon: The key principles you told Congress about, you reviewed them, right?

SBF: Yes.

AUSA: Did you participate in drafting it?

SBF: I don’t remember participating in drafting it.

AUSA: Did you solemnly submit it?

SBF: Yes.

AUSA Sassoon: Would you read this?

SBF (in a dramatic voice): We are presenting this today.

AUSA: The next item is about proper disclosures.

SBF: Yes.

AUSA: There are also press releases, right?

SBF: Yes.

AUSA: On Twitter, did you say your support for regulations depends on protecting customers?

SBF: I don’t remember.

AUSA: But privately, you said, “F**k regulatory agencies,” right?

SBF: I said it once.

AUSA: You called people on cryptocurrency Twitter “stupid idiots,” right?

SBF: Some of them, yes.

AUSA: Don’t you think regulation will help you gain market share from Binance?

SBF: That would be an advantage. But there are also disadvantages.

Prosecutor: Reading this, you yourself said that Alameda’s accounts are no different from others, but only Alameda can borrow unlimitedly and not be liquidated

AUSA Sassoon: You can’t deposit $10 and withdraw $1 billion, can you?

SBF: It depends on the circumstances.

AUSA: Are you claiming that the risk engine safeguards the collateral?

SBF: Yes.

AUSA: Is this how you market FTX?

SBF: Sometimes.

AUSA Sassoon: Did you accept an interview with 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 at me when you finish.

SBF: Okay.

AUSA: Customers can have a negative balance, right?

SBF: Yes.

AUSA Sassoon: But a typical customer cannot hold an overall negative account balance for days, they will be liquidated?

SBF: In most cases.

AUSA: For a typical customer, they can borrow against the collateral, right?

SBF: And there’s a credit limit.

AUSA Sassoon: Do you remember guaranteeing that Alameda follows the same rules?

SBF: I’m not sure what you’re referring to.

AUSA: You said, “Their accounts are the same as others.”

SBF: I did say that.

AUSA Sassoon: This is an email from March 2022, right?

SBF: Yes.

AUSA: It didn’t mention manipulating pre-market activity, did it?

SBF: It didn’t directly mention it.

AUSA Sassoon: In 2022, you didn’t claim that Alameda is a completely independent entity?

SBF: More or less.

AUSA: Did you refer to FTX as a neutral market infrastructure?

SBF: I don’t remember saying such words. I may have said it.

Prosecutor: You made a lot of decisions, holding 90% of the shares. Does that mean you mistakenly became a director of Alameda?

AUSA: Do you deny that Alameda has accounts with the “allow negative balance” feature?

SBF: No.

AUSA: Do you deny that Alameda can withdraw billions without worrying about the risk of liquidation?

SBF: That could be true.

AUSA: You don’t deny it.

SBF: No, I don’t deny it.

AUSA Sassoon: Was it your decision to buy a $2 billion stake in FTX from Binance?

SBF: Yes.

AUSA: Do you believe the investment in Genesis Digital Assets, a cryptocurrency mining company, was worth it?

SBF: Yes, if it was properly hedged.

AUSA Sassoon: Did you buy Storybook Brawl for approximately $20 million?

SBF: Yes.

AUSA: Did you buy an apartment in the Bahamas for the CEO of The Block?

SBF: I don’t remember…

AUSA: Do you remember providing financing for it?

Cohen: Already asked and answered!

AUSA Sassoon: Did you instruct the investment in Modulo Capital?

SBF: Yes, I believe it was the right move.

AUSA: Did you instruct the investment in K 5?

SBF: I instructed an investment, but not necessarily this one.

AUSA: Was it your decision to invest in Robinhood?

SBF: Yes.

AUSA Sassoon: Are you the sole member of the board for Alameda Research Limited?

SBF: It makes it seem like I am one of them, but that was not my intention.

Judge Kaplan: You hold 90% of the shares. Is it your position that you mistakenly became a director?

SBF: No.

Prosecution: You knew there was a risk in repaying the debt, yet you still had Caroline do it; and, we have metadata showing you lied about not seeing financial statements

AUSA Sassoon: When repaying debts at Alameda, did you have Caroline pay the lenders?

SBF: Yes.

AUSA: Did you know that doing so would expose FTX to risks?

SBF: No, I didn’t know. At that time, I didn’t believe that situation was likely to happen.

AUSA Sassoon: Did you know there was a risk?

SBF: There is always risk.

AUSA: Withdrawing money from FTX to pay the lenders is not margin trading, right?

SBF: I’m not sure if I agree.

AUSA: Do you understand the risk of “hollowing out” (i.e. risk exposure)?

SBF: There could be “hollowing out.”

AUSA Sassoon: Did you know Alameda couldn’t pay?

SBF: I probably knew at that time. I don’t remember the exact order of events.

AUSA: Alright, let’s look at the spreadsheet. Which one do you see?

SBF: Alt 7. It’s not the main one.

AUSA Sassoon: Do you remember receiving 8 tabs from Caroline?

SBF: I’m not sure.

AUSA: Multiple tabs?

SBF: Possibly.

AUSA: Do you know that the prosecution has Google’s metadata showing that you accessed these 8 alternative spreadsheets?

Cohen: Objection!

Judge: Overruled.

AUSA Sassoon: We can withdraw that. You continue to guide other investments and go to the Middle East to try to raise funds, right?

SBF: Other than that.

AUSA: Have you considered shutting down Alameda and replacing it with Modulo?

SBF: I’ve thought about it.

The trial in this case is about to end this week, and Odaily will continue to follow up and report for you.

We will continue to update Blocking; if you have any questions or suggestions, please contact us!