SBF In His Recent Testimony Says He Believed Taking FTX Customer Funds for Alameda “Was Legal”

Former FTX CEO Sam Bankman-Fried (SBF) has claimed in a recent court testimony that he believed it was legal to commingle customer funds.

On Wednesday, former FTX CEO Sam Bankman-Fried took to the court stand to testify on the events surrounding the $32 billion collapse of his FTX empire. Under oath, the disgraced FTX founder revealed several details to assure the court that he did not intentionally defraud his customers.

SBF, among other things, told the court that he assumed it was legal to transfer FTX deposits to proprietary trading firm Alameda Research. The response came during a questioning session in which SBF’s defense attorney Mark Cohen asked if the former founder believed “taking FTX deposits through Alameda was legal.”

The FTX founder affirmed the positive, saying he believed it was legal that “in many circumstances,” Alameda could borrow from FTX for trading or investment purposes.

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Additionally, he claimed that he understood the payment agent agreement that allowed Alameda to receive funds on behalf of FTX as meaning that “Alameda had a right to hold or transfer those assets,” with a “lien that gave Alameda access to the funds if needed.”

SBF further noted that he believed Alameda was allowed to do futures trading on the FTX platform based on the company’s terms of service. He also admitted knowledge of Alameda Research had some unfair advantages against customers and other market makers while trading on the FTX platform. 

As per SBF, in May 2022, he was “aware of some speed bumps in place on Alameda’s account,” which delayed liquidation. However, he claimed that he didn’t know the “exact nature of them [the speed bumps].”

Another matter notably addressed by SBF in the latest hearing involves the operation of North Dimension, a “shadowy entity” that his company had used to receive deposits on behalf of FTX customers. There are allegations that FTX had used North Dimension for money laundering. Yet, the disgraced founder claimed he could not recall details of discussions around North Dimension beyond the fact that it was a more convenient way for users to deposit assets.

Judge Not Impressed by SBF’s Replies

The former FTX founder’s recent testimony was designed to provide the presiding attorney, Judge Lewis Kaplan, with knowledge of whether the legal advice that SBF received during his time at FTX was relevant to the case. However, Judge Kaplan was left more than impressed with the evasive style in which the former FTX CEO answered questions.

In the aftermath of the testimony, Judge Kaplan told the court audience that “the witness [Sam Bankman-Fried] has what I’ll simply call an interesting way of responding to questions.” SBF repeatedly answered questions with a question for more clarification, noting several times that he could not recall the answer to crucial questions about the commingling of customer funds from conversations with FTX lawyers.

The jury handling Sam Bankman-Fried’s case will decide in the “first few days of next week,” according to Judge Kaplan. The former FTX founder had pleaded not guilty to five counts of conspiracy and two counts of fraud he faces under the current criminal case. SBF is also expected to face a second trial on five more counts in a separate court hearing set to begin in March 2024.