On Tuesday, Sam Bankman-Fried walked off the stand, ending a four-day gamble to convince just a single member of the jury that he didn’t do anything criminally wrong when FTX and Alameda collapsed last year, taking about $9 billion worth of customer funds with them. As far as witnesses go, he was evasive, frustrating, clearly selective in his memory, and made statements that were shown to be not true. But the question left hanging over him was not so much whether his version of events would prevail. It was whether SBF’s gamble had the wrong audience in mind, and he’s giving the judge in the case — who will decide his sentencing — the justification to make any prison sentence longer than it would have been had he just kept his mouth shut.
When SBF was considering whether or not to testify, he surely took a look at the profiles of the jury members and determined that there would be at least one person who would sympathize with him. Among the jurors are a Metro North conductor, a librarian, a social worker, a retired investment banker with non-Hodgkins lymphoma. With the exception of the banker, few seem to have all that much in common with the 31-year-old former crypto billionaire who was raised by two law school professors, went to MIT, and whose first job was for a secretive Wall Street hedge fund.
Yet, for the last three days, it’s felt as if Bankman-Fried has been making his case to a jury of 12 other SBFs, people who like to toy with the idea of truth in a sprawling, never-ending game of intellectual (and financial) domination. Most times before he answered a question, he would often pause, or look up toward the ceiling, before giving some evasive answer in a dismissive tone. When he did answer directly, it was usually a “yep” or a “nope,” delivered in a such a way that he might as well be saying how could you even ask me that question? On Tuesday morning, he quibbled over whether his former deputies had told him about an existential risk to his companies “in that particular sentence” of a conversation. The effect has been frustrating, particularly for Kaplan, who’s admonished the defendant several times to just answer the question he’s been asked.
Still, we now have a story from the defendant himself: he didn’t know that his hedge fund, Alameda, was secretly borrowing billions in customer funds from his exchange, FTX. He had previewed this last year in the wake of his companies’ demise, but his explanation on the stand — that this was all a giant misunderstanding — has a bit more depth.
Here’s how it happened, according to SBF. Alameda had special privileges on FTX because it was originally a special kind of customer. Not only was it a “market maker” — that is, a fund that would trade in just about every asset available to facilitate customer trades on the platform — but it would also knowingly take on losing bets to keep markets liquid. When FTX started getting bigger, he said, there was a bug in the code that nearly wiped out trillions of dollars’ worth of otherwise good trades. He asked his top executives to write code to protect Alameda from another such disaster from occurring. Since one of FTX’s key features was its ability to liquidate a customer’s holdings once the customer’s trading losses hit a certain threshold, that protection took the form of an exemption for Alameda from those liquidations. That was the so-called backdoor, which, coupled with a $65 billion line of credit from FTX, let the hedge fund borrow an infinite amount of customer funds even as it lost more and more money.
SBF says he didn’t know what the backdoor did exactly — that was someone else’s job. He also says he didn’t know that there was an account showing that Alameda was borrowing billions in FTX customer funds. He says he didn’t have access to databases that would have shown that. He says that he doesn’t remember seeing spreadsheets that show the $8 billion or so in “borrows.” There is a lot he can’t remember.
But, of course, his memory isn’t the only record in evidence. There are the recollections of his top executives, who claim that he orchestrated the plot to steal billions in order to fund his political donations, his real estate holdings, his sports stadium sponsorships, his venture capital investments, and much more. There are the documents, and the related metadata, of documents that show he was well aware of the fraud.
On Monday, after the first day of cross-examination, SBF gave the impression that he had a hazy memory about a lot of things — perhaps too many things. Was Anthony Scaramucci an investor in FTX? “I believe so,” he answered. (In fact, he was, they put on a joint conference together in the Bahamas, and the two went on a trip to the Middle East together in 2022 to raise money from investors.) In other instances, he wasn’t around, or didn’t have the power to learn about major problems. After his executives discovered a bug in the code that created the illusion of an $8 billion shortfall, Bankman-Fried says he was told by those executives that “I should stop asking questions.” The prosecutor questioning him, Danielle Sassoon, did not buy that the billionaire owner of both FTX and Alameda would not further investigate this problem, especially after he had canceled plans to Washington in the summer of 2022 to fix it, but SBF insisted that he just delegated it out and didn’t really think about it again for a while.
His strategy seemed to be to make Sassoon crack, or get frustrated, when she found herself unable to get answers. To an extent, that’s a fair strategy from a legal perspective — it is not criminal to be annoying. But if that bleeds into the realm of lying? Well, that’s a different story.
There was a moment Monday where SBF seemed to walk right into a trap set for him by Sassoon. She asked him about his stake in Robinhood, the online brokerage that he bought a 7.6 percent percent stake in — using customer funds — in mid-2022. After FTX blew up and declared bankruptcy, he had tried to get a hold of those shares. “Isn’t it true that after FTX collapsed you considered calling the Robinhood broker to see if the broker would give you the shares without thinking about it?” Sassoon asked him. It was a weird question — she never really said what she meant by “without thinking about it,” though, at the time, the shares were frozen by bankruptcy proceedings. After evading for a little while, Bankman-Fried gave an uncharacteristically straight answer: “I didn’t actually consider doing that,” he said.
It was then that Sassoon pulled up government exhibit 2556, which is a document that SBF had written to himself last Christmas. The exhibit includes a note to himself where he is asking himself that very same question.
It’s a minor point — but there is no minor perjury. Judge Kaplan is the one who will determine whether SBF has, in fact, lied under oath, and while he made no statement about this, there is clearly a discrepancy between his under-oath testimony and the evidence obtained from the defendant’s own records.
Before SBF was a defendant, he described himself on the stand as something of a reluctant spokesman for his company. Others took the stand to say that many of the quirks about him — his hair, his Toyota Corolla, his naps on a beanbag chair — were exaggerated for effect, as if he were playing a character version of himself on TV. SBF’s persona on the witness stand is not a wholesale different person — but he’s far more ornery and difficult than the person who went on CNBC and the cover of Forbes. There was no weirdo geek charm on the stand. There was no boy genius. Even the hair was unremarkable. What the judge and jury saw was an evasive, sometimes untruthful person who sounded annoyed to even be there. The closing arguments from the lawyers are Wednesday. The jury may start deliberating as soon as Thursday. The odds of SBF being found innocent look low — probably lower than before he took the stand. But clearly he entered the courtroom with a strategy in mind – what he reasoned to be his best shot at acquittal. In a matter of days, we’ll see if his gamble paid off.
