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SBF's dilemma in FTX trial: Should he speak in his own defense?

Sam Bankman-Fried has to make a fateful decision this week: testify in his own defense, or say nothing in response to former colleagues who claim they helped the FTX founder spearhead a multibillion-dollar fraud.

"Most criminal defendants don’t testify, but Bankman-Fried isn’t an ordinary criminal defendant," former federal prosecutor Neama Rahmani said about the fallen crypto entrepreneur.

Bankman-Fried may take the stand to "explain away what happened," Rahmani added.

The 31-year-old, who pleaded not guilty to seven counts of fraud and money laundering, has sat silently at his Manhattan trial for the last three weeks while prosecutors outlined their version of what happened to $8 billion in missing FTX customer deposits.

Sam Bankman-Fried sits between his defense lawyers Mark Cohen and Christian Everdell during his fraud trial over the collapse of FTX, the bankrupt cryptocurrency exchange, at Federal Court in New York City, U.S., October 16, 2023 in this courtroom sketch. REUTERS/Jane Rosenberg
Sam Bankman-Fried, center, sits between his defense lawyers during his fraud trial over the collapse of FTX, in this courtroom sketch. (Jane Rosenberg/REUTERS) (JANE ROSENBERG / reuters)

The government, which is expected to rest its case as soon as Thursday, alleges that FTX customers couldn't withdraw their money during the exchange's final days in November 2022 because Bankman-Fried had allowed his crypto trading fund, Alameda Research, to spend it.

That claim was backed up by testimony from friends and former classmates Bankman-Fried hired for top jobs at FTX and Alameda. Some of those executives pleaded guilty to multiple felonies and agreed to testify against him.

The prosecution’s trial strategy here is a common one, said white-collar criminal defense attorney and former federal and state prosecutor David Weinstein, adding that the government's level of success will likely influence Bankman-Fried’s decision to testify or not.

"[V]ery often, their proof is based on the words of former co-conspirators who have cut deals with the government," Weinstein said. "The key is for the prosecution to corroborate that testimony with either documentary evidence or the testimony of other witnesses."

While Bankman-Fried’s practice of corresponding through self-deleting messages left prosecutors with less documentary evidence than what actually existed at the time of the alleged fraud, three of his top executives and other former employees walked the jury through a limited number of their preserved messages, spreadsheets, and Google documents.

Prosecutors used the evidence to argue that Alameda Research CEO Caroline Ellison, FTX co-founder Gary Wang, and FTX chief engineer Nishad Singh were actively discussing with Bankman-Fried how to plug the $8 billion shortfall by June 2022. That was just months before the exchange collapsed in November 2022.

Caroline Ellison former CEO of Alameda Research founded by Sam Bankman-Fried exits the Manhattan federal court after testifying on Tuesday, Oct. 10, 2023, in New York. (AP Photo/Eduardo Munoz Alvarez)
Caroline Ellison, former CEO of Alameda Research, exiting a Manhattan federal courthouse after testifying earlier this month. (Eduardo Munoz Alvarez/AP Photo) (ASSOCIATED PRESS)

Weinstein points out that much of the corroborating testimony provided by government witnesses is an interpretation of what Bankman-Fried said. Therefore, the statements from witnesses are open to dissection and discrediting by the defense in an attempt to create reasonable doubt about Bankman-Fried's guilt.

The defense can try to discredit those accounts using Bankman-Fried's testimony, should he take the stand, or without it by questioning the accounts during closing arguments.

To convict Bankman-Fried, all 12 jurors must find that prosecutors proved, beyond a reasonable doubt, what was in Bankman-Fried’s mind. Bankman-Fried’s attorney Mark Cohen said in his opening argument as the trial began that his client believed in "good faith" that Alameda could use FTX’s funds "provided there were sufficient assets for them to be paid back."

In court last Wednesday, Cohen said his defense team was still "working through" whether to put on a defense case at all.

Sam Bankman-Fried's defense lawyer Mark Cohen, exits following jury selection in the fraud trial over the collapse of the bankrupt cryptocurrency exchange FTX, at Federal Court in New York City, U.S., October 3, 2023. REUTERS/Brendan McDermid
Sam Bankman-Fried's defense lawyer Mark Cohen. (Brendan McDermid/REUTERS) (Brendan McDermid / reuters)

"Bankman-Fried has to put on a defense," Rahmani said. "A defense that relies on cross-examination and closing arguments only trying to make the case that he didn’t know what was going on or that the victims weren’t really defrauded isn’t going to work because the prosecution is so far ahead."

Northwestern University criminal law professor Juliet Sorensen said while it’s natural for anyone to want to speak on their own defense, once Bankman-Fried takes the witness stand he opens himself up to significant risk because he can be cross-examined "extensively."

"Even a sophisticated and confident defendant like Sam Bankman-Fried can do more harm than good to his case by testifying," Weinstein said. If Bankman-Fried testifies, he said, he can be asked exactly what he meant by his own statements.

"If he does testify, his cross-examination will determine who wins the case," Rhamani said.

Sorensen said it also appears that Bankman-Fried’s attorneys are making a record concerning Bankman-Fried’s mental state at trial, so that in the event he is convicted the issue can be raised on appeal.

Twice in court and in a letter to US District Judge Lewis Kaplan, who is presiding over the case, Bankman-Fried’s lawyers said the Manhattan administrative facility where Bankman-Fried is being held in custody had deprived him of his prescribed doses of Adderall. On Thursday, the defense acknowledged in court that the defendant had since received a time-release dose that meets his needs.

"I am not a doctor, but my layperson’s perception is that a lower dose of Adderall than Bankman-Fried is accustomed to would not impact his understanding in that way," Sorensen said.

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