FTX fraud trial: Sam Bankman-Fried tells court he thought hedge fund could cover US$8 billion debt

On Monday, FTX founder Sam Bankman-Fried testified in court, stating that he believed his hedge fund, Alameda Research, had sufficient assets to cover a debt of $8 billion to the cryptocurrency exchange. This belief held until just days before both entities collapsed. Bankman-Fried, who is currently on trial for fraud, expressed to the jury that he was concerned and surprised, but not alarmed, when he discovered in October 2022 that Alameda had borrowed $8 billion from deposits made by FTX customers to the exchange.

Prosecutors have accused Bankman-Fried, a graduate of the Massachusetts Institute of Technology, of misappropriating billions of dollars in FTX customer funds to support Alameda, make speculative venture investments, and contribute to US political campaigns. If convicted, he could face decades in prison. Bankman-Fried has pleaded not guilty to two counts of fraud and five counts of conspiracy. He has admitted to making mistakes that led to FTX's bankruptcy on November 11, 2022, which negatively impacted customers and employees. However, he maintains that he did not steal customers' money.

During his testimony, Bankman-Fried attempted to provide alternative explanations for the disappearance of the money. He emphasized that FTX was a 'margin' exchange, where many customers, including Alameda, borrowed money from other users to place bets. Prosecutor Danielle Sassoon questioned Bankman-Fried about testimony given earlier this month by Caroline Ellison, Alameda's former CEO and Bankman-Fried's on-and-off girlfriend. Ellison stated that in June 2022, the fund borrowed money from FTX customers to repay its lenders. Sassoon repeatedly asked Bankman-Fried if using FTX funds to repay lenders constituted margin trading. Bankman-Fried responded that it could be considered margin trading, depending on the specifics.