The simplest legal advice is to say nothing at all. Sam Bankman-Fried, founder of crypto exchange FTX, who recently took the stand at his own fraud trial, isn’t very good at this. But it is probably not his testimony that will seal his fate. This will be the month-long media tour he embarked on late last year, following the fall of FTX.
Bankman-Fried is permanent trial on seven counts of fraud linked to the collapse of FTX. The exchange went bankrupt after users discovered they could no longer withdraw their funds, worth billions of dollars in total. Money was lacking, The US government saysbecause Bankman-Fried had funneled it to a sister company, Alameda Research, and used it for risky trades, debt repayments, personal loans, political donations, risky bets, and various other purposes.
Bankman-Fried remembers the events differently. On the stand, questioned by his own lawyer, he presented himself as a well-meaning but overworked businessman. He acknowledged that costly mistakes had been made in risk management, but said he had never defrauded anyone. For every potentially incriminating aspect of the relationship between FTX and Alameda – the sharing of bank accounts, the special trading privileges and the multibillion-dollar loans – there was a logical business explanation. The arrangement was perfectly honest, he suggested.
That argument, according to Daniel Richman, a former prosecutor and professor at Columbia Law School, was “the most viable path forward” for the defense, whose options had been “significantly limited” by the strength of the cooperating testimony. But it was a I salute you marie nevertheless, largely because Bankman-Fried, in his series of interviews before his arrest, had given the prosecution length upon length of rope with which to hang him.
Bankman-Fried’s decision to testify was a high risk gambling with significant potential disadvantages. While this gave him the opportunity to relay his own version of events, it exposed him to questioning from the prosecution. If he perjured himself and was later found guilty, he also faced a harsher sentence. But to mount the “good faith” defense, says Paul Tuchmann, a former prosecutor and partner at the Wiggin and Dana law firm, testifying was the only available option. “It is very difficult to present this defense without calling the client to the stand,” he said, when “his loved ones testified to the contrary.”
According to Tuchmann, Bankman-Fried’s lawyers will be satisfied with her performance during the examination-in-chief. The goal was to “present an alternative narrative of events,” he said, and to give Bankman-Fried an opportunity to appeal to the jury’s sympathy, which the defense succeeded in achieving.