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Prosecutors Use Sam Bankman-Fried’s Statements as Evidence Against Him

During the rise of cryptocurrency exchange FTX, Sam Bankman-Fried, the founder, frequently communicated with the public through numerous tweets, TV interviews, and statements made in front of Congress.

Now, as Mr. Bankman-Fried takes the stand in his fraud trial in Manhattan, his past words are being used against him.

On Monday, federal prosecutor Danielle Sassoon bombarded the disgraced crypto mogul with questions, highlighting inconsistencies between his public statements and his management of the collapsed crypto empire.

Mr. Bankman-Fried, dressed in a light gray suit and purple tie, offered curt responses, often saying he couldn’t remember most of what he had said publicly about FTX’s handling of customer deposits and conflicts of interest within his businesses.

Throughout the cross-examination, Mr. Bankman-Fried’s claims were undermined, potentially damaging his credibility with the jury. Prosecutors displayed statements on a projector screen that appeared to contradict Mr. Bankman-Fried’s public statements. This included private messages in which he dismissed regulators as useless.

Mr. Bankman-Fried’s testimony is highly anticipated, as it sheds light on hubris and excessive risk-taking in the crypto industry. Once considered the face of crypto’s public appeal, he is now compared to infamous fraudsters like Elizabeth Holmes of Theranos.

Taking the stand was a risky move for Mr. Bankman-Fried, as criminal defendants often avoid testifying to prevent questioning by prosecutors. However, given the damaging testimony from government witnesses, he had few options left to salvage his case.

In December, federal prosecutors charged Mr. Bankman-Fried with orchestrating a large-scale scheme to steal up to $10 billion from FTX customers. They allege that he used the money for lavish projects, political contributions, and luxury real estate in the Bahamas, where FTX was headquartered. Mr. Bankman-Fried is also accused of creating a secret backdoor in FTX’s code that allowed his hedge fund, Alameda Research, to seize billions of dollars from customer funds.

Mr. Bankman-Fried has pleaded not guilty to seven counts of fraud, conspiracy, and money laundering. If convicted, he could face a lengthy prison sentence.

Following the collapse of FTX, three of Mr. Bankman-Fried’s closest associates pleaded guilty to fraud and agreed to cooperate with the government. These individuals have testified against him, stating that they lied and stole at his direction for years.

When Mr. Bankman-Fried took the stand on Friday, he portrayed himself as an overwhelmed founder who neglected major business issues. He denied committing fraud and placed blame on his colleagues for FTX’s collapse.

On Monday, the prosecution questioned him further. The courtroom was filled with spectators, including Mr. Bankman-Fried’s parents, law professors Joe Bankman and Barbara Fried, and Damian Williams, the top federal prosecutor in New York.

Ms. Sassoon focused her questions on Mr. Bankman-Fried’s interviews, congressional testimony, and Twitter posts. She highlighted inconsistencies in his statements and his use of private planes, suggesting his humble persona was just for public image. Ms. Sassoon revealed that Mr. Bankman-Fried had spent $15 million on private flights.

She also grilled him about interviews prior to FTX’s collapse, where he claimed that Alameda had no special privileges as a customer on the exchange. However, the prosecution’s witnesses stated the opposite, alleging that Mr. Bankman-Fried channeled billions of dollars to Alameda.

At one point, Ms. Sassoon presented Mr. Bankman-Fried with a copy of “Number Go Up,” a book about crypto by Bloomberg News reporter Zeke Faux. The book contained an interview that contradicted Mr. Bankman-Fried’s previous claims, acknowledging that Alameda had special privileges. Despite this, Mr. Bankman-Fried stated that it didn’t refresh his memory.

During the questioning, Mr. Bankman-Fried did admit that Alameda had a $65 billion line of credit with FTX, allowing it to borrow unlimited funds. He also acknowledged that his statements attributed to various news articles did not always align with his memory or his objections to the reporting.

Mr. Bankman-Fried expressed disagreement with articles written about him after FTX’s collapse, stating that he disagreed with nearly every one.

Regarding the key moments presented by the prosecutors about FTX’s downfall, Mr. Bankman-Fried claimed he couldn’t recall telling former colleagues to transfer $2 billion from venture capital firms to Alameda. Prosecutors accuse him of misappropriating funds from FTX’s investors and customers.

At one point, Ms. Sassoon asked if he remembered making statements about the importance of safeguarding customer funds. Mr. Bankman-Fried hesitated and eventually said he couldn’t remember. However, Ms. Sassoon presented a tweet where he explicitly mentioned the significance of prioritizing user funds and safety.

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