SBF’s testimony: FTX founder struck by amnesia during cross-examination
- In today’s hearing, SBF believed that most of his actions related to conversations with FTX’s executives were in line with the retention policy drafted by the Chief Regulatory Officer
- However, there is no record of the policy that was used as a defense argument that SBF did what lawyers suggested
The criminal trial against FTX’s founder – Sam Bankman-Fried (SBF) – continues to take the spotlight in all its grandeur. The latest development has SBF himself presiding on a testimony bench.
Today’s (26 October) hearing would determine whether or not the legal advice SBF received while reigning the firm was relevant to the case. Notably, this hearing took place without the jurors’ presence in court. The Judge dismissed them by saying it “doesn’t concern you.” After today’s hearing, the Judge would make a call on the relevant aspects the jury needs to hear.
SBF on Slack and Signal conversations
The testimony began with Bankman-Fried speaking about the communication channels deployed by FTX employees. Platforms such as Slack and Signal were listed by the former CEO, who remarked that they provided “more interactivity,” as per Bloomberg’s reporting.
Additionally, he claimed that the firm needed to use encrypted messaging applications. This was because there were external risks such as “constant hacking attacks”. Although he did note that the firm was never subjected to a “core breach.” However, the situation was quite the contrary for unnamed third parties with ties to FTX.
Furthermore, SBF brought up Dan Friedberg – an ex-FTX lawyer, and his role in the exchange. The former Chief Regulatory Officer previously came under the spotlight for being the “fixer” of the crypto exchange. In a lawsuit filed by the current FTX regime, Friedberg allegedly helped SBF in the “wholesale raiding of customer exchange deposits.”
He also allegedly whitewashed complaints by whistleblowers about the misuse of customer funds. The former executive even went to the extent of paying “exorbitant hush money” to one former employee.
SBF brings up the ‘I followed the policy’ argument
According to SBF, Friedberg was in charge of the firm’s documentation-retention policy. This dictated the circumstances that called for the retention or deletion of data.
Bankman-Fried also claimed that the lawyers were in charge of policy drafts and “what implementation would look like”. Thus, further adding that the retention policy differed for different jurisdictions.
“My big picture takeaway was that there were certain classes of data that we had very clear retentional policies around. Those tended to be regulatory”
SBF stated that the documents that required to be retained were usually discussed via email or Slack. Additionally, he stated that Slack was usually the go-to channel for communication with the attorney and compliance team. He stated that this platform was also devoted to “regulatory or compliance matters.”
Contrary to Slack, conversations that did not require retention landed on Signal, as per Bankman-Fried. These chats were subjected to auto-deletion, which was set on a weekly rotation. Notably, Nishad Singh – the former Chief Engineer, and Caroline Ellison – the former Alameda CEO – testified to sharing important information on Signal.
Some of these texts have been presented as evidence during previous hearings. Furthermore, Ellison claimed that she and Singh started saving them when FTX started to go downhill. Bankman-Fried claimed that Signal was “for chatter, for conversation”.
He also stated that auto-deletion was removed “on any place I found it,” including Signal during the November 2022 collapse. This was followed by the former executive bringing up the group created during the “crisis period” with Can Sun and Ryne Miller – FTX General Counsel, and Brett Harrison – former FTX US President.
Cross-examination probes at Signal chats
Notably, the messaging app and the retention policy were the first topics grilled by the prosecutors. Upon being asked about the first discussion with lawyers about the auto-deletion of messages on Signal, SBF said it took place “shortly after” he began using the application.
However, he claimed that this discussion did not take place as a “formal policy.” He also claimed to not “recall the exact date” of when he enabled auto-delete. But when asked if he explicitly asked lawyers for a greenlight on auto-deletion, he responded that it was something they were aware of, while evading the question altogether.
Furthermore, SBF claimed that the document-retention policy covered aspects that “applied to Signal, but I don’t know that it singled out Signal as a platform.” However, when asked about whether the policy spoke about deleting or destroying company documents, he said,
“I remember my memory of the policy is it laid out various circumstances when it was not permissible or there needed to be a lengthy retention period for company communication”
He also agreed that he believed documents and communication that did not explicitly fall under the regulated category could be deleted. This, to him, was informal chats that were not related to formal business decisions. He also did not believe that the seven balance sheets shared by Ellison needed to be saved. He had remarked,
“A rough draft of that that was still being workshopped — I would not have considered that a formal business document.”
SBF struck by amnesia during cross-examination
Furthermore, Bankman-Fried also claimed to not “specifically recall” having a conversation with Ellison, Singh, and Wang. The conversation revolved around shutting down Alameda because of its billion-dollar hole. However, Ellison claimed that this move would be impossible as the firm would not be able to repay its debt to FTX.
SBF continued to use his “I do not recall” defense during cross-examination. Upon being questioned if he asked Friedberg or Miller if he could share business decisions on Signal, he said that there were conversations surrounding the sharing of spreadsheets, adding that they “were aware that would happen”. However, he does not recall if they specifically told him to retain only “formal business discussions”.
Interestingly, when asked, SBF admitted that he had no record of the FTX retention policy. He also claimed that there were numerous requests for the same. Post this, the prosecutor had also asked if he violated the retention policy. To this, he said, “I don’t have any knowledge that I did, but I am not looking at a copy of it so I don’t know precisely what it says”