In a testimony without the jury present, SBF says he followed the counsel of lawyers to make critical decisions around passing FTX customer money to Alameda

Former crypto billionaire blames lawyers as court hears first snippets of testimony without jury present

Financial Times 2023-10-27

Context & Ripple Effects

The testimony sits alongside evidence that Alameda had special privileges including a large line of credit at FTX. The central issue is therefore not merely who made decisions, but how authority, oversight and customer-fund controls were allocated across the affiliated companies.

Subsequent testimony sharpened the defense’s claimed distance from the books: SBF said he understood only pieces of the companies’ financial position and was surprised by the balance-sheet shortfall. This account makes counsel, executive responsibility and internal reporting competing explanations for the same control failures.

First-order effects

SBF’s defense shifts immediate attention toward whether legal advice was sought, what it covered, and whether following it could bear on his knowledge or intent regarding transfers to Alameda.
The testimony puts FTX’s decision-making chain under closer scrutiny, particularly the distinction between legal sign-off and operational responsibility for customer funds.

Second-order effects

The defense’s reliance on counsel increases the importance of contemporaneous communications and may intensify challenges over whether executives’ emails, messages and internal records align with that account, as later testimony did.
For crypto platforms with affiliated trading firms, the case reinforces the commercial and compliance cost of weak separation between exchange customer assets and proprietary counterparties.

Third-order effects

If this pattern persists across major platform failures, regulators and customers are likely to treat formal segregation, auditable access controls and clearly assigned executive accountability as baseline safeguards rather than internal-policy choices.
The case illustrates a broader governance test for founder-led financial platforms: legal review may document decisions, but it does not by itself substitute for controls that constrain related-party access to customer assets.

The trend: Crypto-market governance is moving toward greater scrutiny of related-party privileges, customer-asset segregation and the accountability of executives who authorize exceptions.

Discussion

@autismcapital @autismcapital on x
Sam on the stand is an unmitigated disaster. For his own sake he can't be allowed to speak to a jury. The prosecution explicitly asked him if he felt he shouldn't embezzle customer assets. His defense objects. The judge sustains. SAM ANSWERS ANYWAYS. His defense says WTF. He says…
@petebrush Pete Brush on x
“The witness has what I'll simply call an interesting way of responding to questions,” Judge Kaplan said at one point as Bankman-Fried sought to have Sassoon rephrase a question in a way that was more to his liking -> https://www.law360.com/...
@eriqgardner Eriq Gardner on x
I have a different view: SBF was VERY good on the witness stand for about 90 minutes. Then the topic got to a topic (auto-liquidation was turned off for Alameda) and prosecutors routed him. Equivalent to a knockdown in the 11th round of a sparring session.
@tiffanyfong_ Tiffany Fong on x
it seems SBF thinks he can deploy the same tactics he used with journalists on the way up: answering a slightly DIFFERENT question than the one asked or diving into a convoluted word salad & hoping no one notices. Judge Kaplan & the prosecutors are NOT having it. 😅
@autismcapital @autismcapital on x
The TLDR of Sam Bankman-Fried's defense is that Sam was simply following the advice of bad legal counsel, specifically Dan Friedberg's bad legal counsel, and in times of crazy rapid growth he was actually a victim of his own success by relying on incorrect information.
@caspiancey H.E. Cas Piancey on x
It is so undeniably over [image]
@cryptadamist @cryptadamist on x
🧵1/Ω Thoughts about SBF's testimony today: 1. I never imagined it would be so grimly satisfying to watch a man hang himself before my eyes. The only disappointing part was that today wasn't in front of the jury.
@innercitypress @innercitypress on x
Judge Kaplan: I'm going beyond my tether here. Part of the problem is that the witness has an interesting way of responding to questions. Cohen: Part of the problem is this type of hearing.
@bitmexresearch @bitmexresearch on x
SBF appears to be pretending not to know what a negative account balance is...
@dylanleclair_ Dylan LeClair on x
imagine being SBF's lawyer [image]
@eleanorterrett Eleanor Terrett on x
🚨NEW on @SBF_FTX trial from me: A busy day of testimony at Sam Bankman-Fried's 13th day of trial in the Southern District of New York on October 26, 2023: The morning (following a 1-week recess) we heard from a final prosecution witness before the government rested at around...
@ashbennington Ash Bennington on x
It's been an extremely odd day at SBF's trial as he testifies — kind of — without a jury in the courtroom https://www.coindesk.com/....
@awice Alex Wice on x
Cohen: According to exhibit L7, how many hours did you play? SBF: 2062 hours. Cohen: And what was your ranking in the game? AUSA: Objection, irrelevant. Kaplan: Overruled. SBF: Bronze 4. Cohen: Let me remind the jury that insanity is a defense against the intent element of fraud.
@ddiamond Dan Diamond on x
“The cross-examination was conducted by Sassoon, who looks like someone who uses ‘summer’ as a verb, and often appears deceptively timid... In her cross, she simply unhinged her jaw and ate Bankman-Fried.” Brutal @mslopatto on SBF finally taking the stand. https://www.theverge.co…
@silvermanjacob Jacob Silverman on x
I just left the courthouse where Sam Bankman-Fried was still testifying without a jury present, giving rambling, vague answers that didn't address the prosecutor's questions. Judge admonished him. Tons of “I can't recall.” Inability to give simple answers. Seemed bad.
@nikhileshde @nikhileshde on x
A lot is going to be said about Sam Bankman-Fried's testimony before a judge today. But I think one of the most interesting moments was when he answered a question despite the judge sustaining an objection against it, leading to his own lawyer sounding kind of exasperated
@jacqmelinek Jacquelyn Melinek on x
To clarify, SBF *did* testify today but it was a hearing testimony between prosecution/defense and others sitting in the court room but without jurors - to determine whether it could be used with them Judge Kaplan said he doesn't think he's ever done anything like this ever lol
@jonathanreidr JonathanReid on x
@amk44139 @molly0xFFF It's because SBF wants to put on evidence to the jury of “advice of counsel” defense; that he only did stuff thinking it was legal because his lawyers said it was. The judge had to hold a hearing today w/o the jury to decide whether to let them do that tomor…
@katiebakes @katiebakes on x
kinda still processing yesterday's SBF trial - I wrote down “strange vibes!” and “weirdest day yet?” and had thoughts about feminine energy that will make me sound deranged if I try to explain in this space (haha “sound")
@lex_node @lex_node on x
it seems like all of SBF's testimony is oriented around advice of counsel defense the problem: I'm pretty sure the lawyers never advised taking customer money from FTX for Alameda to loan it out to buy real estate and invest in Silicon Valley start-ups and bribe politicians
@innercitypress @innercitypress on x
AUSA: What do you mean by that? SBF: I, I... I don't believe I was aware at that time - sorry - I was aware of lines of credit - AUSA: You said speed bumps - what did you mean? SBF: I apologize. This will be a somewhat substantial digression
@cuntycakes123 @cuntycakes123 on x
unfortuantely we recorded the sbf trial pod recap with a former top ftx employee, before the nonsense that has happened in the past 48 hours. still should be a good one out in a few days but we might need to do another one if this keeps up
@leahlibresco Leah Libresco Sargeant on x
Whatever amount of embezzled funds SBF's lawyers are getting paid, it can't feel like enough for this
@janesports Jane McManus on x
Devastating line about Michael Lewis being in the courtroom. “Lewis's general attitude toward Bankman-Fried may be best summed up as ‘I love my gamer son.’”
@innercitypress @innercitypress on x
Judge Kaplan: I'll allow it. AUSA: Were you aware that Dan Friedberg used illegal narcotics — Cohen: Objection! Judge Kaplan: Sustained. Ms. Sassoon! AUSA: May I have a moment? No further questions Cohen: Nothing further. Judge: You're excused, Mr. Bankman-Fried
@edgefills Ven on x
@lex_node The only “legal counsel” present in all the inner circle chats was his dad (who did in fact complete the real estate deals and set up tax advantaged loans...) but I assume turning the spotlight on that is not in his, er, interest...
@poordart @poordart on x
This is so fucking funny Like on what planet does SBF live lmao??
@adamscochran Adam Cochran on x
If your wondering how well SBF's defence is going, here is the main TL;DR: Both the judge AND **his own lawyer** made on the record retorts to SBF for saying stupid stuff. Do you know how bad shit is when your own lawyer calls you out on the stand...
@molly0xfff Molly White on x
@amk44139 he did a portion of his testimony in a hearing in front of the judge without the jury present, bc there were questions about the extent to which some of it is permissible. the real thing will happen tomorrow, but it was QUITE the preview.
@jespow Jesse Powell on x
Even if you thought it was ok to send client deposits to your hedge fund for gambling, why would you? If you did, wouldn't you stop when you realized you were insolvent (not $8b later)? Even if “mark to market” your shitcoins had value, wouldn't you know you can't liquidate them?
@theklineventure @theklineventure on x
Because SBF had a linear utility function of wealth. Thus, no amount of wealth was enough and no risk was not worth taking. Terrifying.
@leomschwartz Leo Schwartz on x
Unsurprisingly, Sam Bankman-Fried is not a good witness under cross-examination. At one point, Judge Kaplan said, quite euphemistically, that “the witness has an interesting way of answering questions.” Luckily for SBF, the jury wasn't present today
@spreekaway @spreekaway on x
vibes from the SBF testimony today remind me of this classic [image]
@coinbureau @coinbureau on x
You know it's going bad when your own lawyer is roasting you on the stand. SBF RIP
@jacqmelinek Jacquelyn Melinek on x
At SBF's hearing yesterday he replied to this question, even though he didn't have to PROSECUTOR: Would [safeguarding] include not embezzling customer assets, for example? DEFENSE: Objection. JUDGE: Sustained. SBF: Yes, it would include that. DEFENSE: You didn't have to answer...
@jackfarley96 Jack Farley on x
Today was first time Sam Bankman-Fried spoke in his trial, here are some of the best moments: Prosecution: was it your view that Alameda Research was allowed to spend FTX customer deposits (per PAA)? SBF: I wouldn't put it that way, but to some degree, YES. 1/7
@bendwalsh Ben Walsh on x
“There are some personality types that are very dangerous to put on the stand: People who are know it alls; People who are temperamental; People who do not understand how the world perceives them. And those all describe Sam Bankman-Fried.” https://open.spotify.com/...
@iamnomad @iamnomad on x
I'm not sure if sbf is being a difficult brainlet as some “I didn't know better” strategy" Or if he thinks he's lex Luther, smarter than everyone in the room so he'll walk away
@nikhileshde @nikhileshde on x
There wasn't a jury today. But AUSA Danielle Sassoon is clearly a savvy interrogator. Lawyers from both parties have tried to inject questions they know won't be answered just to have them. So what happens if Bankman-Fried decides to answer one anyway, in front of a jury?
@innercitypress @innercitypress on x
AUSA: Did you believe you should not embezzle customer assets? Cohen: Objection! Judge: Sustained. SBF: No I did not believe I should do that. Cohen: You don't have to answer after sustained. Haven't you been here for four weeks? SBF: I felt I had to answer it
@innercitypress @innercitypress on x
AUSA: Which attorneys did you discuss this with? SBF: I talked with Ramnik [Arora] about Three Arrows Capital — AUSA: Ramnik Arora is not an attorney. So, no attorneys? The answer is no. AUSA: Let's talk about loans. Where they all documented? SBF: I thought so
@zguz Zack Guzmán on x
Hot take: I actually think SBF did pretty well today on the stand. Crucially, the goal was not how he appeared under cross-examination (the jury wasn't in the room) The jury today was just one man: Judge Kaplan. And the goal was to answer just enough to get Judge Kaplan to let...…
@bitmexresearch @bitmexresearch on x
On Alameda's “allow negative” account feature, it appears in our view as if SBF is being particularly evasive and pretending not to understand the question when repeatedly asked if he knew about this feature. The judge even said that “the witness has what I'll simply call an...
@visionaryreaper @visionaryreaper on x
Idk who this is but it definitely isn't SBF [image]
@jayshams Jacob Shamsian on x
This exchange between a prosecutor and Sam Bankman-Fried... https://www.businessinsider.com/ ... [image]
@innercitypress @innercitypress on x
AUSA: When did you believe Alameda was permitted to borrow funds from FTX? SBF: I believed it was permissible to borrow from assets held as collateral for margin positions... AUSA: Did that include withdrawing assets off the exchange? SBF: With risk analysis
@molly0xfff Molly White on x
Sam Bankman-Fried covered a portion of his testimony without the jury present and it did not go well. Going to hop on livestream when I get back to my hotel in ~20 because I don't know if I can cover that in writing.
@ryansadams Ryan Sξan Adams on x
this is the most SBF thing ever [image]
@zackdabrams Zack Abrams on x
It seems like I'm the only journalist who thought SBF held up... pretty well? He seems like same old SBF — his time since the collapse / in prison hasn't changed him as far as I can tell. Sure, he squirmed, but he didn't seem scared. He even genuinely giggled at one point!
@davidzmorris David Z. Morris on x
Just got out of #ftxtrial. Sam Bankman-Fried took the stand - but only in an evidentiary hearing with no jury present. More details via @protos soon, but: under cross by prosecution, SBF hedged, hesitated, qualified, and obscured. In short, he looked incredibly guilty.
@innercitypress @innercitypress on x
Without jury: SBF's lawyer Cohen: The defense calls Sam Bankman-Fried. AUSA Sassoon: What's your practice on objections in a hearing like this? Judge Kaplan: I haven't had a hearing like this in some time. Go ahead.
@innercitypress @innercitypress on x
[US v SBF without jury present] Cohen: Why did you sign for both FTX and Alameda? SBF: I was CEO of both at that time. FTX didn't have a bank account. Cohen: Did you believe taking FTX deposits through Alameda was legal? SBF: I did
@innercitypress @innercitypress on x
That's where it stands - unless Sam reconsiders overnight in the MDC & decides not to repeat this performance in front of the jury. The time estimates given before the hearing would end it on Friday. But if cross examination goes this way, it would go into Monday
@adamscochran Adam Cochran on x
@icebergy_ Yes, because it's incredibly hard to prove knowledge, and it shifts the crime from fraud to gross negligence (much less sentence) due to the absence of a ‘mens rea’ It's a very good legal path for them to take, and the prosecution has to work really hard to fight it. W…
@technology @technology on x
Sam Bankman-Fried acknowledged that Alameda was being used as a payment processor for FTX. He previously stated in an interview with Bloomberg in August 2022 that the two companies were completely separate entities Follow our free to read live blog: https://www.bloomberg.com/...
@leomschwartz Leo Schwartz on x
For the record, he was in the friends and family section
@autismcapital @autismcapital on x
Sam blames his memory for not answering some questions. He must need more adderall...you know...for the memory.
@autismcapital @autismcapital on x
What's currently happening at Sam's private hearing with Judge Kaplan is exactly why Kaplan forced him to do a hearing prior to being allowed to speak with a jury; Kaplan did not want to waste the jury's time. Every time Sam is asked a question, he gives a non-answer unrelated to…
@mikeburgersburg @mikeburgersburg on x
This judge is fantastic. Get this man a TV show! [image]
@autismcapital @autismcapital on x
The prosecution is really hammering down on the Signal with disappearing messages thing. Literally every single person in tech we know uses Signal with disappearing messages. While it's obvious why Sam was using that, it's pretty common and considered best practices to do that.
@autismcapital @autismcapital on x
Judge Kaplan is getting pissed at Sam's deflections and non-answers. He says that the witness has an “interesting” way of responding to questions. Sam's defense says that the problem is the format of this hearing. He wants Sam to be able to speak to a jury. Then it can get real.
@leomschwartz Leo Schwartz on x
The loudest gasp in the courtroom today came when AUSA Danielle Sassoon, not holding back even without the jury present, asked whether Sam Bankman-Fried's definition of safeguarding funds would include “not embezzling customer assets.” The objection was sustained
@allnick @allnick on x
You should have seen how eager SBF was... When we returned from lunch he was proactively sitting in the witness stand before being sworn in. He was basically giddy 😂
@autismcapital @autismcapital on x
We are not exaggerating when we say literally every other answer Sam says is “Dan Friedberg.”
@leomschwartz Leo Schwartz on x
This is the biggest question going into tomorrow — given how today's testimony went even with limited ammunition from prosecutors, it seems disastrous to allow SBF to undergo cross-examination in the presence of a jury
@silvermanjacob Jacob Silverman on x
SBF actually began an answer with “I'm not a lawyer but...” Dude, we know. You're charged with seven felonies.
@mikeburgersburg @mikeburgersburg on x
SBF pointing the finger for everything at poker star Dan Friedburg
@adamscochran Adam Cochran on x
SBF taking the stand to throw everyone under the bus. Trying to act like he was just a puppet that signed papers and wasn't aware of what was going on around him. He should really just be pleading the 5th instead of trying to make a mockery of the court.
@adamscochran Adam Cochran on x
Once again, SBF is trying to frame the argument as gross negligence rather than fraud as it carries a lesser sentence. But he has blatantly lied in court to do it. Because when asked on Twitter he would tell you they didn't borrow your assets. Not that he thought it was ok.
@dawn_kopecki Dawn Kopecki on x
Sam Bankman-Fried @SBF_FTX just took the witness stand in Manhattan court. In an unusual move, the judge sent the jury home and allowed SBF to testify before him alone, deciding to rule later on what the jury will hear or not. We have @CBerthelsen1 in the courtroom now....
@autismcapital @autismcapital on x
Basically the TLDR of why Judge Kaplan sent the FTX jury home is to avoid Sam Bankman-Fried shenanigans during the trial. Kaplan knows that Sam will try to overshare and sway the jury and say unnecessary and inappropriate things so he is doing a private hearing, today, without...
@inkbacker Nick Baker on x
lil bit of courtroom drama with SBF!
@autismcapital @autismcapital on x
Sam Bankman-Fried is testifying without a jury present. Judge Kaplan sent the jury home because he says there's some information they should not hear.
@watcherguru @watcherguru on x
JUST IN: Sam Bankman-Fried says he believed it was legal to take FTX customer funds through Alameda Research.
@adamscochran Adam Cochran on x
Starting with a “we were hacked” defense right off the bat despite no prior mention lol
@autismcapital @autismcapital on x
SBF testifying that Signal with disappearing messages was integral to the business is hilarious on multidimensional levels with hindsight.
@innercitypress @innercitypress on x
OK - SBF trial, day of defense case and, it's said, Bankman-Fried on the stand. Inner City Press is covering the case https://innercitypress.com/... & @SubstackInc https://matthewrussellleeicp.substack.c om/ ... & exhibits https://www.patreon.com/... and will live tweet, thread b…
r/Buttcoin r on reddit
SBF finally took the stand and it was a GLORIOUS sh*tshow!
r/ethtrader r on reddit
Sam Bankman-Fried could take stand at fraud trial over FTX collapse

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