NEW YORK — Sam Bankman-Fried’s lawyer struggled Thursday to conduct a winding cross-examination of the FTX founder’s former girlfriend, leaving the judge and the public uncertain about the strategy of the defense team to counter the testimony of the government’s key witness.
Caroline Ellison had testified over the previous two days that Bankman-Fried repeatedly asked her over the years to withdraw money from FTX client accounts to fund investments and trading strategies within the crypto hedge fund -coin from Bankman-Fried, Alameda Research. Ellison was CEO of Alameda when it and FTX collapsed in November last year.
Ellison spent much of her testimony explaining to the jury how she repeatedly had to dip into customer deposits at FTX to resolve problems at the hedge fund or exchange. FTX deposits would be withdrawn to pay for new investments or political donations, or to hide heavy losses on Alameda’s balance sheet, she testified. All of this was done under Bankman-Fried’s leadership, she said.
Ellison, 28, pleaded guilty to fraud in December, when Bankman-Fried was extradited from the Bahamas to the United States. Bankman-Fried, 31, was the majority owner and CEO of FTX until the crypto exchange filed for bankruptcy on November 11. He has pleaded not guilty to fraud charges.
Bankman-Fried’s lead defense attorney, Mark Cohen, was expected to try to shift the blame for Alameda’s problems to Ellison, following his trial opening statement in which he said Bankman-Fried did not had not committed fraud and was instead trying to blame Ellison for Alameda’s problems. to clean up a mess largely created by his lieutenants.
Cohen, however, appeared to have difficulty questioning Ellison, failing to pick holes in his testimony. He repeatedly changed the topics and dates of discussions, often seemingly at random.
At one point, Cohen apologized for referencing the wrong document. Another time he stopped because he had “lost my place.”
On several occasions, Justice Lewis A. Kaplan had to ask Cohen where he was going with his questions or what exactly he was talking about.
“Maybe this is a good time to take a break,” Cohen said after an hour of cross-examination of Ellison.
Initially confined to his parents’ home in Palo Alto, Calif., under $250 million bail, Bankman-Fried has been jailed since August after Judge Kaplan found he attempted to influence inappropriate behavior of potential witnesses, including Ellison.
The court began its lunch break Thursday, with Ellison appearing more relaxed than in previous days.
As the jurors left the room, she stood up and placed both hands on her hips. This differs from her postures at the beginning of the week, where she seemed more restrained.
After the break, Ellison expressed concern about Alameda lenders recalling loans in June 2022.
She discussed that period during her testimony Wednesday, when she talked about preparing seven different spreadsheets under Bankman-Fried’s direction that showed Alameda’s balance sheet, including its loans to FTX executives and the amount she had borrowed from FTX.
“I don’t remember if we discussed all of them, I know we discussed some of them,” Ellison said of the seven different spreadsheets Thursday.
Cohen told Kaplan that his goal was to finish questioning Ellison on Thursday, but that it could extend into today. Cohen will then address a new topic: business terms of service.
In a letter filed to the court during cross-examination, Bankman-Fried’s lawyers told the judge they wanted to cross-examine the witnesses on their understanding of FTX’s terms of service.
In the letter, Cohen disputed the government’s position that the use of FTX funds for Alameda’s investments constituted theft under U.S. law and said the defense hoped to argue that the transfers were permitted under of the exchange’s customer agreement, which is governed by UK law.
Cohen asked Kaplan to reconsider an earlier ruling barring expert testimony on the subject by London lawyer Lawrence Akka, who intends to testify that, under British law, FTX’s terms of service required it to honor customer withdrawal requests but did not prevent it from using the funds for a particular purpose in the meantime.
Information in this article was provided by Ken Sweet and Larry Neumeister of The Associated Press and by Allyson Versprille, Bob Van Voris, Chris Dolmetsch and Yueqi Yang of Bloomberg News (WPNS).