Sam Bankman-Fried Took Risks at FTX. Will He Bet on His Own Testimony?

Sam Bankman-Fried Took Risks at FTX. Will He Bet on His Own Testimony?
Sam Bankman-Fried Took Risks at FTX. Will He Bet on His Own Testimony?

Summary

The FTX crypto-exchange founder faces a choice on whether to take the stand after former members of his inner circle testified that there was sweeping fraud.

FTX founder Sam Bankman-Fried, known for his appetite for risky bets, is mulling perhaps his biggest gamble yet: testifying in his own defense.

The onetime crypto star, on trial in New York on allegations of fraud, money laundering and other offenses, has spent nearly three weeks watching some of his former close friends and colleagues take the stand and offer what appeared to be damning testimony. Bankman-Fried, they told jurors, knowingly directed and committed an array of criminal acts that led to the collapse of the FTX crypto exchange and the loss of billions of dollars in customer funds.

With federal prosecutors set to wrap up their case this week, Bankman-Fried’s legal team will be searching for some way to change the momentum. While taking the stand in one’s own defense is usually considered too perilous a step to leave to chance, the state of the trial, plus Bankman-Fried’s limited options, point toward testifying as his best shot, lawyers said.

“Under the current state of play, unless Sam does something dramatic, he is almost certainly going to be convicted," said Evan Barr, a former federal prosecutor and partner at the law firm Reed Smith.

Bankman-Fried’s likely hope would be that his testimony in the least wins over a couple of jurors, leading to a hung jury, Barr said.

Lawyers typically advise against taking the stand, sometimes even conducting mock trials and cross-examinations of their clients to demonstrate how self-defense testimony can go badly when facing hostile questions from prosecutors. But for high-profile defendants, the temptation to tell their own story is particularly strong, said Robert S. Frenchman, a defense attorney at the firm Mukasey Frenchman.

“They think that they are convincing, and they are—in most contexts," Frenchman added. “But in the courtroom it brings so much risk."

Since the trial began in early October, a parade of witnesses have testified that Bankman-Fried lied to lenders and investors, doctored balance sheets and spent billions in FTX customer funds on extravagant real estate, risky investments and the repayment of loans. While communicating with Google Docs and disappearing Signal chats, the FTX founder oversaw a company that made illegal political donations, poured more than $1 billion into celebrity endorsements and sponsorships and failed to address a gaping hole in its balance sheet, witnesses told the jury.

Bankman-Fried also has been portrayed as a dismissive and uncaring figure. Caroline Ellison, his former girlfriend and former chief executive officer of FTX’s sister hedge fund, Alameda Research, testified that Bankman-Fried once berated an employee who opposed paying bribes to Chinese officials to obtain access to $1 billion in frozen cryptocurrency. Former FTX Chief Technology Officer Gary Wang testified that Bankman-Fried sought to assure FTX customers their money was safe when he knew it wasn’t.

Nishad Singh, Bankman-Fried’s longtime friend and a former FTX executive, said he felt “betrayed that five years of blood, sweat and tears from me and so many employees, driving something that I thought was a beautiful force for good, had turned out to be so evil."

Those three witnesses, who have already pleaded guilty to crimes and are cooperating with the government, are central to the prosecution’s case. If Bankman-Fried takes the stand, prosecutors would have a chance to press him under oath about their testimony. He wouldn’t have his lawyers to offer advice on how to respond to questions.

“Once the defendant takes the stand, the defense lawyer has no control," said Josh Naftalis, a former prosecutor and partner at the law firm Pallas Partners. “The defendant could say whatever he wants. The cross could go terribly."

Bankman-Fried has said publicly that he made management mistakes but committed no crimes. During opening statements at trial, one of his lawyers said he acted in good faith while trying to steer his companies through a crisis. Bankman-Fried’s legal team has said any possible defense case could begin as soon as Thursday, but it hasn’t said whether it plans to call any witnesses. Mark Botnick, a spokesman for Bankman-Fried, declined to comment.

Bankman-Fried has few, if any, remaining allies with intimate knowledge of FTX whom he could call as a witness to back up his version of events.

While Bankman-Fried’s lawyers showed some inconsistencies in the testimony of the cooperating witnesses, they didn’t appear to score any major blows to undermine them. Testifying would at least give Bankman-Fried an opportunity to explain directly to jurors that he didn’t believe he was committing fraud.

One hint that Bankman-Fried might testify was a recent court filing in which his lawyers said they were trying to get him access to prescribed Adderall medication during the trial day. Without it, he wouldn’t be focused enough to participate meaningfully in presenting his defense, including making the decision to testify, his lawyers said. One of his lawyers subsequently said in court that he is now receiving the dosage they sought from jail officials.

While most defendants choose not to testify, some notable ones have done so in recent years.

One was Theranos’s founder, Elizabeth Holmes, who was on trial to face charges that she ran a yearslong fraud scheme at her blood-testing company. The jury convicted her last year of four of the 11 criminal counts she faced. Jurors said after the trial that they didn’t find her credible. One told The Wall Street Journal that jurors created a star system to judge witnesses’ credibility and rated Holmes a 2 on a scale of 1 to 4, the lowest score of anyone who took the stand.

In Manhattan, after former U.S. Rep. Stephen Buyer testified in his own defense at his insider-trading trial earlier this year, the judge determined that he lied and handed down a longer sentence. “While Defendant Buyer had every right to testify, he was also obligated to tell the truth," wrote U.S. District Judge Richard Berman, who sentenced the Indiana Republican to 22 months in prison.

In Wisconsin state court in 2021, a jury acquitted Kyle Rittenhouse, a teenager charged with killing two people during unrest over a police shooting. Rittenhouse testified that he feared for his life and acted in self-defense.

Still, such a success is rare, said Lara Treinis Gatz, who worked as a federal prosecutor in Brooklyn and Florida. “In 22 years, I’ve only seen one defendant successfully testify," she said. “Usually they walk themselves into a conviction."

Write to Corinne Ramey at corinne.ramey@wsj.com and James Fanelli at james.fanelli@wsj.com

Sam Bankman-Fried Took Risks at FTX. Will He Bet on His Own Testimony?
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Sam Bankman-Fried Took Risks at FTX. Will He Bet on His Own Testimony?
Sam Bankman-Fried Took Risks at FTX. Will He Bet on His Own Testimony?
View Full Image
Sam Bankman-Fried Took Risks at FTX. Will He Bet on His Own Testimony?
Sam Bankman-Fried Took Risks at FTX. Will He Bet on His Own Testimony?
View Full Image
Sam Bankman-Fried Took Risks at FTX. Will He Bet on His Own Testimony?
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