FTX founder Sam Bankman-Fried testified on Monday that the collapse of the cryptocurrency exchange was precipitated by the head of his Alameda Research trading firm failing to adequately hedge against a downturn in the market, Reuters reported. Testifying in his defense for a second day, the 31-year-old former billionaire said that he asked Caroline Ellison — chief executive of Alameda Research and his former romantic partner — to make trades that would offset the risk of falling cryptocurrency prices starting in mid-2022. Answering questions from his defense lawyer, Mark Cohen, Bankman-Fried said Ellison became emotional when he discussed the risk of Alameda — which had lent funds to FTX executives and invested in startup companies — going bankrupt. "She started crying," he said. "She agreed that Alameda should have hedged, she also said that maybe it shouldn't have made some of the venture investments." Ellison is one of three of Bankman-Fried's former close confidantes who pleaded guilty and testified for the prosecution. Bankman-Fried has pleaded not guilty to two counts of fraud and five counts of conspiracy. Prosecutors have said he looted billions of dollars in FTX customer funds to prop up Alameda, make speculative venture investments, and contribute to U.S. political campaigns. If convicted, he could face decades in prison.
