Day 15 - October 27, 2023
The court declined to bar use of Bankman-Fried's prior hearing testimony and limited the proposed attorney-involvement evidence. On direct examination, Bankman-Fried denied fraud, acknowledged FTX's risk-management failures, and described Alameda's account privileges, customer fiat deposits, and an $8 billion balance he said surprised him.
Full day summary
1. Advice-of-Counsel Ruling and Morning Matters
The court began Day 15 with morning procedural matters and rulings on disputed evidence concerning the prior day's cross-examination and attorney involvement at FTX.
Highlights
Advice-of-Counsel Ruling and Morning MattersrulingThe court refused to bar use of the prior hearing testimony, allowed limited evidence that counsel helped prepare FTX's data-retention policy, and excluded four other attorney-drafted-document items as irrelevant or substantially outweighed by unfair prejudice and confusion.Advice-of-Counsel Ruling and Morning Matters“I will not prohibit use of anything that the defendant said yesterday on the grounds articulated by Mr. Cohen.”— Lewis A. KaplanThe court rejected the defense request to categorically bar use of the prior hearing testimony.Advice-of-Counsel Ruling and Morning Mattersprocedural actionThe omnibus-wallet issue remained unresolved pending a morning-break conference after the court said the testimony did not clearly address whether the subject extended to fiat deposits or holdings.
2. Samuel Bankman-Fried — Direct (Part 2)
Samuel Bankman-Fried's Day 15 direct examination addressed FTX and Alameda's growth, customer deposits, risk controls, political giving, and Alameda's multibillion-dollar obligations to FTX.
Highlights
Samuel Bankman-Fried — DirectadmissionBankman-Fried denied defrauding anyone or taking customer funds, acknowledged that customers and employees were hurt, and identified the absence of a dedicated risk-management team and chief risk officer as his largest mistake.Samuel Bankman-Fried — Direct“No, it turned out basically the opposite of that. A lot of people got hurt——customers, employees——and the company ended up in bankruptcy.”— Samuel Bankman-FriedBankman-Fried opened his testimony by acknowledging the harm and collapse while separately denying fraud.Samuel Bankman-Fried — Directtestimony highlightBankman-Fried described a 2020 automated risk-engine failure that generated escalating erroneous liquidations and testified that his request for a safeguard against liquidating Alameda's account was implemented through the feature he later understood as Allow Negative.Samuel Bankman-Fried — DirectadmissionBankman-Fried testified that FTX customers wired fiat to Alameda-controlled bank accounts and said he was not entirely sure how the funds were handled, but believed any Alameda use would appear as borrowing on its FTX account.Samuel Bankman-Fried — DirectadmissionBankman-Fried testified that an October 2022 database review showed fiat@FTX.com with a negative $8 billion balance under an Alameda affiliate. He said this surprised him because he had previously believed Alameda's FTX liability was reflected in the roughly $2 billion owed through its primary account.Samuel Bankman-Fried — Direct“That there was an account with a negative $8 billion balance that was a subaccount of an Alameda affiliate.”— Samuel Bankman-FriedThe statement identifies what he said he discovered in the later database concerning the fiat@FTX liability.Samuel Bankman-Fried — Directtestimony highlightBankman-Fried said Alameda's failure to hedge had cost more than $10 billion in value and described proposing in September 2022 that Alameda shut down; Gary Wang, Nishad Singh, and Caroline Ellison opposed the proposal, and Alameda remained open.