Sam Bankman-Fried is Misled by the Facts: Telling a Private Piggy Bank of FTX with a Grandparent
If I am the owner of a hedge fund, one fine June day, my employees come to me and say that there is an accounting problem. We’re missing several billion dollars. What would I do?
Let’s be honest: Sam Bankman- Fried is hurt by the facts. The prosecution, in the closing statement delivered by Nicolas Roos (pronounced “Rose”, though he won’t correct you if you get it wrong, as Judge Lewis Kaplan did for most of the trial) today, went through a lot of contemporaneous written evidence that suggested that Bankman-Fried was very, very guilty of wire fraud and conspiracy charges at FTX. Roos gave a confident, restrained argument, relying heavily on that evidence to argue Bankman-Fried had used FTX customer deposits as his own private piggy bank, funneling them through his trading firm, Alameda Research.
When the FTX software bug was being fixed, Bankman-Fried found out that his senior staff had been keeping track of how much Alameda owed. He didn’t find out what the account was for until October. I know this sounds crazy, but this is his actual testimony.
The co-founders of FTX and the firm Alameda Research stopped answering curt “yes” and “no” questions. The defendant was admonished several times for not paying attention.
Yedidia — Bankman-Fried’s college friend, Bahamas roommate, and employee at FTX — had testified that he’d asked Bankman-Fried about the $8 billion hole on a padel tennis court in their luxury complex in June or July. Today, in testimony, Bankman-Fried seemed to be trying to deny that conversation had ever taken place. It was not until Judge Lewis Kaplan intervened to ask if Bankman-Fried had ever been told by Yedidia about that money, in words or in substance, that Bankman-Fried admitted he’d been told.
“So it’s your testimony that your supervisees told you to stop asking questions?” “What did you ask?” Sassoon asked. She could have been filing her nails, her tone was so level. Had Bankman-Fried called anyone in to ask who spent $8 billion? “I wasn’t trying to build out blame for it,” he said. He was focused on solutions! Did he fire anyone? Nope!
I can’t tell you how Bankman-Fried’s parents reacted to this, they weren’t there I couldn’t really blame them. I would not want my child to be vivsected. The jurors, however, watched the operation attentively. $8 billion can focus the mind for most of us.
Response to Bankman-Fried’s FTX Test in Direct and Indirect Interrogation of the Bahamian Attorney General
Look, uttering phrases like “hole isn’t really the word I would use” and responding to a question by saying you wanted “a few more qualifiers and scoping on it” do not, as a general rule, bode well for your believability. This will make certain kinds of nerds happy. But this is a courtroom, and I have come to believe that if you know the meaning of the word “epistemology,” you absolutely should not testify in your own defense.
Bankman-Fried’s lawyers will be pleased, says Tuchmann, with his performance in direct examination. The defense was able to present an alternative narrative of events, which gave Bankman-Fried the chance to appeal to the jury’s sympathies.
We then saw a November 9th email from Bankman-Fried to Ryan Pinder, attorney general of the Bahamas, that said “we are deeply grateful” for what the Bahamas had done for FTX. As a token of that gratitude, Bankman-Fried wrote:
We can open up withdrawals for all of our clients in the country, so that they can withdraw all of their funds tomorrow, making them whole. If you say that you want us to, we will open it up immediately and consider it the least of our duties to the country. If we don’t hear back from you, we are going to go ahead and do it tomorrow.
Bankman-Fried opened withdrawals for their customers in the country. The upshot of this testimony seemed to be that Bankman-Fried had a cozy, perhaps even inappropriately cozy, relationship with the Bahamian government — which isn’t what he’s on trial for but probably doesn’t make him look any better to a jury.
After the case is handed to the jury, they will hear closing arguments. I will ponder the appropriate response to the loss of $8 billion. Crying? Are you considering it a Fainting? Maybe it is pads tennis, because I wouldn’t know. No one has given me $8 billion to misplace, and net sports are not my area.
Taking the stand was always going to be a risky move — one few criminal defendants make. It was clear that from the first minute of the prosecution’s cross-examination.
Time and time again, the U.S. government’s lawyers pointed to contradictions between what Bankman-Fried said in public and what he said — and did — in private, as they continued to build a case that he orchestrated one of the largest financial frauds in history.
For Bankman-Fried, the stakes are high. He’s been charged with seven criminal counts, including securities fraud, and if he is found guilty, he could spend the rest of his life in prison.
Sassoon’s case against FTX, Alameda Research – a trial that didn’t go well for Bankman-Fried
Danielle Sassoon, a former clerk of the late Justice Antonin Scalia, used her experience in litigation to deliver her cross-examination.
The assistant U.S. Attorney asked Bankman-Fried a lot of questions for almost eight hours. She moved quickly, and whenever the defendant hesitated, she dug in.
Bankman- Fried was becoming more and more angry with each passing hour. He often disagreed with how Sassoon characterized his past comments — in trial testimony, but also in media reports.
At times, he seemed resigned. When the prosecutor asked him to read his prior statements, Bankman- Fried did not do so with great reluctance.
There were media interviews after his companies failed and he was indicted. He was fond of X, the name of the social media site formerly known asTwitter. He even tried to start his own e-mail newsletter.
Bankman- Fried claimed that he was someone who had a hard time keeping up with the speed and magnitude of FTX’s growth, but didn’t recognize the extent of its troubles.
The prosecutor tried to make Bankman-Fried look like someone who ordered his subordinates to funnel billions of dollars from FTX’s users to Alameda Research and to plug holes in the company’s balance sheet.
FTX used private planes to ferryAmazon packages from the U.S. to The Bahamas, where it was based, while Bankman-Fried bought luxury real estate.
A conversation with Sassoon about risk management at a Silicon Valley firm: When she saw Bankman-Fried, she knew she didn’t know
Above all, Sassoon was prepared. When Bankman-Fried said he couldn’t remember something, she would confront him with the evidence in the form of an email, or a tweet, or an excerpt from an interview.
The main thing the closing arguments made clear was how lopsided the case was. Bankman- Fried seems to be a nice boy who would never hurt anyone on purpose. An introvert! Who doesn’t take recreational drugs? When Cohen asked the jury to keep him in mind as they deliberated, Bankman-Fried crumpled the water bottle in his hand, making a noise. He looked directly at the jury, with an expression on his face that suggested he might cry.
The court was told by Bankman- Fried that he made a number of small mistakes. He said that the biggest problem was that there was not a dedicated risk management team.
Bankman- Fried said that they didn’t have a chief risk officer. “We had a number of people who were involved to some extent in managing risk, but no one dedicated to it, and there were significant oversights.”
He blamed his top lieutenants in FTX and Alameda for their poor handling of the situation that had led to the death of a former girlfriend.
Bankman-Fried, for example, said that when Ellison led Alameda, she failed to hedge the firm’s investments adequately, which made it vulnerable to steep market downturns.
Michael Lewis’s overflow room testimony to Bankman-Fried, aka Ben McKenzie, failed to bring up a rebuttal
Michael Lewis, who wrote a book about Bankman-Fried, was also there. The man wearing Hoka running shoes and a down jacket was able to sit near Bankman- Fried’s friends and family in the overflow room because he followed proceedings in one of the rooms.
Ben McKenzie was one of the celebrities who came to the testimony. The former star of “The O.C.” and “Gotham” is the author of a book about cryptocurrencies.
And crypto influencer Tiffany Fong, who has gained some celebrity during the trial after she interviewed Bankman-Fried for hours when he was under house arrest, has summarized each day’s proceedings in video digests.
He was working 12 hours a day, which seemed low, but Bankman-Fried had testified he worked as many as 22 hours a day. But I couldn’t tell you what exactly he was doing for all that time, as there was precious little testimony about it. There was a data protection policy the defense could not come up with.
So I was sympathetic to Mark Cohen, the lawyer for the defense, who didn’t seem like he had much to work with. But then his closing statement managed to make things worse? To begin with, he appeared to be reading directly from a document he’d created, rather than looking up at the jury. He spoke softly, almost in a somber tone, as he tried to lull the jurors to sleep.
We must hear the prosecution’s rebuttal to Cohen’s arguments before the case goes to the jury. But I think even the most talented defense lawyer would struggle with this case. The documentary evidence for the prosecution is too overwhelming, there is not a lot of evidence to back Bankman-Fried’s stories, and Yedidia hasn’t been charged with anything. Plus, the last person the jury heard speak was Bankman-Fried, and we did establish at length that he loves to lie.
The closing statement could have ended before the first hour. The evidence that Bankman-Fried was involved — from his Google Meet with the other alleged co-conspirators, to the metadata linking him to various incriminating spreadsheets, to the funds traced to entities he controlled — would have been enough. We were given a few more hours, since Roos was going to use the backhoe he had rented to haul his evidence.
The jury was focused on him as he spoke. No one appeared to be napping. I didn’t see anyone glance at the clock; many jurors were taking notes. Though Roos was interrupted by an AV mishap when the screens used to show the jurors the evidence briefly went out in the middle row, the closing argument was smooth. Roos talked directly to the jury, glancing occasionally at his own notes.
Mistaken vs. Honesty: A Hail Mary for a Misleading Defense Attorney and a Fail-by-Fried
Cohen made it clear that mistakes are not illegal. He wanted to present Alameda and FTX as innovative businesses. It was sort of hard to understand exactly what they were innovating or how, but never mind. At its peak, FTX’s valuation was very high.
This was the most viable option for the defense, who had limited options, according to Daniel Richman, a professor at Columbia Law School. But it was a Hail Mary nonetheless, in no small part because Bankman-Fried, in his parade of interviews prior to his arrest, had given the prosecution length upon length of rope with which to hang him.