Prosecutor grills Sam Bankman-Fried about his hair and tech genius persona as it happened | Sam

Prosecutor grills Bankman-Fried on whether he thought of himself as a ‘smart guy’

Danielle Sassoon is drilling down on the role of exceptionalism in this case – both in terms of what Alameda was allegedly able to get away with, as well as Bankman-Fried’s self perception.

The assistant US attorney’s line of cross-examination follows Bankman-Fried’s testimony last week, in which he and his defense attorney attempted to portray him as overwhelmed by his rapid success, and as someone who had simply made a lot of “mistakes”.

“You called the shots at FTX?” Sassoon asked.

“I called some of them,” Bankman-Fried said.

“You think of yourself as a smart guy?”

“In many ways, not all ways,” he said.

“And as CEO of FTX, you thought highly of yourself?” she asked.

“I did.”

She pressed him a few moments later about Alameda, which had a $65bn line of credit from FTX.

“And as far as you know, there were no other customers on the exchange with a $65bn line of credit?” she said. “With a billion or more?”

He said he didn’t know of other customers with such credit.

“And Alameda was permitted to use a line of credit to withdraw money from the exchange?” she pressed.

“I now believe that was probably true,” Bankman-Fried said.

Summary: seven testimony takeaways

Testimony has ended for the day in Sam Bankman-Fried’s fraud trial. Here are seven key takeaways from the former CEO’s testimony and cross-examination today:

• Bankman-Fried came to court today with a haircut, a significant gesture for a man whose chaotic mane became part of his signature look as a tech innovator.

• In direct examination by his defense attorney, Mark Cohen, Bankman-Fried once again sought to portray himself as an overwhelmed “math nerd” who had tried to do his best and who had made many mistakes, but did not commit crimes.

• The defense again sought to blame FTX’s collapse on Caroline Ellison, who is the former CEO of Alameda Research (FTX’s sister hedge fund) and Bankman-Fried’s ex-girlfriend. Ellison is the star witness for the prosecution, and has testified that she, Bankman-Fried and others did commit crimes. The defense also appeared to suggest that actions taken by cryptocurrency exchange Binance could be to blame for FTX’s downfall.

• In her cross-examination, Danielle Sassoon grilled Bankman-Fried on whether his messy appearance was part of a deliberate strategy to cultivate his reputation as a young tech genius, something that Ellison, his ex-girlfriend, had previously testified was the case. Bankman-Fried has previously testified that he was simply “busy and lazy”.

• The assistant US attorney’s cross examination also drew extensively on Bankman-Fried’s interviews with a range of media outlets, as well as the contrast between his public statements and his private ones. Among the contrasts Sassoon asked about: the tension between his congressional testimony in support of cryptocurrency regulation, and his private comments like “fuck regulators”. Bankman-Fried admitted: “I said that once.”

• Another comment that drew scrutiny: Bankman-Fried’s private message that people on crypto Twitter were “dumb motherfuckers”. Bankman-Fried said he was only referring to a “subset of them”.

• Sassoon also pressed Bankman-Fried on: what she characterized as his attempts to convince potential investors that FTX was safe; the special relationship between Alameda Research and FTX; and his own involvement and degree of control over Alameda Research.

Bankman-Fried’s media interviews have become key material for prosecutors

As Sam Bankman-Fried faces cross-examination today, one of the major themes has been his many media interviews and other public statements, which the prosecution seems to view as a rich trove of material to use in building a case against him.

In response to questions about his many media statements or reported comments to investors or colleagues, Bankman-Fried has often tried to deflect, saying he does not recall.

Puck’s Teddy Schleifer captured a common response to today’s cross-examination:

The fact that Bankman-Fried’s media comments have, in fact, come back to haunt him is hardly a surprise, as Sean Tuffy, a longtime commentator on the case, noted:

And, of course, prosecutors are also very much using Bankman-Fried’s private statements as well: among the comments he was asked about today in cross-examination was a private message in which he called people on crypto Twitter “dumb motherfuckers”.

He confirmed the comment but said that he was referring only to “a subset of them”.

More questions on Bankman-Fried’s involvement with Alameda Research

In his previous testimony, Sam Bankman-Fried and his defense attorney have attempted to blame FTX’s collapse on his ex-girlfriend Caroline Ellison, who is the former CEO of Alameda Research, the hedge fund associated with FTX. Ellison is the star witness of the prosecution, and has testified directly that she, Bankman-Fried and others had committed crimes, including “fraud, conspiracy to commit fraud and money laundering”.

This afternoon, Danielle Sassoon’s questions have probed Bankman-Fried’s general financial handling of Alameda, specifically his understanding of risk and whether he acted on it.

“Would you agree, Mr Bankman-Fried, that Alameda’s venture investments were too large?” the assistant US attorney said.

“Given that it didn’t hedge them, yes,” Bankman-Fried said.

Was too much of Alameda’s balance sheet venture investments? she asked.

“Uh, same answer,” he replied. Sassoon pressed him to give a complete answer to the question. He repeated his comment on hedging.

Sassoon then grilled Bankman-Fried on hedging. He has repeatedly blamed Ellison for Alameda, and thus FTX’s, financial woes over her not allegedly taking defensive market positions, despite his urging.

“It’s your testimony that you told her to hedge, right?” she asked Bankman-Fried of Ellison.

“You knew in May that the failure to hedge had a negative effect on Alameda’s net asset value?” Sassoon said of spring 2022. He replied in the affirmative.

‘The single biggest way for one person to produce carbon dioxide’

One piece of Sam Bankman-Fried’s testimony today is resonating outside of the cryptocurrency and criminal justice worlds, with climate activist Bill McKibben picking up on Bankman-Fried’s confirmation, during his cross-examination, that he had indeed authorized flying Amazon packages to the Bahamas using private planes. (Bankman-Fried also testified that he did not know how much this cost.)

McKibben tweeted that this might be “the single biggest way for one person to produce carbon dioxide”.

Prosecutor grills Bankman-Fried on whether he thought of himself as a ‘smart guy’

Danielle Sassoon is drilling down on the role of exceptionalism in this case – both in terms of what Alameda was allegedly able to get away with, as well as Bankman-Fried’s self perception.

The assistant US attorney’s line of cross-examination follows Bankman-Fried’s testimony last week, in which he and his defense attorney attempted to portray him as overwhelmed by his rapid success, and as someone who had simply made a lot of “mistakes”.

“You called the shots at FTX?” Sassoon asked.

“I called some of them,” Bankman-Fried said.

“You think of yourself as a smart guy?”

“In many ways, not all ways,” he said.

“And as CEO of FTX, you thought highly of yourself?” she asked.

“I did.”

She pressed him a few moments later about Alameda, which had a $65bn line of credit from FTX.

“And as far as you know, there were no other customers on the exchange with a $65bn line of credit?” she said. “With a billion or more?”

He said he didn’t know of other customers with such credit.

“And Alameda was permitted to use a line of credit to withdraw money from the exchange?” she pressed.

“I now believe that was probably true,” Bankman-Fried said.

Also at issue: could FTX clients do as they pleased?

Previously, Danielle Sassoon had pressed Bankman-Fried on his claim last week that FTX clients could do what they please.

The prosecution has contended that Bankman-Fried let Alameda do whatever it wanted with borrowed funds; he has maintained that it was a customer, and that customers weren’t restricted.

By doing their best to prove that Alameda was permitted different privileges than other FTX clients, prosecutors are hoping to show that Bankman-Fried intentionally committed financial misconduct.

Last week, Bankman-Fried said: “In general, FTX didn’t have restrictions on what people could do with funds that they borrowed. So the answer like for other users was, anything – so long as we believed that the risk was being managed, which is to say, so long as we believe that its assets were greater than its liabilities – we didn’t care if a user withdrew funds and used them to buy muffins, to pay business expenses, to invest or anything else.”

Today, Bankman-Fried suffered a blow in relation to baked goods.

“I want to talk a little bit about muffins,” the assistant US attorney said. “You said they could buy muffins with their money if they wanted, right?”

“Yep,” he said.

“Isn’t it true that FTX had rules about what they could withdraw from their exchange?” she asked.

Did any FTX customer other than Alameda directly receive customer deposits? “I’m not sure,” he said.

“Sitting here today, do you deny that Alameda’s main trading account had a $65bn line of credit that no other customer had?” Sassoon asked.

“No,” Bankman-Fried said.

Prosecutor grills Bankman-Fried about his hair and his tech genius persona

Following a lunch break, Danielle Sassoon has resumed her cross-examination of Bankman-Fried. The assistant US attorney pressed Bankman-Fried about his famously messy hair. Again, his style (or lack thereof) is particularly important to prosecutors, who contend that his eccentric tech whiz persona was all part of a larger ruse.

“You testified didn’t you that you didn’t cut your hair because you were busy and lazy?” Sassoon said.

“That sounds about right,” he replied.

Sassoon pressed Bankman-Fried about a comment he allegedly made describing a haircut as having a negative EV, or estimated value.

Did he tell his colleague, as the the New York Times reported: “‘I honestly think it’s negative EV for me to cut my hair. I think it’s important for people to think I look crazy’”?

“I don’t think I said that in that way,” he said.

“Mr Bankman-Fried, do you recall this article from the New York Times?” Sassoon pressed, referring to the article with the “crazy” comment.

“Vaguely,” Bankman-Fried said.

“Anthony Scaramucci was one of your investors, right?” Sassoon pressed shortly thereafter.

“I think so,” Bankman-Fried said.

Under questioning, Bankman-Fried answered that Scaramucci traveled with him to the Middle East to court investors.

“When you were in the Middle East, did he tell you that you needed to wear a suit and tie to meetings?” she asked.

“Uh, some of them,” he said.

“Do you recall saying that a T-shirt and shorts were part of your brand?” Sassoon said. “Do you recall saying that?”

“I don’t recall it,” he said.

Prosecutor asks Bankman-Fried about his ‘fuck regulators’ comment

Over the course of her cross-examination thus far, Danielle Sassoon’s salvo repeatedly undermined Bankman-Fried’s professed positive intentions toward customers.

Bankman-Fried appeared stilted and potentially unlikeable to jurors, as the assistant US attorney laid the groundwork for arguing that he did whatever he could to make hapless customers feel safe.

“You wanted customers to view FTX as transparent?” Sassoon asked. “You wanted potential customers to view FTX as safe, as compared to other exchanges?”

“You wanted customers to trust you with their money, didn’t you?” she pressed.

“You said publicly while you were CEO of FTX that FTX had reformed how crypto exchanges worked?”

Bankman-Fried responded to many questions with yeps and yeahs. When pressed about specific representations the once media-hungry Bankman-Fried made to the public, he often responded vaguely.

“Do you recall making numerous public statements to the effect that the FTX platform was safe?” Sassoon asked.

“I don’t specifically recall, no,” he said. Presented again with this question, he said: “I remember things around specific parts of the FTX platform that were like that – I don’t remember a general statement about that. I’m not sure there was one.”

Sassoon also pressed Bankman-Fried on his appearance before Congress, where he expressed support of regulation. He wanted customers to think that he favored consumer protections, right? He answered yes.

“But this was really just for PR, wasn’t it?” she asked.

“No,” he said.

“In private you said things like ‘fuck regulators?’” Sassoon shot back.

“I said that once,” Bankman-Fried said.

Danielle Sassoon has launched into pointed questioning about Bankman-Fried’s persona and wooing investors. Bankman-Fried’s ex-girlfriend and former CEO of Alameda Research, Caroline Ellison, has testified that his unkempt boy genius look was an act. For instance, the assistant US attorney said, he believed his trademark messy hair won him higher bonuses at Jane Street, the trading firm where they worked together. He trimmed his mop for the trial.

“Mr Bankman-Fried, would you agree that you know how to tell a good story?” Sassoon asked.

“I don’t know, it depends on what metric you use,” Bankman-Fried said.

“In your role as CEO you participated in pitching the company to potential investors?” Sassoon asked. He answered into the affirmative.

“The purpose of some of the meetings was to persuade them to give you money for your company?” Would he “tell a story about your company,” she asked.

“I would tell what I thought was the truth about the company,” Bankman-Fried said.

“You would talk about for example how FTX was innovative,” she said. He again answered in the affirmative.

“You would tell that story over and over again to all different kinds of potential investors, right?” she said. “And you were good at that?”

Bankman-Fried said he wasn’t sure whether he was good at that. Sassoon pointed out that he had been successful in raising money, indicating that he was good at story-telling.

“Perhaps,” he said. “Perhaps the company was valuable.”

Sam Bankman-Fried’s cross-examination has started

Danielle Sassoon immediately launched into questions about the relationship between FTX and Alameda and Bankman-Fried’s role in this relationship.

“You owned both Alameda and FTX, correct?” asked the assistant US attorney.

“I owned substantial stakes in both,” Bankman-Fried said.

“If Alameda made money, that meant that you made money? And for a period of time you were a billionaire, correct?” Sassoon asked.

“Yep,” answered Bankman-Fried.

Why did Sam Bankman-Fried give so many interviews after the collapse of FTX?

Mark Cohen, Bankman-Fried’s defense attorney, again flirted with the suggestion that Binance’s treatment of FTX led to the exchange’s downfall alongside Alameda Research, its sister hedge fund – an attempt to bolster Bankman-Fried’s argument that the onetime crypto mogul was doing whatever possible to save both companies. Starting on 7 November 2022, Bankman-Fried said he reached out to Binance about possibly acquiring FTX.

“Later that day, they signed a letter of intent to acquire of FTX,” Bankman-Fried said.

“What happened with respect to that?” Cohen said.

“About a day later, [they] backed out of it,” Bankman-Fried said.

“Did you speak to other investors?” Cohen pressed.

“Yes,” said Bankman-Fried.

Bankman-Fried was also asked about his participation in media interviews; the government has contended that he tried to use public comments to misrepresent his companies’ health.

“I felt it was the right thing for me to do—to try to talk about what happened,” he said.

Bankman-Fried’s direct testimony just came to a close. Cross-examination is set to begin soon.

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