Sam Bankman-Fried, the co-founder of failed cryptocurrency exchange FTX, testified Friday that many mistakes were made that led to the collapse of the business and the disappearance of $8 billion in customer money, but he denied that any fraud occurred.
Taking the stand in his own defense in his criminal fraud trial, the 31-year-old Bankman-Fried explained that FTX’s risk-management structure came unwound, but he attempted to couch that as a failure that resulted because the company had grown too rapidly.
“We thought we might be able to build the best product on the market and move the cryptocurrency system forward,” Bankman-Fried said in response to questions from his lawyer. “It turned out basically the opposite of that. A lot of people got hurt.”
But when asked directly if he had defrauded anyone, Bankman-Fried responded, “No, I did not.”
Bankman-Fried spent much of his time on the stand describing how FTX and its sister hedge-fund investment arm, Alameda Research, were built and how their systems were intertwined.
Federal prosecutors have alleged that Alameda was effectively granted carte blanche to use FTX customer money to make risky bets. One key element was that certain risk-management systems that FTX used to to liquidate customer accounts that had entered into negative territory were disabled for Alameda, allowing it unfettered ability to make high-risk moves.
Bankman-Fried said one of his bigger regrets was not bringing in a more robust legal and compliance team, but he said that because FTX had expanded so quickly, the systems that had been put in place had strained under that growth.
“The risk engine was effectively sagging under that growth and was running behind,” he said.
Bankman-Fried has pleaded not guilty to charges accusing him of diverting billions of dollars of customer money to Alameda in order to make risky investments, buy a $35 million home in the Bahamas, make high-profile political donations and fund a star-studded ad campaign for the company.
Prosecutors have called several of Bankman-Fried’s top executives at FTX and Alameda to testify against him after they pleaded guilty and agreed to cooperate.
Bankman-Fried’s lawyers took the unusual step of having him testify in his own defense in an effort to paint a picture of a company that collapsed under its own weight after growing too quickly and facing adverse market conditions that overwhelmed the crypto industry in mid-2022. While Bankman-Fried has acknowledged making mistakes, his defense has been that there was no criminal intent.