Former FTX CEO Testifies in Court Regarding Alleged Misuse of Customer Funds
Summary:
Ex-FTX CEO Sam Bankman-Fried testified under oath in a New York courtroom regarding allegations of using customer funds without their knowledge for investments. Questioned about his use of messaging app Signal and data retention at FTX, he claimed all actions adhered to company policies. There were inquiries about the legality of channeling FTX deposits through Alameda, a practice Bankman-Fried deemed lawful. He denied all seven charges in his criminal trial and expects to face five more in a second trial set for March 2024. The case highlights concerns regarding the reliability of cryptocurrency exchanges post-FTX's collapse.
Sam Bankman-Fried, the previous CEO of FTX, provided sworn testimony in a New York courtroom sans the presence of a typical 12-person jury. This long-awaited testimony, given on October 26, occurred in a court hearing where defense attorney Mark Cohen grilled the ex-CEO of FTX about his use of Signal, the messaging application, and about data preservation at the cryptocurrency exchange. Bankman-Fried insisted that he adhered to company policies concerning records and none of the platforms set for automatic deletion were decision making avenues.
When queried by Cohen about why he disabled the auto-delete feature, Bankman-Fried stated it was due to regulatory advise. The attorney further questioned Bankman-Fried regarding North Dimension's creation, a so-called "grey area entity" implicated in money laundering from the crypto business via Alameda Research. The ex-FTX head claimed that the former chief regulatory officer, Dan Friedberg, provided him with the necessary paperwork to establish the firm which he signed without hesitation.
Cohen asked Bankman-Fried if he thought it was lawful to channel FTX deposits through Alameda, to which he responded affirmatively, explaining, "At that point in time, I was the CEO of both FTX and Alameda, and FTX didn't possess a bank account."
The key point of dispute in the United States government's case against Bankman-Fried involves claims that he used the cryptocurrency exchange's customer funds without their awareness to make Alameda investments. He declared under oath that he consulted with Friedberg, law firm Fenwick & West, and previous FTX general counsel Can Sun on these alleged investments.
Bankman-Fried believed that the use of customer funds was confined to futures trading, according to the language in FTX's terms of service, with Alameda having the necessary permissions to do so.
Bankman-Fried marks the final witness to testify after three continuous weeks revealing the supposed funds' intertwined operations between FTX and Alameda. The jury is expected to reach a verdict "in the early part of next week", after listening to a portion of the former FTX CEO's testimony, according to Kaplan.
Bankman-Fried has denied all seven charges in his criminal trial and anticipates facing an additional five charges in a second trial slated for March 2024. This case raises questions about the trustworthiness of cryptocurrency exchanges following FTX's downfall.
Published At
10/26/2023 7:04:00 PM
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