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Sam Bankman-Fried said he believed he was complying with legal advice when he allowed his hedge fund Alameda to borrow customer funds from his FTX exchange, in a preview of the former tycoon’s planned defence in the criminal trial over the collapse of his cryptocurrency empire.
Taking the witness stand in Manhattan federal court on Thursday afternoon, Bankman-Fried, 31, repeatedly asserted that he had followed the counsel of FTX lawyer Dan Friedberg and Californian law firm Fenwick & West when deciding on whether to retain internal documents, funnel venture capital investments via the private banks of executives, or allow Alameda to process FTX customer payments.
The testimony was heard without the jury present. Judge Lewis Kaplan, who is overseeing the case, will later decide what evidence can be repeated in front of jurors when they return on Friday.
Bankman-Fried, who was wearing a grey suit and a purple tie, spoke softly and deliberately as he said Friedberg had helped draft a document retention policy to determine which communications could take place via ephemeral apps such as Signal, and which needed to be preserved.
He said there were “meetings [with internal and external lawyers] to decide which channels would fall into which categories”, and that the only interactions that were set to auto-delete were “informal chatter, for conversation”.
Prosecutors have insinuated that Bankman-Fried ordered staff to auto-delete sensitive messages so as to hide them from law enforcement authorities.
Kaplan expressed scepticism over the strength of Bankman-Fried’s contention, commenting: “One thought that readily occurs — where is this policy?”
Bankman-Fried also testified that he believed he managed FTX in accordance with the exchange’s terms of service, and that those terms allowed Alameda to borrow FTX customer money “in many circumstances”.
The former entrepreneur stands accused of defrauding customers by dipping into $10bn of their deposits without permission, leaving an $8bn hole in FTX’s balance sheet at the time of its collapse last November.
He faces the prospect of a lifetime behind bars if convicted on charges including wire fraud and money laundering. He has pleaded not guilty.
Fenwick & West did not immediately respond to a request for comment. A lawyer for Friedberg, who was sued by the FTX debtors in June over his role as an alleged “fixer” for Bankman-Fried and his associates, also did not immediately respond.
The tentative testimony from Bankman-Fried comes after a New York jury heard several days’ worth of damning testimony from his former colleagues and friends, as well from his ex-girlfriend Caroline Ellison, who pleaded guilty last year and agreed to co-operate with the government.
Defence attorneys tend to advise clients against testifying, fearful of direct questioning from prosecutors.
But Bankman-Fried has been keen to present his side of the story ever since FTX collapsed last November with a multibillion-dollar hole in its balance sheet. He had granted multiple interviews to journalists and the author Michael Lewis from his parents’ Californian home before he was jailed for breaching his bail conditions this summer.
Earlier on Thursday, the jury heard from the government’s final witness — an FBI agent who testified that several Signal group chats within FTX had been set to auto-delete, before hearing from two defence witnesses, including a Bahamian lawyer for Bankman-Fried and a coding expert.
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