1.Samuel Bankman-Fried — Cross/Redirect (Part 5)
1,010 linesUNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK ------------------------------x UNITED STATES OF AMERICA, v. 22 CR 673 (LAK) SAMUEL BANKMAN-FRIED, Defendant. Trial
New York, N.Y. October 31, 2023 9:36 a.m. Before: HON. LEWIS A. KAPLAN, District Judge APPEARANCES DAMIAN WILLIAMS United States Attorney for the Southern District of New York BY: DANIELLE R. SASSOON NICOLAS ROOS DANIELLE KUDLA SAMUEL RAYMOND THANE REHN Assistant United States Attorneys COHEN & GRESSER, LLP Attorneys for Defendant BY: MARK S. COHEN CHRISTIAN R. EVERDELL SRI K. KUEHNLENZ DAVID F. LISNER Also Present: Luke Booth, FBI Kristin Allain, FBI Arjun Ahuja, USAO Paralegal Specialist Grant Bianco, USAO Paralegal Specialist
(In open court; jury not present)
JUDGE KAPLAN: Good morning. Before we bring the jury out, we've heard from the juror who didn't know her schedule yesterday, and that juror has no problem——that is, with sitting Friday. Juror No. 3 cannot adjust her plans and make the event she wants to make by rescheduling the flight later on Friday. Is that right, Andy, Friday?
COURT CLERK: That's correct, Judge.
JUDGE KAPLAN: And in any case, her return flight to New York would be on Saturday. So it seems to me there are three options on the table. One is, depending on how things go today, we finish the government's rebuttal case, the cross and the rebuttal case, distribute the charge, which would probably be sometime midafternoon, and we do the charge conference today and close tomorrow, with the rebuttal closing going over into the next day, depending on how long the two closings are. Or we seat an alternate and excuse No. 3. So I'll be happy to hear views.
MS. SASSOON: The former proposal sounds realistic. Especially given the anticipated remaining length of the cross, it does seem feasible to have the charge conference later today by our estimate, and so at this time, we don't see a need yet to excuse one of the jurors.
JUDGE KAPLAN: Thank you. Mr. Cohen?
MR. COHEN: Your Honor, I think our recommendation would be to wait until the end of the day and see where we are, because we could get pressed for time, depending on how the examinations go.
JUDGE KAPLAN: Okay. We'll do that. Let's get the jury. I take it implicit in counsel's answers is that it would be appropriate to tell Juror No. 3 that one way or another, she will make her flight.
MS. SASSOON: Yes, your Honor.
MR. COHEN: Yes.
(Continued on next page)
(Jury present)
JUDGE KAPLAN: Good morning, everyone.
JUROR: Good morning.
JUDGE KAPLAN: The record will reflect that the defendant and all the jurors are present, as they have been throughout. Mr. Bankman-Fried, you are still under oath. Ms. Sassoon, you may continue.
MS. SASSOON: Thank you, your Honor. SAM BANKMAN-FRIED, resumed. CROSS EXAMINATION CONTINUED
BY MS. SASSOON:
MS. SASSOON: Mr. Bankman-Fried, you testified about meetings you had with Bahamian government officials after FTX declared bankruptcy in November 2022. Do you recall that?
MS. SASSOON: And at that point in time you were still hoping that you could regain control of FTX, right?
SAMUEL BANKMAN-FRIED: I was not myself prioritizing gaining control of FTX.
MS. SASSOON: I didn't ask about your priority.
JUDGE KAPLAN: Excuse me. Yes. I'm picking up where you were going.
MS. SASSOON: I didn't ask about——
JUDGE KAPLAN: Just——go ahead, Ms. Sassoon.
MS. SASSOON: Thank you, your Honor. I apologize.
JUDGE KAPLAN: Going the same place, I think.
MS. SASSOON: I didn't ask about your priority. I asked if you were hoping at that point in time to regain control of your company, FTX.
SAMUEL BANKMAN-FRIED: My memory is play a role but not control.
MS. SASSOON: I didn't hear you. I apologize.
SAMUEL BANKMAN-FRIED: My memory is no; play a role but not control.
MS. SASSOON: And so at that point in time you were hoping you could still play a role within FTX, correct?
MS. SASSOON: And at that time you had cultivated a cozy relationship with the Bahamian government, right?
MR. COHEN: Objection.
JUDGE KAPLAN: Sustained as to form.
MS. SASSOON: During your time as CEO of FTX, you spent time meeting with Bahamian government officials, right?
MS. SASSOON: And you cultivated a close relationship with members of the Bahamian government, right?
SAMUEL BANKMAN-FRIED: Some of them.
MS. SASSOON: Philip Davis, for example, he was the prime minister of the Bahamas while you were headquartered there, right?
SAMUEL BANKMAN-FRIED: He was.
MS. SASSOON: And you had meetings with him?
SAMUEL BANKMAN-FRIED: I did.
MS. SASSOON: In one of those meetings you discussed with him paying off the Bahamian national debt of around $11.6 billion, right?
SAMUEL BANKMAN-FRIED: I don't remember that.
MS. SASSOON: Just to be clear, you don't remember offering to Philip Davis that FTX would pay off the Bahamian national debt?
MS. SASSOON: Isn't it true you offered to help the Bahamian prime minister's son with his job?
SAMUEL BANKMAN-FRIED: I offered to have a talk with him, yeah.
MS. SASSOON: About his job?
SAMUEL BANKMAN-FRIED: Yeah.
MS. SASSOON: And isn't it true you joked that Ryan Salame, your employee, was effectively a member of the Bahamian government?
SAMUEL BANKMAN-FRIED: No, I don't think so.
MS. SASSOON: Let's pull up what's marked as Government Exhibit 2504.
MS. SASSOON: And do you see this is a chat called Project Chinchilla Chatter? Do you see that?
SAMUEL BANKMAN-FRIED: I do see that.
MS. SASSOON: And you're a member of this chat, correct?
MS. SASSOON: The government offers Government Exhibit 2504.
JUDGE KAPLAN: It's received.
(Government's Exhibit 2504 received in evidence)
MS. SASSOON: Mr. Bianco, can you publish that for the jury, please.
BY MS. SASSOON:
MS. SASSOON: And now that the jury can see it, this is a chat called Project Chinchilla Chatter, correct?
MS. SASSOON: And it's dated December 2, 2021?
MS. SASSOON: And you sent messages in this chat?
MS. SASSOON: And in the first message you wrote, "yeah, tbh——" that stands for "to be honest"?
SAMUEL BANKMAN-FRIED: Yeah.
MS. SASSOON: "——the Bahamas has already asked if we want to do anything with their CBDC." Do you see that?
MS. SASSOON: And do you see a message from Nick Beckstead at 12:01 a.m. that says, "Leopold is going to look online to try to figure out who in the Bahamas government we should be talking to"? Do you see that?
SAMUEL BANKMAN-FRIED: Yeah, I see that.
MS. SASSOON: And you wrote back, "His name is Ryan Salame." Right?
MS. SASSOON: And that was one of your employees, correct?
MS. SASSOON: You also gave the prime minister and his wife floor-side seats at the FTX Arena in Miami, right?
SAMUEL BANKMAN-FRIED: I'm not sure. I think they did go to a game. I don't know details.
MS. SASSOON: If we could scroll down in this chat, please, Mr. Bianco.
MS. SASSOON: And do you see, you sent a message at 12:04 a.m.?
MS. SASSOON: And can you read what you wrote?
SAMUEL BANKMAN-FRIED: "But yeah the prime minister is currently at FTX Arena in Miami using FTX's floor side seats with his wife."
MS. SASSOON: We can take that down.
MS. SASSOON: In April 2022 you invited the Bahamian prime minister to a private dinner hosted by FTX, right?
SAMUEL BANKMAN-FRIED: When was that? Sorry?
MS. SASSOON: Around April of 2022.
SAMUEL BANKMAN-FRIED: It's possible. I don't remember what that's referring to.
MS. SASSOON: Well, do you recall inviting him to a private dinner in 2022 with former President Bill Clinton and former UK Prime Minister Tony Blair?
SAMUEL BANKMAN-FRIED: No, but it doesn't surprise me.
MS. SASSOON: Did you in fact attend a dinner with the Bahamian prime minister, Bill Clinton, and Tony Blair?
SAMUEL BANKMAN-FRIED: During the conference, the FTX conference, there was a——something like a dinner with them, yeah.
MS. SASSOON: When you say "something like a dinner," was it a dinner?
SAMUEL BANKMAN-FRIED: It may—— I don't remember whether there was food. It may have been.
MS. SASSOON: And you were there, right?
MS. SASSOON: And you had invited the attendees, correct?
SAMUEL BANKMAN-FRIED: We had as a company.
MS. SASSOON: And Bill Clinton, he's one of the people you were introduced to by Michael Kives, right?
SAMUEL BANKMAN-FRIED: Yeah, that's right.
MS. SASSOON: And at this time the government offers Government Exhibit 1559, which is a video that was shared with defense counsel.
JUDGE KAPLAN: Received.
(Government's Exhibit 1559 received in evidence)
MS. SASSOON: Mr. Bianco, can you please play Government Exhibit 1559.
(Video played)
BY MS. SASSOON:
MS. SASSOON: Mr. Bankman-Fried, were you in that video?
MS. SASSOON: Along with Bill Clinton?
MS. SASSOON: And Tony Blair?
MS. SASSOON: And the Bahamian prime minister?
MS. SASSOON: Katy Perry?
MS. SASSOON: And Orlando Bloom?
MS. SASSOON: And that was at this conference you were talking about?
MS. SASSOON: On November 9th——this was before FTX declared bankruptcy——you learned that the Bahamas Securities Commission requested Bahamian police to open an investigation of FTX Digital Markets, right?
SAMUEL BANKMAN-FRIED: I don't recall learning exactly that. I had heard rumors related to that and knew that the SCB was——had an investigation.
MS. SASSOON: So by November 9th, you were aware of the possibility of Bahamian investigations, correct?
SAMUEL BANKMAN-FRIED: Yeah, sometime around then. Sorry. I don't remember exactly when it was.
MS. SASSOON: And by November 9th, you had halted withdrawals from FTX for FTX customers, right?
SAMUEL BANKMAN-FRIED: Sometime around then. I don't remember exactly when.
MS. SASSOON: And withdrawals were halted because FTX was having difficulty satisfying all customer withdrawals in a timely fashion, correct?
SAMUEL BANKMAN-FRIED: Yup, that's right.
MS. SASSOON: And after you halted withdrawals for FTX customers generally, isn't it true that you offered to the Bahamian prime minister to allow Bahamian customers on FTX to withdraw their funds?
SAMUEL BANKMAN-FRIED: I don't think it was the Bahamian prime minister, but I did write that in response to an email from my memory is a different member of the Bahamian government.
MS. SASSOON: So to be clear, you offered to a member of the Bahamian government to open withdrawals just for Bahamian customers so that they could withdraw their funds, correct?
SAMUEL BANKMAN-FRIED: I asked if that was what they had wanted me to do.
MS. SASSOON: And you offered to do it, correct?
SAMUEL BANKMAN-FRIED: If that's what they wanted, yes.
MS. SASSOON: Well, let's pull up Government Exhibit 248.
MS. SASSOON: This is an email you wrote on November 9, 2022, right? I didn't hear if you answered. I apologize.
SAMUEL BANKMAN-FRIED: Sorry. I'm reading it. Yes.
MS. SASSOON: The government offers Government Exhibit 248.
JUDGE KAPLAN: Received.
(Government's Exhibit 248 received in evidence)
MS. SASSOON: If we could publish that, Mr. Bianco.
MS. SASSOON: And Mr. Bankman-Fried, this is an email you wrote on November 9, 2022?
MS. SASSOON: Ryan Pinder, he's a member of the Bahamian government?
MS. SASSOON: And looking at the bottom, No. 6, do you see where you wrote, "We are deeply grateful for what the Bahamas has done for us and deeply committed to it"?
SAMUEL BANKMAN-FRIED: I do.
MS. SASSOON: And looking at the next paragraph, do you see where you wrote, "As part of this, we have segregated funds for all Bahamian customers on FTX and we would be more than happy to open up withdrawals for all Bahamian customers on FTX so that they can, tomorrow, fully withdraw all of their assets, making them fully whole"? Do you see that?
MS. SASSOON: And you did that, correct?
SAMUEL BANKMAN-FRIED: Briefly.
MS. SASSOON: And my question was unclear. You did open the exchange for Bahamian customers only to withdraw money, correct?
SAMUEL BANKMAN-FRIED: For a short period, yes.
MS. SASSOON: We could take that down.
MS. SASSOON: I want to go back in time. When you first started FTX, FTX could not open its own bank accounts, right?
SAMUEL BANKMAN-FRIED: That's essentially correct.
MS. SASSOON: It was not easy to get a bank account for a cryptocurrency exchange, right?
SAMUEL BANKMAN-FRIED: Yeah, especially with various properties.
MS. SASSOON: Isn't it true that many banks did not want to transact at all with a crypto exchange?
SAMUEL BANKMAN-FRIED: I'm not sure what you mean by "transact with." Are you——opening a bank account or sending to one?
MS. SASSOON: Well, isn't it true that many banks did not want to open a bank account for FTX?
SAMUEL BANKMAN-FRIED: Yes, that is true.
MS. SASSOON: And at that time you were still CEO of Alameda, correct?
MS. SASSOON: And you decided to use Alameda bank accounts to accept FTX customer money, right?
MS. SASSOON: And those bank accounts had not originally been opened for the purpose of receiving FTX customer deposits, right?
SAMUEL BANKMAN-FRIED: That's correct.
MS. SASSOON: And you knew about this at the time, that Alameda bank accounts would be used to receive customer money, correct?
SAMUEL BANKMAN-FRIED: I knew it was used to receive deposits as of——I think it was 2020, but, yeah.
MS. SASSOON: And eventually Alameda began receiving FTX customer funds into an account under the name North Dimension, right?
SAMUEL BANKMAN-FRIED: It began receiving deposits into North Dimension, yes.
MS. SASSOON: And you knew about that when that was happening, right?
SAMUEL BANKMAN-FRIED: I learned about that I think after it had been rolled out, but yes.
MS. SASSOON: You knew about it in 2020?
SAMUEL BANKMAN-FRIED: I think it was 2020. I don't remember the exact date.
MS. SASSOON: Certainly by 2021, correct?
MS. SASSOON: And let's pull up Government Exhibit 568 in evidence.
MS. SASSOON: Looking at Government Exhibit 568, while North Dimension was in use, this is what FTX customers would see when they went to deposit dollars or fiat to their FTX account, right?
SAMUEL BANKMAN-FRIED: Partly, some of the time. I think it may have changed over time.
MS. SASSOON: For a period of time this is what customers would see, right?
SAMUEL BANKMAN-FRIED: It looks about right.
MS. SASSOON: And I believe you testified that you were aware at the time that FTX had rolled out North Dimension deposit instructions to its customers, correct?
SAMUEL BANKMAN-FRIED: At some time, yeah.
MS. SASSOON: When you say "at some time," while those instructions were active, right?
MS. SASSOON: And looking at these instructions, nowhere does it say here Alameda, right?
SAMUEL BANKMAN-FRIED: Those do not, that's correct.
MS. SASSOON: And you never tweeted to your customers that Alameda was receiving FTX customer fiat deposits into an entity called North Dimension, right?
SAMUEL BANKMAN-FRIED: Not——no, I didn't.
MS. SASSOON: And you also never disclosed that Alameda was spending FTX customer fiat deposits out of this account, right?
MR. COHEN: Objection, form.
JUDGE KAPLAN: Overruled.
SAMUEL BANKMAN-FRIED: That wasn't my belief at the time.
MS. SASSOON: At what time?
SAMUEL BANKMAN-FRIED: The time I think you're referring to; the time period during which it was receiving customer deposits.
MS. SASSOON: I actually didn't ask about your beliefs. I'm just asking whether you ever disclosed that Alameda was spending FTX customer fiat deposits out of the North Dimension account.
SAMUEL BANKMAN-FRIED: No, I didn't know it was, and I certainly believed it didn't.
MS. SASSOON: And I believe you testified that by September, or October, you certainly knew that the money had been spent, correct?
SAMUEL BANKMAN-FRIED: Of 2022, to be clear?
MS. SASSOON: Yes.
SAMUEL BANKMAN-FRIED: I'm not sure I would say spend, but yeah, that it had been used.
MS. SASSOON: So when you say "been used," it had been used by spending it on Alameda investments and expenses, correct?
SAMUEL BANKMAN-FRIED: Investments, yeah, that's right.
MS. SASSOON: And at the time that you knew this, in September and October of 2022, at the very least, you did not disclose it at that time to FTX's customers, correct?
SAMUEL BANKMAN-FRIED: That's correct.
MS. SASSOON: Now prior to September 2022 you knew that Alameda was not keeping FTX customer money in its bank accounts, right?
SAMUEL BANKMAN-FRIED: I'm not sure that I did, no.
MS. SASSOON: You say you're not sure that you did. Do you recall knowing, prior to September and October 2022, that Alameda was spending the FTX customer deposits?
SAMUEL BANKMAN-FRIED: No, I don't recall that.
MS. SASSOON: Well, isn't it true that as Alameda's CEO at the time, you authorized the spending of FTX customer funds?
SAMUEL BANKMAN-FRIED: No, that's not my memory.
MS. SASSOON: Isn't it true you knew that those funds were being treated as a liability that Alameda owed to FTX?
SAMUEL BANKMAN-FRIED: Yeah.
MS. SASSOON: And they were treated as liability because Alameda was spending them, right?
SAMUEL BANKMAN-FRIED: Not necessarily because it was.
MS. SASSOON: You knew while you were Alameda's CEO that it was at least possible, right?
SAMUEL BANKMAN-FRIED: Yeah.
MS. SASSOON: And didn't you testify that you understood that to the extent that Alameda was borrowing and using the fiat deposits, that would be reflected as a borrow on Alameda's account?
SAMUEL BANKMAN-FRIED: That's correct.
MS. SASSOON: So you permitted this, right?
SAMUEL BANKMAN-FRIED: I would have thought it was permissible. I didn't necessarily think it was happening.
MS. SASSOON: But you didn't tell your employees, don't spend the FTX customer deposits, right?
SAMUEL BANKMAN-FRIED: It's not how I would have phrased it. I didn't. I deeply regret not taking a deeper look into it.
MS. SASSOON: And in substance, you did not tell your employees, don't spend the FTX customer deposits.
SAMUEL BANKMAN-FRIED: I don't think I gave any direction that I can recall relating to them.
MS. SASSOON: And you were CEO when the North Dimension account was set up, correct, of Alameda?
SAMUEL BANKMAN-FRIED: That's right. That's right.
MS. SASSOON: And at no point did you tell your Alameda employees to hold that money for the benefit of FTX customers, right?
SAMUEL BANKMAN-FRIED: I don't recall giving any directions.
MS. SASSOON: And as CEO of Alameda, you never instituted measures to segregate FTX customer deposits from other Alameda funds, correct?
SAMUEL BANKMAN-FRIED: I don't recall giving any directions relating to it.
MS. SASSOON: So you didn't put in place any measures to prevent employees from spending that money.
SAMUEL BANKMAN-FRIED: I don't recall putting in, you know——giving any directions relating to it, no.
MS. SASSOON: But at the time you were making representations before Congress about the safeguarding of FTX customer assets, correct?
SAMUEL BANKMAN-FRIED: Yup, that's right.
MS. SASSOON: You testified last week that it was the settlements team that was managing the bank accounts, right?
MS. SASSOON: The settlements team I think you said was between five to ten people?
SAMUEL BANKMAN-FRIED: Alameda's was, yes.
MS. SASSOON: And these were lower-level employees within Alameda, correct?
SAMUEL BANKMAN-FRIED: Some were lower level, some mid to higher level.
MS. SASSOON: What was the average salary of a settlements team employee?
SAMUEL BANKMAN-FRIED: I'm guessing 150,000.
MS. SASSOON: And that was a lot less than some of your higher-level executives were making in salary and bonus, correct?
SAMUEL BANKMAN-FRIED: Comparing apples to oranges. The salary of one group was less than the salary plus bonus of the other group, that is correct.
MS. SASSOON: Well, was the settlements team receiving bonuses in the multimillion dollars?
SAMUEL BANKMAN-FRIED: The higher-level employees, what I would refer to them, was.
MS. SASSOON: And what about the other members of the settlements team?
SAMUEL BANKMAN-FRIED: I can't recall all of their compensation off the top of my head.
MS. SASSOON: Some of the settlements team employees, that was their first job out of school, right?
MS. SASSOON: And it was their job to process payments for other employees of Alameda, right?
SAMUEL BANKMAN-FRIED: Yeah, that's effectively correct.
MS. SASSOON: For example, if you wanted to direct a trade on behalf of Alameda, you might tell the settlements team to process that, correct?
SAMUEL BANKMAN-FRIED: Yup, that's correct.
MS. SASSOON: The settlements team did not decide how money was spent, right?
SAMUEL BANKMAN-FRIED: Not unless it was spending related to their team.
MS. SASSOON: So generally, when it came to trading, investments, those were not settlements team decisions, right?
SAMUEL BANKMAN-FRIED: Generally——there was some spillover between the trading and settlements team.
MS. SASSOON: Who was on both the trading and settlements team?
SAMUEL BANKMAN-FRIED: It varied over time. And my memory gets fuzzier as I got less involved in Alameda.
MS. SASSOON: Mr. Bianco, will you show the witness what's been marked as Government Exhibit 2577.
MS. SASSOON: Do you recognize the names on this list as members of the Alameda settlements team?
SAMUEL BANKMAN-FRIED: I recognize many of them.
MS. SASSOON: The government offers Government Exhibit 2577.
MR. COHEN: No objection.
JUDGE KAPLAN: Received.
(Government's Exhibit 2577 received in evidence)
MS. SASSOON: Mr. Bianco, can you publish that.
BY MS. SASSOON:
MS. SASSOON: Let's take Lena Ngoy as an example. Do you recall that she was a member of the Alameda settlements team?
MS. SASSOON: She was not a trader, right?
SAMUEL BANKMAN-FRIED: She was involved in OTC trades.
JUDGE KAPLAN: Mr. Bankman-Fried, the question was whether she was a trader. A. Her title was not trader.
MS. SASSOON: And was she making trading decisions for Alameda?
SAMUEL BANKMAN-FRIED: I'm not sure.
MS. SASSOON: Are you aware of any trading decisions that Lena Ngoy made for Alameda?
SAMUEL BANKMAN-FRIED: I can't recall any particular.
MS. SASSOON: Anyone on this list you recall making multimillion-dollar trading decisions for Alameda?
MS. SASSOON: Who?
SAMUEL BANKMAN-FRIED: Stephen Liu and Terence Choo.
MS. SASSOON: Anyone on this list you recall making multimillion-dollar investment decisions for Alameda?
SAMUEL BANKMAN-FRIED: By investment, no, I don't think so with respect to investments.
MS. SASSOON: Now when you say you didn't know that Alameda customer deposits were being——when you say you didn't know that FTX customer deposits were being spent by Alameda, who was making those decisions, Mr. Bankman-Fried?
MR. COHEN: Objection to form.
JUDGE KAPLAN: Sustained.
MS. SASSOON: When you learned——when you claim you learned in September and October that $8 billion had been spent, what, if anything, did you know about who had spent it?
SAMUEL BANKMAN-FRIED: I'm not——I don't remember knowing anything about particular employees.
MS. SASSOON: So it's your testimony that while you were CEO of Alameda, some unknown people spent $8 billion without your knowledge.
SAMUEL BANKMAN-FRIED: No, I don't think that was my testimony.
MS. SASSOON: Well, in September and October you learned that $8 billion of FTX fiat deposits had been spent, right?
SAMUEL BANKMAN-FRIED: Something approximating that, yes.
MS. SASSOON: And I think you testified that this was news to you?
SAMUEL BANKMAN-FRIED: Yeah.
MS. SASSOON: And you didn't call in your deputies and employees and say, Who spent $8 billion?
SAMUEL BANKMAN-FRIED: You're referring to in September and October?
MS. SASSOON: Yeah.
SAMUEL BANKMAN-FRIED: I had conversations with Alameda's leadership, with Caroline in particular.
MS. SASSOON: And did you say, Who spent $8 billion?
SAMUEL BANKMAN-FRIED: I asked her how it had happened, to the best of her understanding.
MS. SASSOON: Isn't it true that when the North Dimension account was set up, Caroline Ellison was just a trader at Alameda?
SAMUEL BANKMAN-FRIED: When it was set up, I think she was the head of trading. I can't remember exactly what her title was then.
MS. SASSOON: She wasn't CEO, right?
SAMUEL BANKMAN-FRIED: Not when it was initially set up, no.
MS. SASSOON: Did you fire anyone for spending $8 billion of FTX customer deposits?
MS. SASSOON: And so just to be clear, it's your testimony that while you were Alameda's CEO, your employees were spending millions and then billions of customer funds without you knowing it?
MR. COHEN: Objection. Asked and answered.
JUDGE KAPLAN: Overruled.
SAMUEL BANKMAN-FRIED: I don't think that was my testimony, no.
MS. SASSOON: So is it your testimony now?
SAMUEL BANKMAN-FRIED: I——I don't believe so. I don't remember the exact time line of things, but I, to my knowledge now, don't believe that was true while I was CEO.
MS. SASSOON: I believe you testified that in your view it was permitted for Alameda to spend the dollar or fiat deposits of customers, right?
SAMUEL BANKMAN-FRIED: Yup, that's correct.
MS. SASSOON: Did you ever institute any requirements for when or how Alameda would repay that money?
SAMUEL BANKMAN-FRIED: I was under the impression that that was folded into the risk management of Alameda's FTX account.
MS. SASSOON: When you say it was folded into the risk management, did you put in place rules for that risk management while you were CEO of Alameda?
SAMUEL BANKMAN-FRIED: When I was CEO of Alameda, I was——let me rephrase this. As CEO of Alameda, I was concerned chiefly with Alameda's overall risk management, with the overall portfolio, and I was paying attention to the risk management of that overall portfolio. As CEO of FTX, I was paying attention, although not merely as closely as I should have been, to the risk management of Alameda's account on FTX in particular.
MS. SASSOON: Did you give specific directions for the risk management of any spending of FTX customer fiat deposits?
SAMUEL BANKMAN-FRIED: I gave directions for the risk management of Alameda's account on FTX, which I believed would have included that had it happened.
MS. SASSOON: Any specific directions to Alameda employees?
SAMUEL BANKMAN-FRIED: No, I don't recall specific directions to Alameda employees.
MS. SASSOON: And are you aware of any other customer on FTX who had the ability to spend FTX customer fiat deposits out of bank accounts?
SAMUEL BANKMAN-FRIED: I think so.
MS. SASSOON: What customer?
SAMUEL BANKMAN-FRIED: I think multiple other payment processors for FTX had accounts on FTX as well.
MS. SASSOON: Didn't you testify yesterday that those payment processors, you did not know of a single one other than Alameda that was a customer on FTX?
SAMUEL BANKMAN-FRIED: I think some were. I cannot say with a hundred percent confidence.
MS. SASSOON: Now when your company Alameda spent this money, it was not used exclusively for margin trading on the FTX exchange, right?
SAMUEL BANKMAN-FRIED: I'm not sure exactly the tracing of funds for it.
MS. SASSOON: Well, let's take a look at Government Exhibit 1045 in evidence. And do you recall Peter Easton testified about this exhibit?
SAMUEL BANKMAN-FRIED: I don't recall that exhibit in particular. I think maybe it would refresh my recollection if there was more context.
MS. SASSOON: You were here for Peter Easton's testimony, correct?
MS. SASSOON: And do you see here it says "FTX fiat liability 11.3 billion"?
MS. SASSOON: Inside the big black circle?
SAMUEL BANKMAN-FRIED: I see that.
MS. SASSOON: If we could go to page 3 of this exhibit, Mr. Bianco. Thank you, Mr. Bianco.
MS. SASSOON: Mr. Bankman-Fried, do you recall Peter Easton testifying that this was how the $11.3 billion of fiat deposits were spent?
SAMUEL BANKMAN-FRIED: I do remember that, yes.
MS. SASSOON: And I just want to take a look at a few of these. Genesis, where it says $1.2 billion, Genesis was a lender to Alameda, right? Genesis, does that refer to Genesis Digital Assets?
SAMUEL BANKMAN-FRIED: Genesis Digital Assets was not a lender to Alameda.
MS. SASSOON: And did Alameda make a $1.2 billion investment in Genesis Digital Assets or in a company called Genesis?
SAMUEL BANKMAN-FRIED: Sorry. There are two companies with Genesis in their name. I'm not sure which of those you're referring to.
MS. SASSOON: Transferring $1.2 billion to Genesis, that's not a margin trade on FTX, correct?
SAMUEL BANKMAN-FRIED: Probably not for either Genesis. Not saying I necessarily agree with this exhibit.
MS. SASSOON: Putting aside whether you agree with this exhibit, K5, do you see where it says 600 million?
MS. SASSOON: Giving money to K5, that's not a margin trade on FTX, right?
SAMUEL BANKMAN-FRIED: That's correct.
MS. SASSOON: $500 million to Anthropic, do you see that?
SAMUEL BANKMAN-FRIED: I do.
MS. SASSOON: That's not a margin trade on FTX, right?
SAMUEL BANKMAN-FRIED: That's correct.
MS. SASSOON: And let's just take one more example. Do you see where it says real estate, 228 million? Spending money on real estate, that's not a margin trade on FTX either, right?
SAMUEL BANKMAN-FRIED: I agree, were this exhibit correct, that is what it would show.
MS. SASSOON: Again, I'm not asking about whether the exhibit is correct or not——
SAMUEL BANKMAN-FRIED: That's correct.
MS. SASSOON: ——just whether transferring money to Modulo, Dave Inc., Anthropic, K5, real estate, none of those things are margin trades, correct?
SAMUEL BANKMAN-FRIED: They're not trades on FTX, I will say.
MS. SASSOON: And those investments that I just went through, each of those was your decision, right?
MS. SASSOON: I think we covered this yesterday, but Modulo, K5, Dave Inc., those were your decisions, right?
SAMUEL BANKMAN-FRIED: Some of them were.
MS. SASSOON: Not Lena Ngoy, correct?
SAMUEL BANKMAN-FRIED: Some of them were neither mine nor Lena Ngoy's.
MS. SASSOON: The ones I just went through, those were yours, correct?
SAMUEL BANKMAN-FRIED: I may have authorized some of them. Some of them I actively decided, others were not me.
MS. SASSOON: Modulo, that was you?
MS. SASSOON: Anthropic, that was you?
MS. SASSOON: K5, that was you?
MS. SASSOON: Dave Inc., you said yesterday you were involved in that decision?
SAMUEL BANKMAN-FRIED: I was involved. I was not the only one, but I was involved.
MS. SASSOON: Buying the, $35 million apartment, that was your decision?
SAMUEL BANKMAN-FRIED: Yes, that was one piece of the real estate.
MS. SASSOON: And that was your decision.
SAMUEL BANKMAN-FRIED: That particular one was, yes.
MS. SASSOON: You testified that in June of 2022, you learned of an $8 billion bug in the fiat@ account, right?
SAMUEL BANKMAN-FRIED: That's correct.
MS. SASSOON: And that bug you testified was the difference between Alameda going bankrupt or not, correct?
SAMUEL BANKMAN-FRIED: Yup, that's right.
MS. SASSOON: And I believe you testified that your employees told you that the bug related to the size of Alameda's liability to FTX in the fiat@ account?
SAMUEL BANKMAN-FRIED: That it had some relation to that, yes.
MS. SASSOON: So they told you it related to the fiat@ account, right?
SAMUEL BANKMAN-FRIED: So they——they said that it had some relation to Alameda's liability to FTX and that it had some relation to fiat deposits. I don't remember them in that particular sentence saying the fiat@ account in particular.
MS. SASSOON: Didn't you testify last week that, "Gary and Nishad told me in person that day in the conversation that it was stemming from something called fiat@"?
SAMUEL BANKMAN-FRIED: So separately in the conversation, they had——they mentioned the word "fiat@." I don't remember them mentioning it in that same sentence as the one you referenced, but in the same conversation I did overhear them using the word "fiat@."
MS. SASSOON: I'm not asking you about one particular sentence, Mr. Bankman-Fried.
SAMUEL BANKMAN-FRIED: Okay.
MS. SASSOON: I asked you whether your employees told you that this bug had to do with the fiat@ account.
SAMUEL BANKMAN-FRIED: Yes, I do——sorry. They said that. They did not tell that to me, but they did say it and I overheard it, or at least I don't recall them specifically telling it directed to me.
MS. SASSOON: So you overheard this.
MS. SASSOON: And you didn't say, Hey, guys, what's this fiat@ account that had an $8 billion bug that almost made Alameda bankrupt?
SAMUEL BANKMAN-FRIED: When I heard it, I didn't have all that context, but I did ask what the fiat@ account——if that was an account——was referring to.
MS. SASSOON: And you were told, weren't you, that it had to do with Alameda's liabilities to FTX for customer funds, right?
SAMUEL BANKMAN-FRIED: Not at that time. I was told they were busy and I should stop asking questions because it was distracting.
MS. SASSOON: So it's your testimony that your supervisees told you to stop asking questions?
SAMUEL BANKMAN-FRIED: Yeah, and I agreed with them.
MS. SASSOON: And you left it at that, you never followed up, What's the fiat@ account?
SAMUEL BANKMAN-FRIED: I eventually did. I don't recall following up that day and regret not doing so.
MS. SASSOON: You canceled a trip to DC because of a crisis, right?
SAMUEL BANKMAN-FRIED: That's right.
MS. SASSOON: And Alameda was on the verge of being bankrupt, right?
SAMUEL BANKMAN-FRIED: That's what I——that's what I was concerned about for an hour or two, yeah.
MS. SASSOON: And it all came down to this $8 billion bug related to a fiat@ account and you never got to the bottom of that?
SAMUEL BANKMAN-FRIED: They were still getting to the bottom of the details of it at that time, but no. I had the number 2, 3, 4, and 5 people at the company all each independently confirm to me that the new understanding was correct, and I trusted them.
MS. SASSOON: You trusted them, but you had no interest in understanding an $8 billion bug in something called a fiat@ account?
MR. COHEN: Objection. Asked and answered.
JUDGE KAPLAN: Overruled.
SAMUEL BANKMAN-FRIED: I had interest in understanding it. They also were busy and I had prioritized getting the high-level updates and making sure that they were working on fixing it.
MS. SASSOON: An $8 billion bug, was that not a big deal to you?
MR. COHEN: Objection.
JUDGE KAPLAN: Sustained.
MS. SASSOON: Now you told Adam Yedidia to fix this bug, right?
SAMUEL BANKMAN-FRIED: I——I told the developer team and leadership to make sure it got fixed, and Adam was ultimately one of the people chiefly working on it.
MS. SASSOON: You were in the courtroom for Adam Yedidia's testimony at the start of this trial, correct?
SAMUEL BANKMAN-FRIED: I was.
MS. SASSOON: Do you recall his testimony that when he fixed the bug, he told you that Alameda still owed $8 billion to FTX customers for their dollar deposits?
SAMUEL BANKMAN-FRIED: I recall something to that effect.
MS. SASSOON: And is it your testimony that when Adam Yedidia said that under oath under a grant of immunity in this courtroom, that he had it wrong?
SAMUEL BANKMAN-FRIED: I don't think I quite said that. I don't remember him saying it in that way.
MS. SASSOON: So are you saying that Adam Yedidia had it wrong when he described telling you that Alameda still owed $8 billion to FTX customers?
MR. COHEN: Objection.
JUDGE KAPLAN: Sustained. Look, Mr. Bankman-Fried, did he tell you, in words or in substance, after the bug was fixed, that Alameda still owed $8 billion to FTX customers for their dollar accounts?
SAMUEL BANKMAN-FRIED: I don't recall him telling that to me on or around that day in words or in substance.
JUDGE KAPLAN: I didn't ask you about that day.
SAMUEL BANKMAN-FRIED: Oh. I apologize. Eventually, yes.
JUDGE KAPLAN: Proceed, counsel.
BY MS. SASSOON:
MS. SASSOON: And when, according to you, did Adam Yedidia tell you this?
SAMUEL BANKMAN-FRIED: So I first remember having concrete conversations about this in particular in October of 2022. I was aware of some pieces of it before then, however.
MS. SASSOON: Let's pull up Government Exhibit 50 in evidence, which the parties have stipulated is a document called Alameda Balances by FTX Sub dated September 13, 2022. And let's go to the second tab called Sheet 2.
MS. SASSOON: And I just want to direct you to the Name column, the Name column, row 13. Do you see in row 13 where it says fiat@ftx.com?
SAMUEL BANKMAN-FRIED: I see that.
MS. SASSOON: And do you see where it says the value is about negative 19 billion?
SAMUEL BANKMAN-FRIED: I see that.
MS. SASSOON: And beneath that, do you see where it says "fiat@ftx.com correction"?
SAMUEL BANKMAN-FRIED: I see that.
MS. SASSOON: And do you see next to that where it says about 7.9 billion?
SAMUEL BANKMAN-FRIED: I see that.
MS. SASSOON: And looking at columns I and J, do you see where it says total negative 10 billion?
SAMUEL BANKMAN-FRIED: I see that.
MS. SASSOON: And I just want to correct myself. I said September 13, 2022. The stipulation says this document is dated June 13, 2022. And we can take that down.
MS. SASSOON: Fair to say, Mr. Bankman-Fried, that prior to November of 2022, you were not transparent with customers about the risks posed to the safety of the exchange by Alameda's spending of customer funds?
SAMUEL BANKMAN-FRIED: It wasn't our policy to disclose customer account details.
MS. SASSOON: That wasn't my question. I asked you whether you would agree that you were not transparent, prior to November of 2022, about the risks posed to the safety of the exchange by Alameda's spending of FTX customer funds?
SAMUEL BANKMAN-FRIED: So that phrasing of the question, no, I do not agree.
MS. SASSOON: Well, isn't it true that after FTX declared bankruptcy, you gave assurances that if FTX reopened, it would have "way more transparency"?
MS. SASSOON: And you wrote, "There would have to be changes, of course, way more transparency," right?
MS. SASSOON: And you told customers at that time that FTX would operate going forward with "radical transparency, transparency probably always should have been giving." Did you say that?
SAMUEL BANKMAN-FRIED: Sorry. Said that to who?
MS. SASSOON: On November——withdrawn. You said that to customers, didn't you?
SAMUEL BANKMAN-FRIED: I may have. I don't remember saying that to customers——excuse me——to customers. I remember thinking about saying that to customers. I may have said it.
MS. SASSOON: Is it fair to say that you didn't stick to your promise that when it came to risk, customers on FTX would only be exposed to what they think they are being exposed to?
SAMUEL BANKMAN-FRIED: I'm not sure that's fair to say.
MS. SASSOON: Do you agree, Mr. Bankman-Fried, that it was your practice to maximize the potential to make money even if it created the risk of going bust?
SAMUEL BANKMAN-FRIED: It depends on the context.
MS. SASSOON: In the context of your business dealings, wasn't it your practice to maximize the potential to make money even if it created the risk of going bust?
MR. COHEN: Objection to form.
JUDGE KAPLAN: Overruled.
SAMUEL BANKMAN-FRIED: It depends on which business dealings you're referring to.
MS. SASSOON: Would that be accurate with respect to some of your business dealings, Mr. Bankman-Fried?
SAMUEL BANKMAN-FRIED: With respect to some of them, yes.
MS. SASSOON: You testified that in 2022 you reviewed Alameda balance sheets that Caroline Ellison sent you, correct?
SAMUEL BANKMAN-FRIED: Yup, that's right.
MS. SASSOON: Let's pull up Government Exhibit 11, which the parties have stipulated is a document called Balance Sheet 10/1/22, dated October 7, 2022.
MS. SASSOON: I want to direct you to column E, row 5. Do you see where it says that Alameda had roughly $1.5 billion of loans from third-party lenders?
SAMUEL BANKMAN-FRIED: I see it says "loans," and that is what I understood it to mean.
MS. SASSOON: For example, the third-party lenders are actually broken out and listed in column H, correct?
SAMUEL BANKMAN-FRIED: That's correct.
MS. SASSOON: And do you see beneath that row 17, where it says "FTX borrows," 13.7 billion?
SAMUEL BANKMAN-FRIED: I do see that, yes.
MS. SASSOON: And under the assets column B, what is the total bank balances listed on this October 2022 balance sheet?
SAMUEL BANKMAN-FRIED: Bank balances are around 449 million.
MS. SASSOON: If we could scroll down and look at row 32.
MS. SASSOON: What is the NAV for Alameda on this October balance sheet?
SAMUEL BANKMAN-FRIED: Around 7.8 billion.
MS. SASSOON: So not 10 billion.
MS. SASSOON: On the balance sheet.
SAMUEL BANKMAN-FRIED: On that particular balance sheet, the number is not 10 billion. It is around 8 billion.
MS. SASSOON: And if we could look back up at the assets column, do you see the section labeled "liquid assets"?
SAMUEL BANKMAN-FRIED: I do.
MS. SASSOON: Now the liquid assets here include Robinhood shares for $664 million, right?
MS. SASSOON: I apologize. Robinhood and Twitter.
SAMUEL BANKMAN-FRIED: That's correct.
MS. SASSOON: And those shares that Alameda owned of Robinhood and Twitter, those were not deposited on FTX, correct?
SAMUEL BANKMAN-FRIED: That's correct.
MS. SASSOON: And do you see where it says FTT, $3.9 billion, under "liquid assets"?
MS. SASSOON: You understood, didn't you, that Alameda could not sell $3.9 billion of FTT all at once without affecting the market price, correct?
SAMUEL BANKMAN-FRIED: That's correct.
MS. SASSOON: This shows Serum 317 million?
MS. SASSOON: Didn't you testify yesterday that Alameda did not own any Serum?
SAMUEL BANKMAN-FRIED: That's not quite what I said.
MS. SASSOON: I believe you testified Serum wasn't on the balance sheet?
SAMUEL BANKMAN-FRIED: That's not quite what I said.
MS. SASSOON: So——
SAMUEL BANKMAN-FRIED: I apologize. My memory is that most——that there was not a extremely large quantity of it relative to the balance sheet and that most of the Serum that could have been on the balance sheet wasn't.
MS. SASSOON: Understood. And I want to direct your attention to assets beginning on row 12 which are labeled "collateral." These are tokens posted as collateral with third-party lenders, correct?
SAMUEL BANKMAN-FRIED: I'm not sure exactly how it's defined. That's a reasonable interpretation. It might or might not be right.
MS. SASSOON: You see the area "long-term assets," row 17?
MS. SASSOON: If we could scroll down.
SAMUEL BANKMAN-FRIED: I do, yes.
MS. SASSOON: Let's take some examples from this section. GDA, that's Genesis Digital Assets?
MS. SASSOON: That was not an asset deposited on FTX, correct?
SAMUEL BANKMAN-FRIED: Correct.
MS. SASSOON: Anthropic, also not an asset deposited on FTX?
SAMUEL BANKMAN-FRIED: That's correct.
MS. SASSOON: K5, the same thing, right?
SAMUEL BANKMAN-FRIED: Correct.
MS. SASSOON: And do you see where it says "locked Solana," 936 million?
SAMUEL BANKMAN-FRIED: I do.
MS. SASSOON: Locked, that means it couldn't be sold on the market for a restricted period of time, correct?
SAMUEL BANKMAN-FRIED: It means something to that effect. I don't know exactly what it meant in the case of Solana.
MS. SASSOON: And you see where it says "locked Serum"?
MS. SASSOON: Now let's take this down and look at Government Exhibit 875.
MS. SASSOON: You were involved——
MS. SASSOON: And if we could publish this. Thank you.
MS. SASSOON: You were involved in drafting this tweet, right?
MS. SASSOON: And I just want to look at the last bullet where it says, "Given the tightening in the crypto credit space this year we've returned most of our loans by now." Do you see that?
SAMUEL BANKMAN-FRIED: I do see that, yes.
MS. SASSOON: And it does not say "most of our third-party loans," does it?
SAMUEL BANKMAN-FRIED: No, it doesn't.
MS. SASSOON: We could take that down.
MS. SASSOON: You testified about clawbacks.
MS. SASSOON: I want to clarify something. Is it your view that what happened to customers in November 2022 was a liquidation clawback covered by 16.4 of the terms of service?
SAMUEL BANKMAN-FRIED: It was my view that there was a risk as of November if there were to be poor management of the process going forward, that there could be a liquidation clawback.
MS. SASSOON: And with respect to what happened on November——in November 2022——
MS. SASSOON: ——would you characterize that as a liquidation clawback?
SAMUEL BANKMAN-FRIED: As to what happened prior to November 11, 2022, I would not describe it that way.
MS. SASSOON: Now you never tweeted in November 2022 that FTX was experiencing clawbacks, right?
SAMUEL BANKMAN-FRIED: That's correct.
MS. SASSOON: Let's pull up what you did tweet.
MS. SASSOON: Mr. Bianco, if you could publish Government Exhibit 866. And if we could zoom in.
MS. SASSOON: When you posted these tweets on November 7th, you wanted FTX customers to feel reassured, correct?
SAMUEL BANKMAN-FRIED: I would have liked it were that to be the case. That wasn't my only goal.
MS. SASSOON: That was one of your goals, wasn't it?
SAMUEL BANKMAN-FRIED: It was one factor.
MS. SASSOON: Was it one of your goals?
SAMUEL BANKMAN-FRIED: Sure.
MS. SASSOON: And you didn't want customers to withdraw their money from FTX, right?
SAMUEL BANKMAN-FRIED: That depends on the context.
MS. SASSOON: Well——
SAMUEL BANKMAN-FRIED: All else equal, that is correct.
MS. SASSOON: And on November 7th, among other things, you tweeted, "FTX has enough to cover all client holdings," right?
MS. SASSOON: Your tweet doesn't say Alameda has enough to cover all client holdings, does it?
SAMUEL BANKMAN-FRIED: No, it doesn't.
MS. SASSOON: And I believe you testified that in this tweet you were referring to the fact that Alameda still had more assets than liabilities, right?
SAMUEL BANKMAN-FRIED: That is only part of what I was referring to.
MS. SASSOON: Well, when you said, we have enough to cover all client holdings, "FTX has enough to cover all client holdings," you were factoring into that Alameda's balance sheet, right?
SAMUEL BANKMAN-FRIED: That's not quite how I would put it.
MS. SASSOON: Well, isn't it true, Mr. Bankman-Fried, that on November 7th, FTX itself, if you disregarded Alameda's assets, did not have enough to cover all client holdings?
SAMUEL BANKMAN-FRIED: That's——I don't believe that's correct, no.
MS. SASSOON: Mr. Bankman-Fried, didn't you testify that you considered this true because at the time, in your view, Alameda still had far more assets than it had liabilities?
SAMUEL BANKMAN-FRIED: That is part of the analysis. I can explain if you want.
MS. SASSOON: So without that part of the analysis, this would not be true, correct?
SAMUEL BANKMAN-FRIED: It would be dubious. I would have considered it only technically true——
MS. SASSOON: Well——
SAMUEL BANKMAN-FRIED: ——were Alameda underwater.
MS. SASSOON: Well, when you considered Alameda's assets in your analysis, you were including assets of Alameda's that were not deposited with the FTX exchange, correct?
SAMUEL BANKMAN-FRIED: For the analysis of Alameda's solvency, that is correct.
MS. SASSOON: And you knew on November 6th, prior to this tweet, didn't you, that the FTT on Alameda's balance sheet, for example, was not liquid, right?
SAMUEL BANKMAN-FRIED: Liquid isn't a binary, just as a qualification.
MS. SASSOON: Yes or no: Would you say you did not consider the FTT on Alameda's balance sheet particularly liquid?
SAMUEL BANKMAN-FRIED: I don't think I would have said that, no.
MS. SASSOON: Mr. Bianco, can you pull up what's marked as Government Exhibit 2502.
MS. SASSOON: Mr. Bankman-Fried, is this a portion of a small group chat that you were a participant on?
MS. SASSOON: Government offers Government Exhibit 2502.
JUDGE KAPLAN: Received.
(Government's Exhibit 2502 received in evidence)
MS. SASSOON: Mr. Bianco, can you publish this.
MS. SASSOON: Mr. Bankman-Fried, this is an excerpt from small group chat on November 6, 2022, correct?
SAMUEL BANKMAN-FRIED: That's correct.
MS. SASSOON: And you were giving the other folks on this chat an update about withdrawals and liquidity, correct?
MS. SASSOON: And looking at your messages at the bottom, do you see where you wrote, "so that would give us a buffer depending on exactly what it turns out to be, marked to the end of tomorrow, of roughly 2-3 billion beyond already pending withdrawals"?
MS. SASSOON: And you see where you wrote, "that's without selling FTT/SOL/etc. but I assume that right now there wouldn't be a huge amount of liquidity for them so I don't know that that's a huge factor"?
MS. SASSOON: You wrote that, correct?
SAMUEL BANKMAN-FRIED: I did.
MS. SASSOON: Let's pull up Government Exhibit 406 in evidence. If we could zoom in at the top.
MS. SASSOON: This is a chat from November 7, 2022, correct?
MS. SASSOON: And in this chat——if we could zoom out——you wrote that over the course of a week, you thought FTX and Alameda could likely liquidate about $3.9 billion, right?
MS. SASSOON: Mr. Bianco, if you could zoom out. Yeah, scroll down. Go back up. Stop.
MS. SASSOON: And do you see here, Mr. Bankman-Fried, that you wrote that over the course of a week, you thought, between FTX and Alameda, you could likely liquidate about $3.9 billion?
SAMUEL BANKMAN-FRIED: Yeah.
MS. SASSOON: And that included selling things like Robinhood shares and Modulo investment, right?
SAMUEL BANKMAN-FRIED: Included——I don't think selling is necessarily the right word for Modulo investment, but yes.
MS. SASSOON: Getting the money back from Modulo.
SAMUEL BANKMAN-FRIED: Yes, that's right.
MS. SASSOON: And again, Modulo, Robinhood, these are examples of assets that were not deposited on the FTX exchange, correct?
SAMUEL BANKMAN-FRIED: I'm not sure it's——whether that statement is true.
MS. SASSOON: Didn't you testify a few minutes ago that Alameda's Robinhood shares were not deposited on FTX?
SAMUEL BANKMAN-FRIED: That is correct.
MS. SASSOON: Now if we could scroll down.
MS. SASSOON: This is a message from you on November 7th at 3:08 a.m. acknowledging that there was an $8 billion hole even if you were able to liquidate all these assets in a week, correct?
SAMUEL BANKMAN-FRIED: I don't know that "hole" is the word that I would use, but liquidity gap, a potential liquidity gap, yes.
MS. SASSOON: The gap between customer assets, excluding Alameda, and the amount of money you could come up with in a week was about $8 billion.
SAMUEL BANKMAN-FRIED: With a few more qualifiers and scoping on it, yes.
MS. SASSOON: The number you wrote here on the group chat is 8 billion, right?
SAMUEL BANKMAN-FRIED: Yes, that's right.
MS. SASSOON: And Modulo, Robinhood, these items that you are including in FTX assets, those are investments, right?
SAMUEL BANKMAN-FRIED: Yeah. Sorry. In——in assets, that is correct.
MS. SASSOON: You tweeted, didn't you, that "we don't invest client assets"?
SAMUEL BANKMAN-FRIED: That is correct.
MS. SASSOON: We could take that down.
MS. SASSOON: Now on November 7th, some customers responded to your tweet, correct?
SAMUEL BANKMAN-FRIED: I think so, yeah.
MS. SASSOON: And some said in substance that they would not withdraw their funds, right?
SAMUEL BANKMAN-FRIED: I think so.
MS. SASSOON: And you liked those tweets, correct?
SAMUEL BANKMAN-FRIED: That may be.
MS. SASSOON: Yes or no: Did you like tweets posted by customers——
SAMUEL BANKMAN-FRIED: Yeah, I think I did.
MS. SASSOON: ——that in substance said, I'm not going to withdraw my money?
SAMUEL BANKMAN-FRIED: I don't remember whether or not they were specifically in response to that tweet, but it may have been.
MS. SASSOON: Meaning you don't know if they were in response to your tweet.
SAMUEL BANKMAN-FRIED: Yeah, but they very well may have been.
MS. SASSOON: But you did like customer tweets that said, I'm not going to withdraw my money?
MS. SASSOON: On November 7th.
SAMUEL BANKMAN-FRIED: I think that's right, yeah.
MS. SASSOON: Do you recall during the trial that clips were played from the November 9th all hands meeting that Caroline Ellison had with Alameda employees?
SAMUEL BANKMAN-FRIED: Yes, I do.
MS. SASSOON: Mr. Bianco, if you could play Government Exhibit 433E.
(Audio played)
MS. SASSOON: Mr. Bankman-Fried, Ms. Ellison identified you, Gary, and Nishad as her co-conspirators, correct?
MR. COHEN: Objection.
JUDGE KAPLAN: Sustained as to form.
MS. SASSOON: During her testimony in court, you recall that Ms. Ellison identified you, Gary, and Nishad as her co-conspirators, right?
MR. COHEN: Objection.
JUDGE KAPLAN: Sustained.
MS. SASSOON: Mr. Bankman-Fried, you would agree that you, Caroline, Gary, and Nishad were the ones involved in the decisions to spend FTX customer money by Alameda, right?
MS. SASSOON: Well, in December, you learned that Caroline had pleaded guilty, right?
SAMUEL BANKMAN-FRIED: I think that's correct, yes.
MS. SASSOON: And you also learned in December that Gary had pleaded guilty, right?
SAMUEL BANKMAN-FRIED: I think that's correct, yes.
MS. SASSOON: And you learned that both were cooperating with the government, right?
SAMUEL BANKMAN-FRIED: I had guesses about that. I don't remember whether I learned that with confidence. I may have.
MS. SASSOON: You learned that they pled guilty to cooperation agreements, right?
SAMUEL BANKMAN-FRIED: I can't remember when I learned that there were cooperation agreements. It may have been then. I just can't recall when I learned that.
MS. SASSOON: It wasn't until January, though, January 2023, that you learned that Nishad had also pleaded guilty, right?
SAMUEL BANKMAN-FRIED: January or February. I don't remember when exactly.
MS. SASSOON: And in December, when you learned that Caroline pled guilty and Gary pled guilty, you were surprised to not learn anything about Nishad, right?
SAMUEL BANKMAN-FRIED: I was surprised to have learned something about those two and not about Nishad.
MS. SASSOON: Because Nishad was the fourth person involved in your scheme to use FTX customer money, right?
SAMUEL BANKMAN-FRIED: Nope.
MS. SASSOON: Well, let's look at Government Exhibit 2556 in evidence. And this is something you wrote on December 25, 2022, right? I believe you testified yesterday that you wrote this document, right?
SAMUEL BANKMAN-FRIED: I——I have a vague memory of this.
MS. SASSOON: And if we could zoom in on item No. 5.
MS. SASSOON: Do you see it says "Nishad"?
SAMUEL BANKMAN-FRIED: I do.
MS. SASSOON: And (a) says "lots of the complaints/etc. filed at this point make claims like the 3 co-conspirators in a way that doesn't really seem to leave much room for them adding on a fourth—–they don't seem to be keeping a seat warm for him as a defendant." Do you see that?
SAMUEL BANKMAN-FRIED: I do see that.
MS. SASSOON: "(b) also there's no plea deal, no nothing, yet," do you see that?
SAMUEL BANKMAN-FRIED: I do see that.
MS. SASSOON: And "(c) what does this mean? (i) He got immunity? (ii) they aren't bothering with him? (iii) they'll just have a separate, parallel set of complaints for him once they get past whatever the blocker is? (iv) something else?" You wrote that, Mr. Bankman-Fried, correct?
SAMUEL BANKMAN-FRIED: I think so.
MS. SASSOON: No further questions.
JUDGE KAPLAN: Thank you. Mr. Cohen.
MR. COHEN: Thank you, your Honor.
REDIRECT EXAMINATION BY MR. COHEN:
MR. COHEN: Mr. Bankman-Fried, do you recall being asked a series of questions yesterday about the discovery in this case?
SAMUEL BANKMAN-FRIED: I do.
MR. COHEN: And you were asked about whether you had reviewed all the documents received in this case?
SAMUEL BANKMAN-FRIED: I do.
MR. COHEN: To your recollection, sir, how many documents were received?
SAMUEL BANKMAN-FRIED: My recollection is that it was around 10 million, not including the database.
MR. COHEN: Okay. So millions and millions?
SAMUEL BANKMAN-FRIED: Yeah.
MR. COHEN: Did you review every single page?
SAMUEL BANKMAN-FRIED: Absolutely not.
MR. COHEN: You were asked yesterday——transcript at 2670——"You ran queries in the database?" Referring to the AWS database. And you answered, "Yup." "You knew how to do that?" "A. I learned how to do that, yes." Do you recall that testimony, sir?
SAMUEL BANKMAN-FRIED: I do.
MR. COHEN: What were you referring to?
SAMUEL BANKMAN-FRIED: As part of discovery in this case, so after the collapse of FTX and before this trial, the defense was given access to at least a snapshot of the AWS database that FTX had maintained, and as part of my defense, I explored that database, familiarized myself with its workings. Much of it was similar in form to the Google database that I had spent a month or so with last year and then ran queries to prepare for trial.
MR. COHEN: And the Google database you're referring to, you got access to that in October; is that correct?
SAMUEL BANKMAN-FRIED: That's right.
MR. COHEN: Prior to getting access to the Google database, had you run queries in the AWS database?
MR. COHEN: You were asked a number of questions yesterday and today about whether you had made disclosures to customers of FTX. Do you recall that, sir?
MR. COHEN: Was FTX a public company?
MR. COHEN: It was a private company?
MR. COHEN: Did you believe you had a obligation to make daily disclosures?
MS. SASSOON: Objection.
JUDGE KAPLAN: Sustained.
MR. COHEN: What was your view of when you had to make disclosures to customers?
MS. SASSOON: Objection.
JUDGE KAPLAN: Sustained.
MR. COHEN: Mr. Bankman-Fried, in connection with your duties as CEO of FTX, did you have occasion to review whether to make disclosures to customers?
SAMUEL BANKMAN-FRIED: In some cases, yes.
MR. COHEN: Okay. And what factors went into that consideration?
SAMUEL BANKMAN-FRIED: So specifically around customer positions on the exchange, our general policy for disclosures was that if a customer account got to the point where we believed that that customer may be insolvent or very close to it, that the NAV is falling close to or to zero, and as for that, we began to liquidate that——that customer. We would generally disclose those liquidation fills to other customers of FTX. Beyond that, I think we almost never disclosed information about a customer's account to the public or to other customers.
MR. COHEN: Okay. Moving on, Mr. Bankman-Fried. Do you recall yesterday you were asked the following question? This is at transcript 2727. "Is withdrawing money from FTX to repay a lender within your definition of a margin trade?" And you answered: "Potentially, yeah. I can explain if you want." And you weren't asked to explain. Can you explain, Mr. Bankman-Fried.
SAMUEL BANKMAN-FRIED: Yeah. So the way that——that margin worked on FTX was if a customer was able to go below zero in a particular asset, for instance, via enabling margin trading, then in most cases they were allowed to do so via withdrawing. So you could withdraw below zero. And if they were doing it via withdrawing, there were no restrictions on what they could then do with their assets, including assets or, you know, the fraction of the value of their assets that was——that had, you know, originally come from that borrow from FTX. So if that customer wanted to return a loan it had taken from someone else, and if they were permitted to borrow from FTX in the first place, there's nothing prohibiting them from margin trading in the first place, nothing prohibiting them from withdrawing to the negative in a particular asset from FTX and then repaying that lender with those or other funds.
MR. COHEN: Okay. Do you recall being asked yesterday about the risk engine?
MR. COHEN: And you were asked——this is transcript at 2694——"A moment ago didn't you say that a customer exploited loopholes in the risk engine?" "Yes. I can explain if you want." Do you recall being asked that question and giving that answer?
SAMUEL BANKMAN-FRIED: I do, yes.
MR. COHEN: Can you explain what you meant by "loopholes in the risk engine."
SAMUEL BANKMAN-FRIED: Yes. That was a messy situation. Roughly a day or two prior to the time——it may have even been a few days prior to when ultimately that position was passed off to Alameda, I had personally intervened. Concerns had been raised to me about that particular account by a few employees, by a combination of Ryan Salame, Nishad, and Gary. They expressed——I——I had understood them to be concerned that there might be something that was happening with that account, that it might be attempting to exploit FTX. I acknowledged that. I agreed that there was a risk of that. I thought it probably wasn't but might have been and so that I would personally manually monitor it and adjust some settings to attempt to protect against such a risk without at that point liquidating the customer, because they were otherwise a valuable customer. In doing so, I overrode FTX's standard risk procedures there and personally took responsible [sic] for that account. I was——they were right. I was not nearly as correct. I was effectively wrong. The customer did attempt ultimately to——to abuse the risk procedures and found loopholes in, among other things, the parameters I had manually set while attempting to monitor that account. In keeping the account open, I had blocked withdrawals on the account but had forgotten to block transfers between other FTX accounts. To my memory is that they transferred between another FTX account, which they then withdrew. As such, I viewed that as much as anything else a personal scruff on my part for a situation I had personally taken responsibility for, and that made me feel like it was further appropriate for Alameda to be the one to take on that position.
MR. COHEN: And which currency or token does this relate to?
SAMUEL BANKMAN-FRIED: This was MobileCoin and/or BTMX, and I think there may have been a few more involved as well.
MR. COHEN: Okay. So what did you do when you wanted——you decided you needed to take a personal responsibility in connection with the MobileCoin transaction?
SAMUEL BANKMAN-FRIED: Yeah. Effectively what that meant was the account, which was still a substantially positive NAV asset at that point, also——I had strong suspicions about how it would fare over time, passed it off to Alameda, both as a backstop liquidity provider and also as a trading firm that I at the time owned and ran, and that would then have to shoulder the risk associated with that account.
(Continued on next page)
MR. COHEN: Ultimately was a loss suffered with respect to MobileCoin?
SAMUEL BANKMAN-FRIED: I think so. I actually don't remember exactly how the market turned out, but I don't think it ended up being a winner of a position.
MR. COHEN: You transferred it from FTX to Alameda, correct?
SAMUEL BANKMAN-FRIED: Well, I transferred it from that user on FTX to Alameda on FTX as a -- essentially as a backstop liquidity provider.
MR. COHEN: And you owned 90 percent of Alameda?
SAMUEL BANKMAN-FRIED: That's correct.
MR. COHEN: So if there was a loss you were going to bear most of it?
SAMUEL BANKMAN-FRIED: That's correct.
MR. COHEN: Do you recall that yesterday you were asked questions about your context with journalists between November 11 and running into December. Do you recall those questions?
SAMUEL BANKMAN-FRIED: Yeah, I do.
MR. COHEN: About how many journalists did you speak with?
SAMUEL BANKMAN-FRIED: In that period in particular?
MR. COHEN: Yes.
SAMUEL BANKMAN-FRIED: I mean, probably 50 or so. I don't remember the exact number.
MR. COHEN: What was your level of preparation for those calls or meetings?
SAMUEL BANKMAN-FRIED: For the most prepared, I probably spent an hour; for the least prepared, probably 30 seconds.
MR. COHEN: What materials did you have access to after November 11?
SAMUEL BANKMAN-FRIED: Just my memory. I was cut off from company systems. I didn't have data access.
MR. COHEN: Do you remember every single statement you made to a journalist during that time period?
SAMUEL BANKMAN-FRIED: Definitely not.
MR. COHEN: You recall you were shown excerpts from articles written about FTX with you during that time period. Do you recall that, sir?
MR. COHEN: Do you recall everything written in every article about you during that time period?
SAMUEL BANKMAN-FRIED: Certainly not.
MR. COHEN: Do you recall that yesterday you were shown part of a chain between you and a journalist for an entity called Vox. Do you recall that?
MR. COHEN: V-o-x. What was Vox?
SAMUEL BANKMAN-FRIED: Vox is an online news and opinion publication.
MR. COHEN: Who was the reporter?
SAMUEL BANKMAN-FRIED: Kelsey. She had been a friend of mine for about a decade.
MR. COHEN: And do you recall being shown a portion of the chain in which you used the phrase fuck regulators? Do you recall that, sir?
SAMUEL BANKMAN-FRIED: Yes, I do recall that.
MR. COHEN: Was that the full extent of the chain between you and Kelsey?
SAMUEL BANKMAN-FRIED: No, it was not.
MR. COHEN: What else did you discuss in that chain about regulators?
SAMUEL BANKMAN-FRIED: The primary discussion there --
MR. COHEN: About regulators.
SAMUEL BANKMAN-FRIED: -- about regulators in particular was I had -- it was me telling Kelsey, in response to a question from her, that I essentially had grown to be frustrated by regulators that I had become skeptical about whether I really had been able to attempt to get good regulation and not bad regulation, and had over time, and especially very recently, as of then, especially at that moment, when I was somewhat frustrated, felt like all the work that I had done to work with regulators might have ended up encouraging bad regulation as much as good regulation in retrospect, and I was not happy with that.
MR. COHEN: That chat was on November 16?
SAMUEL BANKMAN-FRIED: Yeah, that's right.
MR. COHEN: Five days after FTX had gone bankrupt?
SAMUEL BANKMAN-FRIED: Yeah, that's correct.
MR. COHEN: Do you recall being asked questions yesterday about your testimony in front of Congress?
MR. COHEN: Also the written testimony that you submitted to Congress.
SAMUEL BANKMAN-FRIED: In fact, I think only -- I don't recall the spoken testimony, but written testimony, yes.
MR. COHEN: How many times, if you remember, did you appear before Congress?
SAMUEL BANKMAN-FRIED: Three times.
MR. COHEN: And each time did you also submit written testimony?
MR. COHEN: Were you the only one who worked on that testimony?
MR. COHEN: Who else did?
SAMUEL BANKMAN-FRIED: Our policy team, Mark Wetjen particularly, did. Zach Dexter, the CEO of FTX US derivatives, did as well. Others may have as well. I am not sure.
MR. COHEN: Do you remember every paragraph from those written submissions that were made to Congress?
SAMUEL BANKMAN-FRIED: No, I do not.
MR. COHEN: Let's call up GX-914A.
MR. COHEN: This was portions of your testimony to Congress. Do you recall being asked about that yesterday, Mr. Bankman-Fried?
MR. COHEN: And you were directed to the portion that stated that about FTX's key principles. Do you recall that?
MR. COHEN: And you read out a section that said one of its key principles was to ensure customer and investor protection. Do you recall that?
MR. COHEN: Was that a goal of FTX?
MR. COHEN: Did you try to achieve that goal?
SAMUEL BANKMAN-FRIED: Absolutely.
MR. COHEN: How did you do that?
SAMUEL BANKMAN-FRIED: A number of ways. One of the ways was through thinking about equity access for customers, thinking about, in particular, as much as possible letting all users of FTX have direct trading access rather than smaller customers having to go through a number of intermediaries and encountering a number of logistical hoops along the way. That's something we put in a lot of work into. We put a lot of work into the risk engine on FTX. Ultimately, we also had a very large oversight and mistake related to risk management. But at the time I felt like we had done a good job of that. And we put work into the digital security of assets on FTX and, I mean, a number of other smaller things as well.
MR. COHEN: Do you recall being asked yesterday in connection with your congressional testimony whether FTX had followed the key principle of maintaining adequate liquid resources to ensure the platform can return the customer's assets upon request? Do you recall being asked about that?
SAMUEL BANKMAN-FRIED: I do.
MR. COHEN: Did FTX do that?
SAMUEL BANKMAN-FRIED: It did do what my understanding of that was.
MR. COHEN: Why don't you tell us.
SAMUEL BANKMAN-FRIED: So my understanding of that sentence was that in the case of customer withdrawal requests, we wanted to be able to, as quickly as possible, fill that request and that, as such, we wanted to maintain enough assets in terms of liquidity and in terms of the forum and place they were stored, that for typical, or even substantially more than typical, activity, we would be able to promptly and painlessly process customer withdrawals. There is a separate -- I can't remember for that sentence or the next as well about -- which is referring to having an insurance fund of -- in the case of risk of clawbacks as well.
MR. COHEN: Just, finally, on this point you were asked questions about your congressional testimony and you said that -- you said one of the key principles was to avoid or manage conflicts of interest. Do you recall that testimony?
SAMUEL BANKMAN-FRIED: I do, yes.
MR. COHEN: What did you mean by that?
SAMUEL BANKMAN-FRIED: I meant that in general -- as a general matter, managing conflicts of interest is an important part of a business and that at the time I felt like we had potential conflicts of interest with Alameda and in a few cases potentially with others. I had felt like we were doing a relatively good job at managing and mitigating the risks associated with those. I don't know that I would say the same today.
MR. COHEN: Do you recall being asked a number of questions about the tweets you put out in order to try to get customers to use FTX?
SAMUEL BANKMAN-FRIED: Is there a question?
JUROR: Can we get a bathroom break?
JUDGE KAPLAN: We will take our morning break. 15 minutes, folks. I should say, with respect to juror number 3, one way or another, you are going to make your flight.
(Jury not present)
JUDGE KAPLAN: In no way am I rushing you, Mr. Cohen. Give me the best idea you can, please.
MR. COHEN: I think, your Honor, about 40 minutes to an hour.
JUDGE KAPLAN: Thank you.
(Recess)
JUDGE KAPLAN: Mr. Roos, your estimate on a rebuttal?
JUDGE KAPLAN: Which one?
MS. SASSOON: Zachary Allen is out. So it's just the FBI agent, and we produced those materials. We are still seeing --
JUDGE KAPLAN: Time is what I'm interested in.
(Recess)
JUDGE KAPLAN: Bring in the jury.
(Jury present)
JUDGE KAPLAN: The jurors and the defendant all are present, as they have been throughout. Mr. Bankman-Fried, you are still under oath. Mr. Cohen, you may continue.
MR. COHEN: Thank you, your Honor.
BY MR. COHEN:
MR. COHEN: Mr. Bankman-Fried, do you recall being asked yesterday a series of questions about the ways in which FTX got customers?
SAMUEL BANKMAN-FRIED: Yes, I do.
MR. COHEN: And you recall being asked: And one way that it grew was through your interactions with customers on social media, fair? And you answered: Yeah.
MR. COHEN: Is that the only way FTX got customers?
MR. COHEN: How else did it get customers?
SAMUEL BANKMAN-FRIED: Initially, the primary way was word of mouth from existing customers. It was just customers who tried the product, and those who liked it often told their friends about it. And on social media it was primarily customers talking with each other. I did have some interactions as to FTX with them. Ultimately, we began testing out more marketing strategies; in particular, brand advertisements, brand partnerships, things like FTX Arena.
MR. COHEN: What effect, if any, did the quality of your products have on getting customers?
SAMUEL BANKMAN-FRIED: My understanding at the time was that that was the primary driver of the growth of the exchange, that we lived and died by having a better product than competitors, and that at least measured by volume or revenue that nearly all of our business and all of our customers already used competitors before they tried out FTX, so we generally, in my belief at the time, got customers only if they liked our product better.
MR. COHEN: You recall yesterday being asked a series of questions about what happened after Ms. Ellison and Mr. Trabucco took over as co-CEOs at Alameda?
MR. COHEN: And in particular what your role was with respect to Alameda after you stepped down as CEO.
MR. COHEN: What was your role? What did you do and what did you not do?
SAMUEL BANKMAN-FRIED: Yeah. I was chiefly the majority owner of Alameda. So as owner I got updates on financials and other high-level updates periodically. I cared about the company a fair bit. There were a few other specific ways that I was involved. Venture investments was an area. Ultimately we ended up deciding that many of the venture investments didn't exactly fit under the Alameda brand in the first place, although we didn't resolve where it should be. But I was involved in many of the venture investments. And then beginning, to a lighter extent, in the first half of 2022 and a much heavier extent in the second half, I was very involved in decisions around hedging because I viewed it as existential risk for the company to get that right, and I was concerned that the leadership wasn't, in my view, at the time taking it seriously enough, although I understand the complexity around that, and that I may not have been communicating very clearly in the first place or as clearly as I thought I was. And then there were random one-off occasions on which I would have discussions about some particular topic that would come up. Those were the ways I chiefly was involved. Caroline would also sometimes give me previews of things that she was thinking of doing and asked for my impression of them; not always, but now and then. What I did not view myself as involved in was day-to-day trading decisions, which was what I at least referred to as trading or trading decisions or day-to-day trading. That's sort of how I described those things. Although, obviously, you could use the word trading to use venture investments sometimes, but other things or hedging. Every day Alameda would do, I think, millions of trades and billions of dollars, and I was essentially uninvolved with those core operations, I think starting a bit before I passed off the CEO role.
MR. COHEN: You recall yesterday Ms. Sassoon asked you questions about notes you had made after the bankruptcy filing on November 11.
SAMUEL BANKMAN-FRIED: Yeah.
MR. COHEN: And she asked you, this is transcript 2678: Didn't you write, Mr. Bankman-Fried, if Alameda had been a hundred percent separate completely unrelated trading firm in every way, this wouldn't have happened, at least it wouldn't have happened to FTX. Alameda would have had the fiat@ -- wouldn't have had the fiat@ relationship and wouldn't have had on nearly as large of a position. Do you recall being asked about that yesterday?
MR. COHEN: What did you mean by that, Mr. Bankman-Fried?
SAMUEL BANKMAN-FRIED: In my view, essentially the entirety of the ultimate liability or at least net liability that Alameda had to FTX was about the size of the fiat@ account. But that was what myself and I think almost all of us had not been aware of, at least until sometime in the second half of 2022, about that roughly $8 billion liability. And that had it been -- had Alameda never had any relationship with FTX of any form, I think we would have had much better systems in place to monitor the fiat@, what I came to learn was the fiat@ account, the payment agent relationship in general, and I think, in retrospect, our oversight of that was very poor.
MR. COHEN: Let me move to another topic. Do you recall being asked a number of questions yesterday and today about margin trading?
MR. COHEN: And you were asked, this is transcript 2726: "Q. Just to be clear, Mr. Bankman-Fried, taking money from FTX to pay back lenders, that's not margin trading, is it? "A. I'm not -- I don't think that's what happened and I'm also not saying that's not margin trading." Do you recall being asked that question and giving that answer?
MR. COHEN: What did you mean by that?
SAMUEL BANKMAN-FRIED: Two pieces to that. The first piece, which I won't belabor too much again, but was essentially when customers did margin trading on FTX, in general they could withdraw it down to a negative number in a particular asset, and they could do whatever they wanted with their funds. The moment they did that withdrawal, those funds became their funds, not customer funds. They could spend it or invest it or repay it to someone else or do what they liked with it. FTX just managed the risk associated with them as a customer.
MR. COHEN: How did FTX manage the risk associated with the customer?
SAMUEL BANKMAN-FRIED: The chief way was through monitoring the net-asset value effectively. The assets at FTX could ultimately get claimed to versus the liabilities to FTX, monitoring basically which of those was higher or whether the liabilities were approaching the assets in size and then beginning to margin-call the customer and potentially liquidate them if that was the case. So that was one of the two things that I was I think referencing there. The other was that I don't actually remember it being the case that, at least on net, and I don't know about specific movements, that it seemed like Alameda did increase its borrowing on FTX to repay lenders.
MR. COHEN: What did you mean by the phrase on net?
SAMUEL BANKMAN-FRIED: Yeah. Every day Alameda would do hundreds of millions of dollars of deposits and withdrawals from FTX. There would be assets of various forms coming in and out. This was standard of big customers on FTX. Many of them had large deposits and withdrawals per day. But generally the net was much smaller, meaning the deposits minus the withdrawals, so whether the account value was increasing or decreasing. One thing I knew Alameda would do sometimes is use an FTX wallet to collect assets, pool assets that it was going to send somewhere. So if it had one Bitcoin each in five different wallets, it might send all of those to some subaccount on its FTX account for recordkeeping purposes and then send those out to some other place. In that case there would be a withdrawal from FTX. It would be sending those five Bitcoins out from its FTX account, but only right after having deposited a similar number of Bitcoins to that FTX account. It was a way station, effectively, in some cases. I don't know about the detailed flow of funds. But if you looked at line of credit utilization, for instance, I don't remember that increasing in June 2022.
MR. COHEN: You were asked some questions earlier this morning about the time period from September to October. Do you recall being asked about that period when you were discussing the $8 billion liability? Do you recall that?
MR. COHEN: And you were asked whether or not you had spent the $8 billion, and you said no.
SAMUEL BANKMAN-FRIED: That's right.
MR. COHEN: Why did you say that?
SAMUEL BANKMAN-FRIED: A few reasons. One of them is, I don't even know how I would have defined an answer to who spent that money, which is to say, Alameda had 20 employees. They were each collaborating on hundreds of decisions every day. Funds were being deposited and withdrawn all over the place constantly. At least in my knowledge, I don't think it would be the case that there was a clear simple pointer decision at which a particular person or people, you know, decided to spend particular dollars. Money is fungible anyway. There are a lot of things that I don't think I would have been able to define in trying to answer that question if I had investigated it. The other part of it, I mean, I don't know if this is right or wrong, but for better or for worse, it has been a part of me that like I wasn't particularly interested in trying to dole out blame for it. That wasn't my priority. It generally wasn't my priority. It was generally something I deprioritized as later, and I tried to focus as much as I could on what stuff has happened, what's the best thing we can do going forward.
MR. COHEN: And what was the issue, as you understood it, once you understood the $8 billion liability existed?
SAMUEL BANKMAN-FRIED: As I understood it, the issue was basically that the scale of Alameda's total liabilities borrowing from FTX was -- there are various numbers, depending on when and how you define it, but in the $10 billion range, and that was a significant scale of borrowing even by the standards of FTX for Alameda. That was a risk that had to be managed and meant that if Alameda were to go under water, it would potentially have serious implications for FTX as well.
MR. COHEN: Did you try to manage that risk?
SAMUEL BANKMAN-FRIED: I did.
MR. COHEN: Moving on, you were asked a number of questions yesterday about Alameda's line of credit. Do you recall that, sir?
MR. COHEN: And you were asked, transcript at 2633: Sitting here today, do you deny that Alameda's main trading account had a $65 billion line of credit that no other customer had? Your answer: No. That was the maximum withdrawable size. Do you recall this?
MR. COHEN: What do you mean by maximum withdrawable size?
SAMUEL BANKMAN-FRIED: I was just trying to clarify between two different things you could talk about. One was the $65 billion number, which I understand to be a limit put in the database at some point that meant, separate from anything else, in those circumstances could Alameda use more than 65 billion of a line of credit. I separately understood that Alameda never used anything even close to that of its line of credit. The actual line of credit used by Alameda was typically in the $2 billion range, at least during 2022, so I want to differentiate between the theoretical maximum and the amount actually used of line of credit.
MR. COHEN: And you asked yesterday and today a number of questions about whether FTX could include customers' assets held off the exchange as collateral for borrowing. Do you recall those questions?
MR. COHEN: And specifically you were asked, transcript at 2622: "Q. The general rules did not allow for pledging an outside investment as collateral in the exchange, right? "A. I'm not sure that's true." Do you recall giving that testimony?
SAMUEL BANKMAN-FRIED: I do, yes.
MR. COHEN: What did you mean by that, Mr. Bankman-Fried?
SAMUEL BANKMAN-FRIED: There was no automated process, no sort of mass-market process for considering off-platform assets. Anything would have to be sort of individualized because, by default, FTX can only look at what it sees, at what it has. FTX doesn't natively know about your house, but it could be taught about that. And so as I understood it, we were allowed to on a discretionary basis if it felt appropriate from a risk management perspective.
MS. SASSOON: Objection, your Honor, to allowed to.
JUDGE KAPLAN: You can cross on it. A. Was that, you know, if it felt reasonable on various metrics that we could consider other assets that we could give lines of credit or other accounting for other assets that were not on the exchange and that we had investigated doing so in a few cases and had done so in a few cases.
MR. COHEN: Now, during 2022, you were the 90 percent owner of the Alameda?
SAMUEL BANKMAN-FRIED: Yeah.
MR. COHEN: Were you aware of the assets Alameda had on the FTX exchange?
SAMUEL BANKMAN-FRIED: Yes, I was aware of the assets it had on the FTX exchange.
MR. COHEN: Were you aware of the assets it had off the exchange?
SAMUEL BANKMAN-FRIED: Essentially.
MR. COHEN: And during this same period you were the majority owner of FTX?
SAMUEL BANKMAN-FRIED: I think that's right. I think it was a little over 50.
MR. COHEN: Were you aware of the assets that FTX had?
SAMUEL BANKMAN-FRIED: I was aware of the approximate assets that FTX had.
MR. COHEN: During this period you also owned certain assets in your own name?
MR. COHEN: Were you aware of the size of those assets?
SAMUEL BANKMAN-FRIED: Approximately, yes.
MR. COHEN: You were asked some questions earlier today, and I think yesterday also, about June 2022, in particular about a spreadsheet that was sent to you by Caroline Ellison. Do you recall that, sir?
SAMUEL BANKMAN-FRIED: There were a few spreadsheets. Is this the Alameda balance sheet?
MR. COHEN: Let me focus it for you. Referring to GX-44, the spreadsheet with multiple tabs, at transcript 2731 you were asked the following question and gave the following answer: On or around late June 2022, do you recall receiving a spreadsheet with eight tabs? I don't. I don't. I don't specifically recall there being eightish tabs on it. There may well have been. What do you mean by that, sir?
SAMUEL BANKMAN-FRIED: I guess I can describe what I do remember. I remember I was sent sometime around then a balance sheet by Caroline. It was typical that when she sent me balance sheets they would be in spreadsheets with multiple tabs on them. Often other times it would be underlying calculations. And I remember at a high level the conversation that we had about it. It was fairly brief.
MR. COHEN: What was that conversation?
SAMUEL BANKMAN-FRIED: She had sent it to me and said she was thinking of sending this out and wanted to know if I had any thoughts, and I remember saying something like, yeah, that sounds reasonable.
MR. COHEN: Do you recall whether or not you went over each of the tab entries on the spreadsheet?
SAMUEL BANKMAN-FRIED: I don't recall going over multiple tabs on the spreadsheet. There may have been other tabs. I just don't have a memory one way or another about how many tabs there were or what other tabs would have shown, so it very well could have been that spreadsheet.
MR. COHEN: And you said earlier in your answer that this was typical for your interactions with Ms. Ellison?
SAMUEL BANKMAN-FRIED: Yeah.
MR. COHEN: Can you explain that.
SAMUEL BANKMAN-FRIED: Yeah. She would generally send me, when she sent me a balance sheet, I would say about half the time that she sent them, maybe more than that, it would be in a worksheet, an Excel or Google Sheets worksheet, usually Excel, that had many tabs on it, and she would often say, look at this particular tab to see the updated balance sheet, or something like that, so I would, by default, do that. Sometimes I would look through the other tabs at a high level. Sometimes I wouldn't.
MR. COHEN: Yesterday you were asked about a discussion you had with Ms. Ellison about a venture investment in Genesis Digital Assets. Do you recall that, sir?
MR. COHEN: And that was a crypto mining company?
MR. COHEN: Do you recall a discussion with Ms. Ellison about whether or not the investment should have been made?
SAMUEL BANKMAN-FRIED: Yes, I do.
MR. COHEN: Why don't you tell us that.
SAMUEL BANKMAN-FRIED: Caroline expressed, I remember her saying that she didn't think it should have been made, I think -- that's what I remember her saying -- because of the capital usage, and I inferred some skepticism about the investment itself.
MR. COHEN: What did you say, if anything?
SAMUEL BANKMAN-FRIED: I had, in substance, that I thought it was good if hedged, that in particular, given the calculations that had been done by members of our team on GDA, it looked like we are going to be buying it for -- buying into it at less than the amount of money we thought that it would make as a company, but that that amount would vary with Bitcoin's price. In other words, you could think of it as buying a future stream of Bitcoins at less than, as of then, the price of a Bitcoin, but that there was risk associated with it unless it was paired with removing that risk of Bitcoin price decrease by hedging.
MR. COHEN: Were you talking about a hedge of the general market or a hedge of something relating to GDA?
SAMUEL BANKMAN-FRIED: So in the GDA case in particular, there is actually something much more specific, which was, I had understood that there is going to be a roughly $2 billion Bitcoin hedge put on corresponding to the GDA investment, a hedge of roughly twice the amount that we had invested in Bitcoin.
MR. COHEN: Can we call up Government Exhibit 14A, please, and go to row 2 and highlight that, please.
MR. COHEN: Do you recall being shown this yesterday in relation to the GDA investment?
MS. SASSOON: Objection. I don't believe he was shown this spreadsheet.
JUDGE KAPLAN: 14A? Is it 14A?
MR. COHEN: 14A, your Honor. I'll rephrase, your Honor. Can we go to the end of the column, please. This is in evidence, your Honor. You can highlight the entry under Y and Z. It says: Hedged with 2X BTC.
MR. COHEN: What does that refer to, Mr. Bankman-Fried?
SAMUEL BANKMAN-FRIED: That refers to the expectation or the understanding that, in connection with the investment in Genesis Digital Assets, Alameda had put on a hedge with Bitcoin as in sold Bitcoins and, in particular, sold twice the value of Bitcoins as the size of the investment. There are reasons why twice made sense in that case, which I could go into if you're interested.
MR. COHEN: No. I think that's fine.
MR. COHEN: We can take that down.
MR. COHEN: Do you recall being asked several questions yesterday about FTX providing for your use of a private jet?
SAMUEL BANKMAN-FRIED: I do, yes.
MR. COHEN: And I believe we were shown a photograph of you on the jet or a jet.
SAMUEL BANKMAN-FRIED: Very flattering one.
MR. COHEN: As CEO of FTX, did you believe that use of a private jet was a valid business expense?
SAMUEL BANKMAN-FRIED: Yeah. Depending on the context.
MR. COHEN: Can you tell us why.
SAMUEL BANKMAN-FRIED: Yeah. I didn't believe it would be a valid business expense if used for recreational travel, you know, for a vacation, and I did not use it for those purposes. But it was a very logistically difficult to travel between the Bahamas and a few places, chiefly including Washington, D.C. I had to go to D.C. frequently in 2022. I think I spent more than a month there in aggregate, and I had meetings with senators, with regulators that I couldn't be late to. There were not very many commercial flights between the Bahamas and D.C. They were often delayed or cancelled. And I had tight deadlines to make. And separately at that point in time my understanding was that the amount -- that the expense associated with it was, although large compared to the scales I would have thought about a few years earlier for the company or for myself, fairly small compared to the scale of the business at that point in time.
MR. COHEN: Let's move on, Mr. Bankman-Fried. Do you recall yesterday being asked a series of questions about shares in a company called Robinhood?
MR. COHEN: The shares of Robinhood were shares that were acquired, correct?
SAMUEL BANKMAN-FRIED: They were purchased, yes.
MR. COHEN: Who purchased them?
SAMUEL BANKMAN-FRIED: Emergent Fidelity was the entity that purchased them.
MR. COHEN: Who owned Emergent?
SAMUEL BANKMAN-FRIED: Myself and Gary.
MR. COHEN: Do you recall being shown an affirmation that you had signed in connection with some litigation over Robinhood shares?
MR. COHEN: Where did that litigation take place?
SAMUEL BANKMAN-FRIED: Antigua.
MR. COHEN: Why Antigua?
SAMUEL BANKMAN-FRIED: Robinhood was a U.S. company, but Emergent Fidelity, the entity that owned the shares in Robinhood, was an Antigua-based company. It was my understanding that it had been sued by some individual, not by a bankruptcy estate, in Antigua court.
MR. COHEN: Were you asked the following question and gave the following answer? Transcript 2711: And the purpose of this affirmation was to lay claim to the Robinhood shares, correct? "A. That wasn't how I understood it at the time." Do you recall giving that testimony?
SAMUEL BANKMAN-FRIED: I do.
MR. COHEN: What do you mean by that, sir?
SAMUEL BANKMAN-FRIED: So my understanding, and my understanding --
MR. COHEN: At the time?
SAMUEL BANKMAN-FRIED: -- at the time was a little bit hazy. But what I understood was that Emergent was being sued by a particular individual in an Antiguan court case, that it would a logistical headache for everyone if that lawsuit proceeded without any statements from Emergent, and that this was not a sort of proper -- this is not a process that, in my understanding at the time, was designed to return the Robinhood shares that were in Emergent to one of the various global bankruptcy estates for the purposes of customers and in fact might impede that process.
MR. COHEN: And answer this question yes or no, please. Yes or no, were you represented by an Antiguan attorney or an attorney in connection with the Antigua litigation?
MR. COHEN: Let's move forward, Mr. Bankman-Fried.
MR. COHEN: Can we call up Government Exhibit 248, please. Can I ask the government to call this up. I think the version you are using is redacted. I want to use that one. Would that be possible?
MS. SASSOON: Sure.
MR. COHEN: Thank you.
MR. COHEN: Do you recall being shown this email exchange earlier this morning?
MR. COHEN: To refresh everyone, this is an exchange on November 9 between you and someone named Ryan Pinder. You see that, sir?
MR. COHEN: Do you recall being asked questions about that?
MR. COHEN: Who was Mr. Pinder?
SAMUEL BANKMAN-FRIED: He was the Attorney General of the Bahamas.
MR. COHEN: Why were you in communication with him on November 9?
SAMUEL BANKMAN-FRIED: He and Christina Rolle, the head of the securities commission, who is also cc'd on this, had reached out to ask questions about FTX, given what I think -- what they described as the rumors that they had heard about turmoil and the various public statements we had made.
MR. COHEN: If we might call out number 6, the whole section underneath the block, and pull it out.
MR. COHEN: Do you recall being shown news this morning, Mr. Bankman-Fried?
SAMUEL BANKMAN-FRIED: I do, yes.
MR. COHEN: And counsel showed you the second paragraph. As part of this we have segregated funds for all Bahamian customers on FTX -- this is you speaking -- and we would be more than happy to open up withdrawals for all Bahamian customers on FTX so that they can, tomorrow, fully withdraw all of their assets, making them fully whole.
MR. COHEN: If we could highlight in yellow the next sentence, please.
MR. COHEN: Is it fair to say you went on to say: It is your call whether you want us to do this, but we are more than happy to and would consider it the very least of our duty to the country, and could open it up immediately if you reply saying you want us to. What did you mean by that?
SAMUEL BANKMAN-FRIED: At the time that I sent this email, I had interpreted a prior email sent to me by Mr. Pinder as implying that they wanted us to take this action or something similar. They were -- the security commission in the Bahamas was the primary regulator for FTX International, and we were headquartered in the Bahamas, so I felt beholden to them.
MS. SASSOON: Objection. The question is, what did you mean by that?
JUDGE KAPLAN: Yes. Strike that last part.
MR. COHEN: Finish your answer.
SAMUEL BANKMAN-FRIED: So I was responding, trying to clarify if that was what they had wanted us to do.
MR. COHEN: We can take this down.
MR. COHEN: You mentioned two entities in the Bahamas yesterday, the SCB and the JPLs. Can you tell us again who those were.
SAMUEL BANKMAN-FRIED: The SCB is the Securities Commission of the Bahamas. It's the chief financial regulator in the Bahamas and the head regulator of FTX. The JPLs, joint provisional liquidators, were a group of people appointed by the SCB to manage the future direction of FTX and its liquidity insolvency proceedings in the Bahamas.
MR. COHEN: After you stepped down on November 11, through December, did you continue to have communications with the SCB and the JPLs?
MR. COHEN: What was your reason for doing so?
SAMUEL BANKMAN-FRIED: I wanted to help the company. I wanted to help the customers. I wanted to help make the customers as whole as possible. And they were -- at least had expressed to me that it would be helpful for doing so for me to tell them what I knew and give them my thoughts.
MR. COHEN: Thank you, Mr. Bankman-Fried. I have nothing further.
JUDGE KAPLAN: Thank you. Any recross, Ms. Sassoon?
MS. SASSOON: No, your Honor.
JUDGE KAPLAN: You are excused, Mr. Bankman-Fried. You may step down.