FTX Founder Bankman-Fried Testifies On Controversial Borrowing Practices: 'I Believed It Was Permissible'

FTX founder Sam Bankman-Fried on Thursday shed light on his company's controversial practices in his testimony regarding borrowing from assets held as collateral for margin positions in crypto exchange FTX for trading in Alameda Research.

Bankman-Fried stated unequivocally, "I believed it was permissible to borrow from assets held as collateral for margin positions," according to Inner City Press.

This statement came as part of a line of questioning from Assistant United States Attorney Danielle Sassoon during Bankman-Fried's criminal trial.

The hearing offered a rare insight into the opaque world of digital asset exchanges and their operational procedures. This revelation is bound to spark further debates and discussions in the rapidly evolving domain of cryptocurrencies and digital assets. For those keen on understanding the future trajectory of the digital asset space, Benzinga's Future of Digital Assets conference on Nov. 14 promises to provide more in-depth explorations and expert perspectives.

Throughout the 3 hours of testimony without a jury present, Sassoon pressed Bankman-Fried on various aspects, including his discussions with lawyers about the auto-deletion of messages on Signal, a messaging platform, and document retention policies.

The hearing highlighted the former CEO's frequent interactions with FTX's former chief regulatory officer Dan Friedberg and revealed nuanced details about FTX's operational intricacies, especially concerning document retention and policies around Signal auto-deletion.

Also Read: Far-Right House Speaker Mike Johnson Not Expected To Prioritize Crypto Regulation 

One of the key contentious points revolved around the deletion of specific messages and whether such actions were permissible.

In one exchange, when Sassoon probed whether Bankman-Fried believed it was permissible to delete a message containing seven different spreadsheets, Bankman-Fried responded, "Yes. For example, verbal discussions were not required to be reported," according to Inner City Press.

Bankman-Fried was unclear about the reasons FTX shifted user assets from an account associated with Alameda to North Dimension, a company under scrutiny for potential financial misdeeds.

He hinted that banks might have felt more at ease with North Dimension, steering clear of prominent hedge funds linked to cryptocurrencies like Alameda.

Although Bankman-Fried stated the he had limited involvement with North Dimension, he couldn't remember any specific talks with auditors regarding FTX customer funds being transferred to both the mentioned entities.

"I must clarify that I'm not a legal expert. I'm sharing what I remember. During that period, some FTX users believed their accounts were directed to Alameda," he testified.

Read Next: Bankman-Fried's Day In Court: A Scandal To Rival History's Most Infamous Financial Meltdowns?

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Image created using artificial intelligence with MidJourney.