During his first day of testimony before jurors on Friday, Sam Bankman-Fried emphasized his position that his subordinates were responsible for the major blunders that led to the failure of the FTX cryptocurrency exchange, rather than misbehavior.
For example, he said in court that he had requested his on-again, off-again girlfriend Caroline Ellison’s hedge fund, Alameda Research, which he formed and which had tight ties to FTX, to hedge its risks.
Nevertheless, Bankman-Fried curtly responded, “No,” when his criminal defense attorney questioned Ellison about whether or not Alameda followed his advice to “get shorter” to reduce its risks and close its multibillion-dollar shortfall.
Bankman-Fried told jurors early in his testimony on Friday that he made mistakes at his now-defunct cryptocurrency behemoth FTX, the most significant of which was failing to hire a risk manager, and that as a result “a lot of people got hurt.”
The majority of Friday morning was devoted to Bankman-Fried’s attorney, Mark Cohen, taking his client through the early years of the FTX exchange and Bankman-Fried’s trading company, Alameda Research.
The aim was to rewrite the prosecution’s account of the companies’ demise in a way that would be more advantageous to the defendant by depicting the companies as respectable, well-meaning organizations and offering background information to illuminate the reasons behind contentious business choices.
According to the FTX creator, a highly scrutinized component of the exchange’s software was put in place to fix a flaw in the risk-management system that allowed Alameda to have a negative balance and avoid having its positions liquidated.