FTX founder Sam Bankman-Fried has decided to testify in his own defense, a legal gamble that sets up a dramatic conclusion to his criminal trial in New York City.
The 31-year-old, who pleaded not guilty to seven counts of fraud and money laundering, has sat silently for the last three weeks while prosecutors argued that he stole billions of customer deposits from FTX, his cryptocurrency exchange.
He could take the stand as early as Thursday, when the trial is scheduled to resume. His attorney told US District Judge Lewis Kaplan on Wednesday that Bankman-Fried would testify.
A new letter from Bankman-Fried’s lawyer to Kaplan also provided some hints of points the defendant may make.
The letter, filed Wednesday, states that Bankman-Fried had no intent to steal from his customers and that he believed FTX customers "would not be harmed at all because the use of customer deposits was permissible and consistent with the rights and obligations comprising the FTX-customer relationship."
In a separate court filing late Wednesday, Bankman-Fried’s attorneys outlined other key testimony they plan to elicit from Bankman-Fried, as well as testimony they hope the judge will permit.
The lawyers said they will question Bankman-Fried about his intentions and beliefs on Nov. 12, the day after he relinquished control of the company and its new management filed for bankruptcy.
According to the attorneys, the testimony would counter claims from FTX co-founder Gary Wang, who testified that Bankman-Fried ignored objections from FTX’s lawyers who wanted him to refrain from sending FTX.com asset transfers to Bahamian authorities.
The lawyers also asked that Bankman-Fried be allowed to testify about his reliance on FTX lawyers who took part in drafting customer terms of service for the exchange, helped implement auto-deletion policies for company communications over Slack and Signal, helped set up bank accounts for Alameda, and drafted loans to company executives.
"Bankman-Fried’s knowledge of the involvement of counsel in these matters is directly relevant to his state of mind and good faith at the time," his lawyers wrote in the letter.
Before trial, Judge Kaplan prohibited Bankman-Fried’s lawyers from mentioning the lawyers’ alleged roles and said he would rule later on the request depending on evidence introduced by the government.
The decision to testify is a high-stakes bet for Bankman-Fried. Once he takes the witness stand, he opens himself up to significant risk because he can be cross-examined "extensively," said Northwestern University criminal law professor Juliet Sorensen.
"Even a sophisticated and confident defendant like Sam Bankman-Fried can do more harm than good to his case by testifying," added white-collar criminal defense attorney and former federal and state prosecutor David Weinstein.
The government, which is expected to rest its case as soon as Thursday, alleges that FTX customers couldn't withdraw their money during the exchange's final days in November 2022 because Bankman-Fried had allowed his crypto trading fund, Alameda Research, to spend it.
That claim was backed up by testimony from friends and former classmates Bankman-Fried hired for top jobs at FTX and Alameda. Some of those executives pleaded guilty to multiple felonies and agreed to testify against him.
While Bankman-Fried’s practice of corresponding through self-deleting messages left prosecutors with less documentary evidence than what actually existed at the time of the alleged fraud, three of his top executives and other former employees walked the jury through a limited number of their preserved messages, spreadsheets, and Google documents.
Prosecutors used the evidence to argue that Alameda Research CEO Caroline Ellison, Wang, and FTX chief engineer Nishad Singh were actively discussing with Bankman-Fried by June 2022 how to plug an $8 billion shortfall at FTX. That was just months before the exchange collapsed in November 2022.
Much of the corroborating testimony provided by government witnesses is an interpretation of what Bankman-Fried said, according to Weinstein.
Therefore, Weinstein added, the statements from witnesses are open to dissection and discrediting by the defense in an attempt to create reasonable doubt about Bankman-Fried's guilt. The defense can try to discredit those accounts using Bankman-Fried's testimony.
To convict Bankman-Fried, all 12 jurors must find that prosecutors proved, beyond a reasonable doubt, what was in Bankman-Fried’s mind. Bankman-Fried’s attorney Mark Cohen said in his opening argument as the trial began that his client believed in "good faith" that Alameda could use FTX’s funds "provided there were sufficient assets for them to be paid back."
"Bankman-Fried has to put on a defense," former federal prosecutor Neama Rahmani said. "A defense that relies on cross-examination and closing arguments only trying to make the case that he didn’t know what was going on or that the victims weren’t really defrauded isn’t going to work because the prosecution is so far ahead."
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