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FTX

FTX Founder Sam Bankman-Fried Admits Limited Cryptocurrency Knowledge During Fraud Trial

Ronaldo Marquez
by Ronaldo Marquez
1 year ago
·
Posted in FTX
Trusted Editorial content, reviewed by leading industry experts and seasoned editors. Ad Disclosure

During the ongoing trial of Sam Bankman-Fried, co-founder of the now-defunct FTX crypto exchange, startling revelations have emerged regarding his understanding of cryptocurrency.

FTX Co-Founder’s Shocking Testimony 

According to live coverage of the trial by The Guardian, Bankman-Fried confessed to knowing “basically nothing” about cryptocurrency before launching FTX and its affiliated hedge fund, Alameda Research. On the stand, Bankman-Fried admitted:

I had absolutely no idea how they worked. I just knew they were things you could trade.

According to the report, when Bankman-Fried teamed up with co-founder Gary Wang, who testified against him in the trial, they had no idea how to attract customers. 

Related Reading: US Urges Crypto Asset Firms To Intensify Efforts Against Illicit Financing

As for FTX’s collapse, US Attorney Mark Cohen’s questioning suggested that there was nothing particularly wrong with the exchange’s operations or Bankman-Fried’s business decisions.

The attorney highlighted FTX’s terms of service, finalized in early to mid-2022, which included provisions allowing a client’s balance to be used to cover others’ losses in certain situations, such as futures trading.

Bankman-Fried also discussed FTT, the cryptocurrency created by FTX. Its role in the collapse of FTX and Alameda Research cannot be overstated. Customers rushed to withdraw funds from FTX after reports revealed that Alameda’s loans heavily relied on FTT. 

Per the report, Bankman-Fried portrayed FTT as a beneficial token for FTX users, providing account benefits if held. He explained the concept of “buy and burn,” where FTX used a portion of its weekly earnings to buy and eliminate FTT tokens, effectively giving value to FTT holders.

Management Mistakes Admitted

According to The Guardian, Throughout his testimony, Bankman-Fried attempted to portray the growth of his exchanges as a result of growing pains rather than intentional wrongdoing. 

Bankman-Fried argued that borrowing from FTX was in line with the setup of the exchange and its sister hedge fund, Alameda Research. As long as the risk was managed and assets exceeded liabilities, they did not concern themselves with how users utilized funds/

Related Reading: Nigerian Crypto Twitter Up In Arms As Prominent Influencer Rug Pulls STIMMY Coin

Furthermore, Bankman-Fried acknowledged making management mistakes, admitting that the lack of a dedicated risk management team was the most significant oversight. The defense sought to present Bankman-Fried as an overwhelmed math savant, mitigating allegations of criminal intent.

As the trial unfolds, the question of whether Bankman-Fried is a crypto criminal mastermind or an unfortunate “math nerd” remains central. 

While Bankman-Fried denies committing fraud, he acknowledges significant oversights. Bankman-Fried’s personal history, including his time at MIT and associations with FTX co-founder Gary Wang and exchange developer Adam Yedida, has also come under scrutiny during the trial. 

FTX
FTT’s uptrend continues on the 4-hour chart. Source: FTTUSDT on TradingView.com

As of the time of writing, the exchange’s token FTT is trading at $1,2714, representing a 1.4% increase. This surge follows a substantial upward trend observed over the past 30 days.

Featured image from FOX Business, chart from TradingView.com 

Editorial Process for bitcoinist is centered on delivering thoroughly researched, accurate, and unbiased content. We uphold strict sourcing standards, and each page undergoes diligent review by our team of top technology experts and seasoned editors. This process ensures the integrity, relevance, and value of our content for our readers.
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Ronaldo Marquez

Ronaldo Marquez

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Ronaldo is a seasoned crypto enthusiast with over four years of experience in the field. He is passionate about exploring the vast and dynamic world of decentralized finance (DeFi) and its practical applications for achieving economic sovereignty. Ronaldo is constantly seeking to expand his knowledge and expertise in the DeFi space, as he believes it holds tremendous potential for transforming the traditional financial landscape.

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