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SBF Trial – 26 October 2023 - SBF Testimony (without jury)
Today SBF testified without the jury present. This appears to be a practice for the judge, to help judge Kaplan decide what the jury should and should not be allowed to hear. SBF will testify for real tomorrow, (unless he changes his mind overnight). The judge has not told the jury that this is going on.
THE COURT: There is something that has to happen at this point in the trial that will take a couple of hours, and that is not something that concerns you. In consequence, you've got the rest of the day off. We'll see you at 9:30 tomorrow morning.
THE COURT: Now just so that everyone who has taken the trouble to get here today understands what is going on and why, there are a number of areas of potential testimony from Mr. Bankman-Fried that the defense wishes to elicit. The government asserts that I shouldn't hear any of it, or, to be more precise, that the jury shouldn't hear any of it. And despite a great deal of effort on the part of everybody concerned, the amount of information that I have to date is, in my judgment, inadequate to resolve the admissibility of this testimony, in significant part because it's not sufficiently detailed or specific. I have the authority under the rules of evidence to conduct a hearing so that the defendant can put in the evidence for my ears alone, following which I'll be in a position to rule one way or another as to whether the evidence is admissible before the jury
Today SBF testified without the jury present. This appears to be a practice for the judge, to help judge Kaplan decide what the jury should and should not be allowed to hear. SBF will testify for real tomorrow, (unless he changes his mind overnight). The judge has not told the jury that this is going on.
THE COURT: There is something that has to happen at this point in the trial that will take a couple of hours, and that is not something that concerns you. In consequence, you've got the rest of the day off. We'll see you at 9:30 tomorrow morning.
THE COURT: Now just so that everyone who has taken the trouble to get here today understands what is going on and why, there are a number of areas of potential testimony from Mr. Bankman-Fried that the defense wishes to elicit. The government asserts that I shouldn't hear any of it, or, to be more precise, that the jury shouldn't hear any of it. And despite a great deal of effort on the part of everybody concerned, the amount of information that I have to date is, in my judgment, inadequate to resolve the admissibility of this testimony, in significant part because it's not sufficiently detailed or specific. I have the authority under the rules of evidence to conduct a hearing so that the defendant can put in the evidence for my ears alone, following which I'll be in a position to rule one way or another as to whether the evidence is admissible before the jury
CROSS EXAMINATION
Cross examination began with discussions about the auto-deletion of Signal messages and document retention policies
Q. Is it your recollection that the policy expressly authorized deleting company communications that did not fall within the regulated categories?
A. That is my memory, yes.
Q. Where is this written policy?
A. I'm not sure if my answer is admissible.
THE COURT: Don't worry about that. You worry about Blockchain explorers. I will worry about what's admissible.
A. When I was a member of the company, I remember interacting with the policy and discussing it. As part of this case I think we have been unable to serve the subpoenas we have requested asking for it.
…
Q. I think you said you mentioned in passing that you set this auto-delete feature on Signal. Did you ever discuss with a lawyer whether that was covered by this policy?
A. Yeah.
Q. With who?
A. With Dan Friedberg.
Q. When?
A. This was around the time that he was discussing the auto deletion and data-retention policy with us, which my memory was late 2021.
Q. So which is it? Did you just mention that you were putting on this setting or did you seek approval from Dan Friedberg?
A. I think -- I apologize. I may have misinterpreted. I interpreted your early question as what conversations I had contemporaneous with when I originally changed that setting, which my memory it was prior to the discussions around the auto-deletion policy. So there is no formal policy around it when I had initially changed the default settings on my Signal
app to one week, but we did have formal discussions about it in connection with the data-retention policy which happened some number of months later.
Q. Just to make sure I follow your testimony, you implemented this setting and later this policy was put into place?
A. I believe that is correct, yes.
…
Q. Is that the document retention policy you've been talking about?
A. No, this is not.
Q. And does it resemble in substance what was in the retention policy you've been talking about?
A. No, it does not.
Q. So the supposed policy you've been testifying about, you have no record of it sitting here today.
A. That's correct. We have requested it numerous times.
Cross examination began with discussions about the auto-deletion of Signal messages and document retention policies
Q. Is it your recollection that the policy expressly authorized deleting company communications that did not fall within the regulated categories?
A. That is my memory, yes.
Q. Where is this written policy?
A. I'm not sure if my answer is admissible.
THE COURT: Don't worry about that. You worry about Blockchain explorers. I will worry about what's admissible.
A. When I was a member of the company, I remember interacting with the policy and discussing it. As part of this case I think we have been unable to serve the subpoenas we have requested asking for it.
…
Q. I think you said you mentioned in passing that you set this auto-delete feature on Signal. Did you ever discuss with a lawyer whether that was covered by this policy?
A. Yeah.
Q. With who?
A. With Dan Friedberg.
Q. When?
A. This was around the time that he was discussing the auto deletion and data-retention policy with us, which my memory was late 2021.
Q. So which is it? Did you just mention that you were putting on this setting or did you seek approval from Dan Friedberg?
A. I think -- I apologize. I may have misinterpreted. I interpreted your early question as what conversations I had contemporaneous with when I originally changed that setting, which my memory it was prior to the discussions around the auto-deletion policy. So there is no formal policy around it when I had initially changed the default settings on my Signal
app to one week, but we did have formal discussions about it in connection with the data-retention policy which happened some number of months later.
Q. Just to make sure I follow your testimony, you implemented this setting and later this policy was put into place?
A. I believe that is correct, yes.
…
Q. Is that the document retention policy you've been talking about?
A. No, this is not.
Q. And does it resemble in substance what was in the retention policy you've been talking about?
A. No, it does not.
Q. So the supposed policy you've been testifying about, you have no record of it sitting here today.
A. That's correct. We have requested it numerous times.
SBF mentions in late 2021 that “Trabucco was slowly drifting effectively towards retirement”
A. I think late 2021. I don't remember the exact time.
Q. And what was your involvement in Alameda at that point?
A. So this was after the CEO role had transitioned to Caroline Ellison and Sam Trabucco. It was during a period where it was, you know——Trabucco was slowly drifting effectively towards retirement, so it was primarily Caroline. I was involved in a few areas of Alameda. I was particularly involved in venture-related investments, and later on I became involved in
hedging decisions. I was not on a day-to-day level involved in other topics that I can recall——there——there may well be one or two I'm forgetting there——although I would get periodic updates from Caroline about it and she would sometimes elicit input from me.
A. I think late 2021. I don't remember the exact time.
Q. And what was your involvement in Alameda at that point?
A. So this was after the CEO role had transitioned to Caroline Ellison and Sam Trabucco. It was during a period where it was, you know——Trabucco was slowly drifting effectively towards retirement, so it was primarily Caroline. I was involved in a few areas of Alameda. I was particularly involved in venture-related investments, and later on I became involved in
hedging decisions. I was not on a day-to-day level involved in other topics that I can recall——there——there may well be one or two I'm forgetting there——although I would get periodic updates from Caroline about it and she would sometimes elicit input from me.
North Dimension Bank, blaming Dan Friedberg for several failings and SBF repeating the phrase “I don't recall”
Q. First of all, whose idea was it to incorporate North Dimension?
A. It was communicated to me by Dan Friedberg. I know there were others involved. I'm not sure whose idea originally North Dimension in particular was.
Q. You've described a couple things now where you've said that something was Dan Friedberg's idea.
A. Mm-hmm.
Q. Can you explain generally the relationship between you and Dan Friedberg, and generally, were you giving him direction or was he just popping ideas on your desk?
A. There were some of each. That relationship, it changed a little bit over different periods of time. I can just give an overview. If there's a specific time period you want me to zoom in on, I'm happy to do that as well.
Q. Let's focus first on North Dimension. Did you give Dan Friedberg any direction about North Dimension?
A. I don't recall giving specific direction to him about it. Yeah, no, I don't recall giving a direction to him about it.
Q. And why the name North Dimension for this entity?
A. I honestly don't know where the name came from.
Q. So is it your testimony you didn't come up with the name?
A. That is correct.
…
Q. And is it your testimony that as CEO of Alameda, you had no insight into why Alameda stopped receiving customer funds into a bank account in Alameda's name?
A. I——it is correct that I do not know why it incorporated North Dimension. It wasn't a project that I was driving, although it was one that I was made aware of. I had contextual clues that I could try to draw on, but in general, I was——even for companies that I was fully running day to day, there were a lot of things that happened that I was either not informed of
or after the fact sort of summarily informed of, and at that point with Alameda, I was still CEO, I was still involved sometimes in the day-to-day operations, but I often was not. I was, you know, about halfway, I would say, through transitioning from running Alameda day to day to running FTX
day to day.
…
Q. What, if anything, did you discuss with Dan Friedberg about the purpose of this bank account?
A. I'm not sure I remember having discussions before or at the time about the purpose of the bank account. I know that there had been——yeah. Sorry. I'm not sure that I did. I'm not sure that I did entirely. I just don't recall any in particular.
…
A. Whose decision was it to roll it out for FTX or to open the bank account or——
Q. To use North Dimension to receive FTX customer money.
A. I'm actually not entirely sure whose decision it originally was. I think Nishad was the one who added it to the code base, but presumably that was after conversations with other people. I'm not sure who sort of made that decision initially.
…
Q. So what conversations, if any, did you have with lawyers about the permissibility of using North Dimension to receive FTX customer funds?
A. We had conversations around Alameda generally acting as a payment processor, as a payment agent for FTX, which were, you know, memorialized in a payment agent agreement, and I had conversations with that at a high level with lawyers, and I was at least aware of conversations that were happening with the ccountants and auditors around that as well. I know that there were lawyers who were, I mean, involved in and driving the incorporation and usage of North Dimension as part of this payment agent. I'm not sure if I initiated a specific conversation after seeing it around that, the——it was initiated with me. But yeah.
THE COURT: So I take it the answer is you don't remember; is that about it?
THE WITNESS: I don't remember that specifically. I do know that lawyers were involved in that decision. I don't know that I specifically
THE COURT: No. The question was about conversations you had.
THE WITNESS: That's right.
THE COURT: So the answer is you don't remember; is that right or not?
THE WITNESS: Sorry. I want to make sure I'm answering the right question. Conversations that I had with lawyers around——
THE COURT: The permissibility of using North Dimension to receive FTX customer funds. That was the question.
THE WITNESS: Right. No, I——not unless you count conversations I had around the permissibility of using Alameda as a payment agent, and North Dimension was a wholly-owned subsidiary of Alameda. I don't know that I had conversations around the permissibility of North Dimension in particular.
THE COURT: Listen to the question and answer the question directly.
…
Q. And did you read in one of those reports that Friedberg says he could not recall who asked for North Dimension to be formed but it would have been either you or Andy Croghan?
A. I don't specifically recall reading that, no, but it very well may have been in there.
Q. Is it possible that you asked Dan Friedberg to form North Dimension?
A. I don't recall doing so.
…
Q. Do you recall reading in the report that Friedberg said he was not part of any discussion of FTX customer funds depositing into Alameda Research accounts?
A. I remember hearing that that had been there.
…
Q. So I'm not asking you that. I'm asking whether, according to you, Dan Friedberg was in fact part of discussions of FTX customer funds depositing into Alameda Research accounts.
A. So just to clarify, I do think that Dan Friedberg——I do remember Dan Friedberg being involved in discussions relating to Alameda being——Alameda bank accounts being used as a way to accept deposits from customers of FTX.
Q. First of all, whose idea was it to incorporate North Dimension?
A. It was communicated to me by Dan Friedberg. I know there were others involved. I'm not sure whose idea originally North Dimension in particular was.
Q. You've described a couple things now where you've said that something was Dan Friedberg's idea.
A. Mm-hmm.
Q. Can you explain generally the relationship between you and Dan Friedberg, and generally, were you giving him direction or was he just popping ideas on your desk?
A. There were some of each. That relationship, it changed a little bit over different periods of time. I can just give an overview. If there's a specific time period you want me to zoom in on, I'm happy to do that as well.
Q. Let's focus first on North Dimension. Did you give Dan Friedberg any direction about North Dimension?
A. I don't recall giving specific direction to him about it. Yeah, no, I don't recall giving a direction to him about it.
Q. And why the name North Dimension for this entity?
A. I honestly don't know where the name came from.
Q. So is it your testimony you didn't come up with the name?
A. That is correct.
…
Q. And is it your testimony that as CEO of Alameda, you had no insight into why Alameda stopped receiving customer funds into a bank account in Alameda's name?
A. I——it is correct that I do not know why it incorporated North Dimension. It wasn't a project that I was driving, although it was one that I was made aware of. I had contextual clues that I could try to draw on, but in general, I was——even for companies that I was fully running day to day, there were a lot of things that happened that I was either not informed of
or after the fact sort of summarily informed of, and at that point with Alameda, I was still CEO, I was still involved sometimes in the day-to-day operations, but I often was not. I was, you know, about halfway, I would say, through transitioning from running Alameda day to day to running FTX
day to day.
…
Q. What, if anything, did you discuss with Dan Friedberg about the purpose of this bank account?
A. I'm not sure I remember having discussions before or at the time about the purpose of the bank account. I know that there had been——yeah. Sorry. I'm not sure that I did. I'm not sure that I did entirely. I just don't recall any in particular.
…
A. Whose decision was it to roll it out for FTX or to open the bank account or——
Q. To use North Dimension to receive FTX customer money.
A. I'm actually not entirely sure whose decision it originally was. I think Nishad was the one who added it to the code base, but presumably that was after conversations with other people. I'm not sure who sort of made that decision initially.
…
Q. So what conversations, if any, did you have with lawyers about the permissibility of using North Dimension to receive FTX customer funds?
A. We had conversations around Alameda generally acting as a payment processor, as a payment agent for FTX, which were, you know, memorialized in a payment agent agreement, and I had conversations with that at a high level with lawyers, and I was at least aware of conversations that were happening with the ccountants and auditors around that as well. I know that there were lawyers who were, I mean, involved in and driving the incorporation and usage of North Dimension as part of this payment agent. I'm not sure if I initiated a specific conversation after seeing it around that, the——it was initiated with me. But yeah.
THE COURT: So I take it the answer is you don't remember; is that about it?
THE WITNESS: I don't remember that specifically. I do know that lawyers were involved in that decision. I don't know that I specifically
THE COURT: No. The question was about conversations you had.
THE WITNESS: That's right.
THE COURT: So the answer is you don't remember; is that right or not?
THE WITNESS: Sorry. I want to make sure I'm answering the right question. Conversations that I had with lawyers around——
THE COURT: The permissibility of using North Dimension to receive FTX customer funds. That was the question.
THE WITNESS: Right. No, I——not unless you count conversations I had around the permissibility of using Alameda as a payment agent, and North Dimension was a wholly-owned subsidiary of Alameda. I don't know that I had conversations around the permissibility of North Dimension in particular.
THE COURT: Listen to the question and answer the question directly.
…
Q. And did you read in one of those reports that Friedberg says he could not recall who asked for North Dimension to be formed but it would have been either you or Andy Croghan?
A. I don't specifically recall reading that, no, but it very well may have been in there.
Q. Is it possible that you asked Dan Friedberg to form North Dimension?
A. I don't recall doing so.
…
Q. Do you recall reading in the report that Friedberg said he was not part of any discussion of FTX customer funds depositing into Alameda Research accounts?
A. I remember hearing that that had been there.
…
Q. So I'm not asking you that. I'm asking whether, according to you, Dan Friedberg was in fact part of discussions of FTX customer funds depositing into Alameda Research accounts.
A. So just to clarify, I do think that Dan Friedberg——I do remember Dan Friedberg being involved in discussions relating to Alameda being——Alameda bank accounts being used as a way to accept deposits from customers of FTX.
SBF says that with respect to the North Dimension deposits, the payment agent agreement does allow Alameda to spend FTX customer deposits!
Q. And the payment agent agreement that we looked at during your direct testimony, does it say anything about Alameda being authorized to spend FTX customer funds?
A. So I believe that it authorizes——that it gives a fair bit of discretion to Alameda about what it——how it acts in general, clarifying that it has an obligation upon demand to FTX of that amount of money, but not specifying that it has to be——what has to——what Alameda has to do with any of it, of its assets. That is my understanding of it.
Q. So is it your understanding that under the agreement Alameda was permitted to spend FTX customer deposits?
A. I wouldn't phrase it that way. But I think that the answer to the question I understand you to be trying to ask is yes.
Sam was the repeatedly asked to point to the part of the agreement that authorized Alameda to spend the FTX customer funds. Sam eventually responded:
A. So I——there is the line that the——that FTX may, without notice or demand, without notice to or demand on provider, transfer any crypto or cash asset on hand to the provider, to Alameda, to be held and/or transferred by provider. I would have interpreted that as saying that Alameda had the right to hold or transfer those assets and that ——the——what these represented was, in the return section, a secured liability, and that it was secured, as described in the lien section, by a lien against the provider, in this case Alameda, which would implicitly have access to all of Alameda's assets, which is how I would imagine describing a contractual loan obligation, effectively.
Q. Did any lawyer at FTX tell you that any language in this agreement meant that Alameda could spend FTX customer deposits?
A. I don't know that I had contemporaneous conversations with lawyers about exactly what this agreement meant.
…
Q. As far as you know, was this agreement ever disclosed to the public?
A. I'm not sure if it was.
Q. And the payment agent agreement that we looked at during your direct testimony, does it say anything about Alameda being authorized to spend FTX customer funds?
A. So I believe that it authorizes——that it gives a fair bit of discretion to Alameda about what it——how it acts in general, clarifying that it has an obligation upon demand to FTX of that amount of money, but not specifying that it has to be——what has to——what Alameda has to do with any of it, of its assets. That is my understanding of it.
Q. So is it your understanding that under the agreement Alameda was permitted to spend FTX customer deposits?
A. I wouldn't phrase it that way. But I think that the answer to the question I understand you to be trying to ask is yes.
Sam was the repeatedly asked to point to the part of the agreement that authorized Alameda to spend the FTX customer funds. Sam eventually responded:
A. So I——there is the line that the——that FTX may, without notice or demand, without notice to or demand on provider, transfer any crypto or cash asset on hand to the provider, to Alameda, to be held and/or transferred by provider. I would have interpreted that as saying that Alameda had the right to hold or transfer those assets and that ——the——what these represented was, in the return section, a secured liability, and that it was secured, as described in the lien section, by a lien against the provider, in this case Alameda, which would implicitly have access to all of Alameda's assets, which is how I would imagine describing a contractual loan obligation, effectively.
Q. Did any lawyer at FTX tell you that any language in this agreement meant that Alameda could spend FTX customer deposits?
A. I don't know that I had contemporaneous conversations with lawyers about exactly what this agreement meant.
…
Q. As far as you know, was this agreement ever disclosed to the public?
A. I'm not sure if it was.
On Alameda’s “allow negative” account feature, it appears in our view as if SBF is being particularly evasive and pretending not to understand the question when repeatedly asked if he knew about this feature. The judge even said that “the witness has what I'll simply call an interesting way of responding to questions for the moment”.
Q. So "Allow Negative," in May 2022, you were not aware of it by name?
A. I don't recall being aware of it then, no.
…
Q. Okay. And you mentioned that at this time you were not aware of "Allow Negative" by name.
A. Yeah.
Q. So I just want to clarify.
A. Yeah.
Q. Were you aware that Alameda could go negative regardless of the name for that feature?
A. I was aware that Alameda and many other accounts on the exchange, in fact most by volume, could go negative in a particular asset. That was a core property of FTX as an exchange. I'm not——but I——I'm sorry. I'm probably not
addressing your——your question.
…
Q. Were you aware at that time in May of 2022 that Alameda could have an overall negative balance on FTX?
A. By an overall negative balance, are you referring to a negative balance, a negative net asset value, or are you
talking about a negative balance in a particular asset, or are you——sorry. I just want to make sure I understand what you
mean by overall.
Q. That if you added up all the accounts, they could have a overall negative balance.
A. And adding up all assets, not talking about particular assets; is that correct?
Q. That's correct.
A. Okay. My understanding was that we were ensuring that Alameda's——at that time my understanding was that we were ensuring Alameda had a positive overall net asset value on FTX. I was not sure whether that was enforced into a code base or whether that was something that we inspected to confirm it was true. It was something that I had discussed at various points with Gary and others, and had checked that Alameda's overall net asset value on the platform had remained positive.
Q. So when you said that you were not aware of "Allow Negative" by name but you had some understanding of it, tell me what you meant by that.
A. So I'm not sure that——I apologize. I might be misunderstanding what the "Allow Negative" feature did. I——I——I think I've given you what my understanding was, but I suspect I might be wrong about what it——what it did.
Q. Well, let's talk about Alameda's main trading account. Are you aware that that main trading account could go negative?
A. And so to clarify, you're talking about info@, the main account, or the entire user?
Q. The info@ main account.
A. So account No. 9.
Q. Yes.
A. And by "go negative," you're talking about negative in a particular coin or negative net asset value?
Q. Just have a negative balance, Mr. Bankman-Fried.
A. Sorry. I——
Q. Let me make this easier for you.
…
THE COURT: Well, look, I'm going to allow this. I understand your point.
I've gotten beyond my tether here. I'm going to allow this. I am going to acknowledge the point you make, but all things are relative, and there is a good deal to what the government says also, and part of the problem is that the witness has what I'll simply call an interesting way of responding to questions for the moment.
Q. Mr. Bankman-Fried, in May of 2022, were you aware that account ID 9 @AlamedaResearch.com could have an overall negative value?
A. I am giving you my best guess at answering the question.
Q. I'm not asking for a guess. I'm asking what you understood at the time.
A. I am going to answer what I think the question you are asking is, but I apologize if I'm answering the wrong question. I don't know exactly what that cell was referring to. As of May 2022, I believe that I did not have any specific knowledge about the extent to which, for instance, one
subaccount of Alameda Research's info@ account, as in, i.e., the account number 9, was treated as part of a collection of or separate from other subaccounts of that user or other users affiliated with Alameda. What I believe I knew at that time was, or at least what I believed at that time was that Alameda overall maintained a positive net asset value on FTX. I don't think at that time I had specific beliefs about how that did or didn't apply to a particular subaccount of Alameda's. I'm assuming that overall net asset value, rather than value in a particular coin, is what I think that you are going for here, so that's how I was answering that question. That is my answer as of that time.
THE COURT: Mr. Bankman-Fried, you have been asked that question in one form or another quite a number of times and not once did the question include the phrase net asset value. Unless I'm mistaken, every single answer you have given responded on the assumption that counsel had asked you about
net asset value. Now, that's just an observation. If I'm mistaken, I'll stand corrected, but it says what it says
A. I apologize if that's correct. If that's true, I don't know what you mean by negative balance.
Q. So "Allow Negative," in May 2022, you were not aware of it by name?
A. I don't recall being aware of it then, no.
…
Q. Okay. And you mentioned that at this time you were not aware of "Allow Negative" by name.
A. Yeah.
Q. So I just want to clarify.
A. Yeah.
Q. Were you aware that Alameda could go negative regardless of the name for that feature?
A. I was aware that Alameda and many other accounts on the exchange, in fact most by volume, could go negative in a particular asset. That was a core property of FTX as an exchange. I'm not——but I——I'm sorry. I'm probably not
addressing your——your question.
…
Q. Were you aware at that time in May of 2022 that Alameda could have an overall negative balance on FTX?
A. By an overall negative balance, are you referring to a negative balance, a negative net asset value, or are you
talking about a negative balance in a particular asset, or are you——sorry. I just want to make sure I understand what you
mean by overall.
Q. That if you added up all the accounts, they could have a overall negative balance.
A. And adding up all assets, not talking about particular assets; is that correct?
Q. That's correct.
A. Okay. My understanding was that we were ensuring that Alameda's——at that time my understanding was that we were ensuring Alameda had a positive overall net asset value on FTX. I was not sure whether that was enforced into a code base or whether that was something that we inspected to confirm it was true. It was something that I had discussed at various points with Gary and others, and had checked that Alameda's overall net asset value on the platform had remained positive.
Q. So when you said that you were not aware of "Allow Negative" by name but you had some understanding of it, tell me what you meant by that.
A. So I'm not sure that——I apologize. I might be misunderstanding what the "Allow Negative" feature did. I——I——I think I've given you what my understanding was, but I suspect I might be wrong about what it——what it did.
Q. Well, let's talk about Alameda's main trading account. Are you aware that that main trading account could go negative?
A. And so to clarify, you're talking about info@, the main account, or the entire user?
Q. The info@ main account.
A. So account No. 9.
Q. Yes.
A. And by "go negative," you're talking about negative in a particular coin or negative net asset value?
Q. Just have a negative balance, Mr. Bankman-Fried.
A. Sorry. I——
Q. Let me make this easier for you.
…
THE COURT: Well, look, I'm going to allow this. I understand your point.
I've gotten beyond my tether here. I'm going to allow this. I am going to acknowledge the point you make, but all things are relative, and there is a good deal to what the government says also, and part of the problem is that the witness has what I'll simply call an interesting way of responding to questions for the moment.
Q. Mr. Bankman-Fried, in May of 2022, were you aware that account ID 9 @AlamedaResearch.com could have an overall negative value?
A. I am giving you my best guess at answering the question.
Q. I'm not asking for a guess. I'm asking what you understood at the time.
A. I am going to answer what I think the question you are asking is, but I apologize if I'm answering the wrong question. I don't know exactly what that cell was referring to. As of May 2022, I believe that I did not have any specific knowledge about the extent to which, for instance, one
subaccount of Alameda Research's info@ account, as in, i.e., the account number 9, was treated as part of a collection of or separate from other subaccounts of that user or other users affiliated with Alameda. What I believe I knew at that time was, or at least what I believed at that time was that Alameda overall maintained a positive net asset value on FTX. I don't think at that time I had specific beliefs about how that did or didn't apply to a particular subaccount of Alameda's. I'm assuming that overall net asset value, rather than value in a particular coin, is what I think that you are going for here, so that's how I was answering that question. That is my answer as of that time.
THE COURT: Mr. Bankman-Fried, you have been asked that question in one form or another quite a number of times and not once did the question include the phrase net asset value. Unless I'm mistaken, every single answer you have given responded on the assumption that counsel had asked you about
net asset value. Now, that's just an observation. If I'm mistaken, I'll stand corrected, but it says what it says
A. I apologize if that's correct. If that's true, I don't know what you mean by negative balance.
The moment SBF answered a question when he didn’t need to….
Q. Is that the limit of your understanding of what it means to safeguard assets?
A. No. I apologize. I think that answer was cut short a small fraction the way it's written. There are a number of things that I would have considered to be related to that.
Q. Would that include not embezzling customer assets, for example?
MR. COHEN: Objection.
THE COURT: Sustained.
A. Yes, it would include that.
MR. COHEN: You didn't have to answer if it has been sustained. Haven't you been sitting here for four weeks.
THE WITNESS: I felt the need to answer that one.
Q. Is that the limit of your understanding of what it means to safeguard assets?
A. No. I apologize. I think that answer was cut short a small fraction the way it's written. There are a number of things that I would have considered to be related to that.
Q. Would that include not embezzling customer assets, for example?
MR. COHEN: Objection.
THE COURT: Sustained.
A. Yes, it would include that.
MR. COHEN: You didn't have to answer if it has been sustained. Haven't you been sitting here for four weeks.
THE WITNESS: I felt the need to answer that one.
SBF when asked if its ok to take customer deposits
Q. Did you have conversations with CEOs of crypto exchanges about whether it was proper to use customer money out of omnibus crypto wallets for purposes other than customer trading and withdrawals and the like?
A. Let me, A, apologize if this isn't responsive, so tell me that. I will try to be responsive. I certainly did not have conversations with CEOs about them discretionarily taking funds from -- as CEO of the exchange from customer omnibus wallets for their own personal expenses.
Q. What about CEOs discussing using customer funds in omnibus crypto wallets for the spending of their affiliated companies?
A. So, once again, I will give a specific answer, but if this is not scoped correctly, tell me.
Q. Go ahead and give your answer, and I will ask another question if it's not responsive.
A. Thank you. I certainly did not have conversations with CEOs about them as CEO of an exchange, taking -- using funds from omnibus customer wallets for their own spending of any sort. However, I'm not entirely sure what the implied relationship there was between the CEO of the exchange and the affiliates, so it's hard for me to answer that.
Q. Let me ask it another way. Did you have any conversations with industry participants that led you to believe that it was proper for you to spend customer cryptocurrency deposited into omnibus crypto wallets for your affiliates?
A. So let me again attempt to answer that. What I did have discussions with industry participants about was on margin wallets for margin exchanges that
customers, including in some cases affiliates, might have borrows. They might have liabilities. And those would necessarily have come out -- been part of the net customer balances. There were negative numbers in those customer balances that added up to the overall customer balances. That would be a separate thing from a flow-of-funds perspective than the CEO not as a customer but as just the exchange or the CEO of the exchange using funds from customer wallets for corporate expenses.
Q. I apologize now. Now I'm apologizing. I don't know that I understood that answer.
Q. Did you have conversations with CEOs of crypto exchanges about whether it was proper to use customer money out of omnibus crypto wallets for purposes other than customer trading and withdrawals and the like?
A. Let me, A, apologize if this isn't responsive, so tell me that. I will try to be responsive. I certainly did not have conversations with CEOs about them discretionarily taking funds from -- as CEO of the exchange from customer omnibus wallets for their own personal expenses.
Q. What about CEOs discussing using customer funds in omnibus crypto wallets for the spending of their affiliated companies?
A. So, once again, I will give a specific answer, but if this is not scoped correctly, tell me.
Q. Go ahead and give your answer, and I will ask another question if it's not responsive.
A. Thank you. I certainly did not have conversations with CEOs about them as CEO of an exchange, taking -- using funds from omnibus customer wallets for their own spending of any sort. However, I'm not entirely sure what the implied relationship there was between the CEO of the exchange and the affiliates, so it's hard for me to answer that.
Q. Let me ask it another way. Did you have any conversations with industry participants that led you to believe that it was proper for you to spend customer cryptocurrency deposited into omnibus crypto wallets for your affiliates?
A. So let me again attempt to answer that. What I did have discussions with industry participants about was on margin wallets for margin exchanges that
customers, including in some cases affiliates, might have borrows. They might have liabilities. And those would necessarily have come out -- been part of the net customer balances. There were negative numbers in those customer balances that added up to the overall customer balances. That would be a separate thing from a flow-of-funds perspective than the CEO not as a customer but as just the exchange or the CEO of the exchange using funds from customer wallets for corporate expenses.
Q. I apologize now. Now I'm apologizing. I don't know that I understood that answer.
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