By Luc Cohen and Jody Godoy NEW YORK (Reuters) -FTX founder Sam Bankman-Fried testified on Monday that he believed his Alameda Research hedge fund had enough assets to cover an $8 billion debt to the cryptocurrency exchange until days before both collapsed. On Friday, his first day testifying in his own defense at his fraud trial, he said he was “very surprised” when he realized in October 2022 that Alameda had borrowed $8 billion from deposits that FTX customers sent to the exchange, and that the loan was not listed on Alameda’s main account. He told jurors on Monday that while he was concerned about the Alameda liability, it did not alarm him. “If it were far larger, I would have been calling a crisis,” Bankman-Fried said from the witness stand in Manhattan federal court in response to questions from his defense lawyer, Mark Cohen. The Massachusetts Institute of Technology graduate has pleaded not guilty to two counts of fraud and five counts of conspiracy. Prosecutors have said he looted billions of dollars in FTX customer funds to prop up Alameda, make speculative venture investments and contribute to U.S. political campaigns. If convicted, he could face decades in prison. Some of the debt was the result of FTX customers depositing their money into an Alameda bank account before the exchange had its own accounts. On cross-examination, prosecutor Danielle Sassoon asked Bankman-Fried if he could identify FTX customers besides Alameda who received deposits on behalf of other customers. “Not with 100% confidence,” Bankman-Fried said, while rocking slightly side to side. Bankman-Fried sought to push back on testimony from three former confidantes at FTX or Alameda – each of whom pleaded guilty and testified against him earlier this month – that his Nov. 7, 2022, tweet that “FTX is fine” was an attempt to give customers false assurances about the exchange’s financial health. “My view at the time was the exchange was OK, and there was no hole in terms of assets,” he responded to Cohen. Bankman-Fried said that after he posted the tweet, Alameda took a 50% hit when its cryptocurrency investments plummeted. Alameda owed billions of dollars to FTX at the time, which he said changed his thinking about the exchange’s solvency. He deleted the tweet the next day. On Friday, Bankman-Fried acknowledged making “mistakes” that led to FTX’s Nov. 11, 2022, bankruptcy, harming customers and employees. But he said he did not steal customers’ money. BANKMAN-FRIED SAYS HE ‘TRUSTED’ DEPUTIES In his testimony, Bankman-Fried has portrayed himself as a hands-off CEO who frequently left operational details to others, part of an effort to discredit testimony from his former confidantes that he directed them to commit crimes. For example, FTX computer programmers Nishad Singh and Gary Wang – who have pleaded guilty and agreed to cooperate with prosecutors – testified that Bankman-Fried directed them to grant Alameda special trading privileges on FTX that prosecutors say allowed the fund to siphon off customer funds. Bankman-Fried testified on Friday that said he asked Wang and Singh to prevent Alameda from getting liquidated by mistake, but did not know their solution was to let Alameda run a negative balance. On Monday, prosecutor Sassoon challenged that assertion. “You did not learn the details for the code change that you directed?” Sassoon asked. “That’s correct,” Bankman-Fried said. “I trusted Gary and Nishad.” (Reporting by Luc Cohen and Jody Godoy in New York; Editing by Will Dunham, Nick Zieminski, Noeleen Walder and Cynthia Osterman)
Sam Bankman-Fried testifies he thought hedge fund could cover $8 billion debt to FTX
