Takeaways from Sam Bankman-Fried’s second day in front of a jury

Prosecutors grilled former crypto king Sam Bankman-Fried on Monday as his criminal fraud trial entered its third week. He stands accused of orchestrating a multibillion-dollar fraud in a seismic event that has left the industry reeling.

While prosecutors have cast SBF as a Bernie Madoff-like mastermind, Bankman-Fried’s lawyers argue that “it’s not a crime to be the CEO of a company that later files for bankruptcy.”

For his own part, Bankman-Fried has largely offered vague responses on cross-examination so far, saying he does not recall conversations or statements he made in the past. Judge Lewis Kaplan has at least twice interjected to instruct Bankman-Fried to simply answer yes or no and stop trying to infer intentions from those questioning him.

The tweets that started — or ended — it all

Monday’s testimony kicked off with the former billionaire describing the days leading up to FTX’s bankruptcy filing on November 11 last year.

On November 6, FTX saw about $1 billion of net withdrawals in response to a tweet from the CEO of FTX’s bigger rival, Binance. The pace of withdrawals then increased further, with about $4 billion in net withdrawals the following day, or 100 times more than a typical day.

“I was concerned,” Bankman-Fried testified Monday. “It signaled a potential run on the bank and a risk of a liquidity crisis.”

That led him to send the tweet that has been central to the government’s argument that he lied to customers and investors about the state of his companies.

The tweet — which said FTX and its assets were both “fine” — was accurate at the time he posted it on the morning of November 7, he told jurors. But as the market crashed further that evening and into the following morning, “we were risking a solvency crisis,” Bankman-Fried said.

A market downturn meant that assets associated with FTX’s sister company, the hedge fund Alameda Research, “declined massively in value,” he said. The approximately 50% crash in Alameda’s assets drove the firm’s net asset value from around $10 billion to a little bit above zero, SBF testified.

At that time, he said, he deleted his earlier tweet.

Ellison agreed Alameda should have been hedged

Bankman-Fried on Monday recalled a conversation he had with Caroline Ellison, his ex-girlfriend and then-CEO of Alameda Research. He was worried, he said, that if the market decreased another 50% then Alameda would become insolvent.