For three weeks, Sam Bankman-Fried sat silently in the third row of a Manhattan federal courthouse as his former closest colleagues and ex-girlfriend tore him apart.
All three members of his inner circle—Caroline Ellison, Gary Wang, and Nishad Singh—testified that the former FTX CEO directed them to commit fraud, lie to investors, and create special exceptions to allow his trading firm Alameda Research to borrow billions of dollars from FTX customers. They said that he knowingly deceived the public about the way his business worked. Bankman-Fried has been charged with eight counts, including wire fraud and conspiracy to commit money laundering.
Throughout the trio’s testimonies, it was yet unclear as to whether Bankman-Fried would respond to their allegations by taking the stand himself. A criminal defendant’s choice to testify comes with extreme risk, legal experts say: The defendant opens themselves up to harsh cross-examination, in which they must dodge both admission of wrongdoing and perjury.
But Bankman-Fried decided that the ability to tell his story himself to the jury was worth the risk. So on Thursday, Oct. 26, he was sworn in for the first time, in front of a large crowd of crypto enthusiasts and curious onlookers that spilled into several overflow rooms in the courthouse.
Bankman-Fried’s remarks on Thursday afternoon, however, were not part of the trial evidence heard by the jury to determine his guilt or innocence. Rather, they were part of a hearing in which Bankman-Fried’s lead defense attorney Mark Cohen tried to persuade Judge Lewis Kaplan that they should be able to admit certain evidence when they begin presenting their case on Friday. The task for Bankman-Fried, his lawyers, and the prosecution was not to appeal to the jurors—who had been sent home for the day—but to persuade Judge Kaplan himself.
In this way, the hearing served as a kind of dry run for Bankman-Fried’s actual testimony. It provided a preview of his attempts to deflect blame for the collapse of FTX, and the prosecutors’ attempts to induce errors from him. After three hours, the hearing did not appear to go particularly well for Bankman-Fried: Judge Kaplan said at the end of it that he was “pretty dubious” about his lawyers’ arguments, and Bankman-Fried’s mother Barbara Fried, who was in the crowd, at one point appeared to put her head in her hands.
Cohen’s central aim on Thursday was to present the case that Bankman-Fried had received poor legal advice from his former FTX lawyers. Cohen argued that while Bankman-Fried had taken “comfort” from the counsel of attorneys like Dan Friedberg, they had induced him into making wrong decisions. For instance, Bankman-Fried contended that Friedberg and other lawyers handed him documents to sign—including one that allegedly misled a bank about the purpose of opening a bank account—which Bankman-Fried only skimmed, trusting that they were proper.
“There were a lot of things that happened that I was either not informed of, or after the fact, sort of summarily informed of,” he said at one point, adding later: “I wish I had had more conversations; that I myself had been more informed.”
Once Cohen was finished, prosecutor Danielle Sassoon took her turn, and subjected Bankman-Fried to a couple hours of rapidfire, hyper-specific questions about his conversations with Friedberg: when and where they happened and what was said in them. The aggressive approach appeared to stymie Bankman-Fried at certain points: He stuttered frequently, used a labyrinth of jargon and repeated the phrase “I don’t recall” 25 times.
Bankman-Fried’s circuitous approach to answering Sassoon’s questions appeared to annoy Judge Kaplan. “Listen to the question and answer the question directly,” he admonished Bankman-Fried at one point. At another juncture, he said to Cohen: “Part of the problem is that the witness has, what I’ll simply call, an interesting way of responding to questions.”
The tensest moment of the hearing came when Sassoon asked Bankman-Fried a forceful question about “embezzling customer assets.” While the question was thrown out by Judge Kaplan, Bankman-Fried responded anyway, refuting her question with a laugh.
His lawyer cut in and scolded him in a playful tone: “You didn’t have to answer if it has been sustained. Haven’t you been sitting here for four weeks?
“I felt the need to answer that one,” Bankman-Fried replied.
At the end of the hearing, Judge Kaplan said he would decide on Friday whether the evidence about Bankman-Fried’s former lawyers would be allowed. But he said he was “dubious” about Cohen’s position, and even drew an analogy to someone robbing a bank, hiring a lawyer to help him launder the funds, and then pinning the crime on the lawyer. “How is that different from what you are trying to do in principle?” he asked, adding: “I am not saying anything about your client’s guilt or innocence.”
If Judge Kaplan rules against Bankman-Fried in this hearing, it would reduce the defense’s available approaches even further: In a pretrial ruling, Judge Kaplan sharply limited the number of expert witnesses the defense could call. Regardless of what happens, Bankman-Fried will return to the stand—with the jurors present—on Friday.