Sam Bankman Fried - Guilty on All Charges!

A jury has found Sam Bankman-Fried guilty of all seven criminal counts against him. The FTX founder faces a maximum sentence of 115 years in prison.  In today's podcast we discuss the findings of the trial and speak with Tiffany Fong who has been there in person reporting from the courthouse in New York along with people like Michael Lewis.

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Transcript

A federal prosecutor told the twelve-person jury on Wednesday that Sam Bankman Fried had built his crypto exchange into a “pyramid of deceit” resting on a “foundation of lies and false promises,” that Sam was “ultimately responsible for raiding FTX depositors’ accounts to make a series of risky bets, repay loans and buy real estate”. “He spent customers’ money and he lied about it.” The defense countered that Sam was simply a “math nerd” who may have made some bad business decisions, but they argued those were “not a crime”.

The closing arguments from both sides brought together the five weeks of testimony presented to the jury, which shone a light on the inner workings of FTX and its related trading firm Alameda Research.

The trial wrapped up almost exactly a year after FTX fell into bankruptcy after being unable to honor withdrawal requests from its customers after revelations about the exchange’s financial position.

Bankman-Fried was convicted on all seven charges by a New York jury that is likely to send him to prison for decades.  Prosecutors plan to try him on several other counts in a separate trial that is expected to take place early in 2024.

Evidence was given that Sam had bribed Chinese Government officials and hired Thai Prostitutes to help move money.  We learned that Caroline Ellison had created seven different balance sheets to make Alamedas financials look less risky than they were to lenders.  We learned that Sam believed that his curly hair was the source of his powers and helped him get higher bonuses when he worked at Jane Street.  This may be true as he had it cut just before his trial, which didn’t really work out for him.  We learned that he and Ellison drove luxury cars before deciding that it was better for their image to own budget cars and claim not to care about material goods.

Sams longtime friend Gary Wang began his testimony by saying that he had committed financial crimes with Sam. Ecplaining that he had written code that gave Alameda privileges such as the ability to have a negative balance on FTX and the ability to borrow up to $65 billion dollars of customer money.

During his testimony, Wang was shown an SBF tweet claiming that FTX had a $100 million insurance fund. He explained that this was untrue and that the number they publicized was calculated by taking the daily trading volume, multiplying that by a random number, and dividing it by 1 billion.

All of this is bad, and if you have been considering doing any of these things hopefully you are learning from Sam Bankman Frieds mistakes.

The jury’s decision came after less than five hours of deliberation over the seven charges. It was expected that the jury would take at least a day to come to a verdict, so this was surprisingly fast.

Bankman-Fried is said to have shown no emotion as the verdict was read out. It is possible that he was playing video games at the time and didn’t hear what had happened.

Sam could still face further charges in a trial scheduled for March of next year, on allegations including bribery of foreign officials and campaign finance violations, there is apparently a chance that the judge could hold off on sentencing until after the second trial (I’m not sure how likely that is).  Additionally, it’s possible that Sam receives such a severe sentence on these seven charges that the prosecution drop the additional charges against him. 


This upcoming trial could be even more of a spectacle as it would involve many of the politicians who took money from FTX.

The guilty verdict comes after Bankman-Fried decided against his lawyers advice to testify in his own defense.

It was expected that there might be some sort of “Hail Mary” attempt – a big gamble - to get at least one juror to acquit him, but his testimony mostly involved claiming not to remember any of his actions, which possibly only made him appear both untrustworthy and annoying to jurors.

My friend Tiffany Fong has been in the court every day for the trial and has spent hours interviewing Sam over the last year about the crimes he has been convicted of and she is here to explain the highlights of the trial.  

Patrick Boyle:
Okay, so welcome to the video, Tiffany. You've been covering this whole thing for quite some time. In fact, I think it's the best coverage on the internet. Can you tell me what the vibe was like at the trial? What it's like being...

Tiffany Fong:
God, I mean, the days vary. First of all, there are early days for anyone who wants to actually attend the trial in person. There were some days that I was heading to court at 1 or 2 a.m. just to line up and there would already be people there. So first of all, everyone, everyone attending and who is in the actual courtroom and fighting for one of those few 20 spots. is extremely exhausted, but we've all been doing our best to check out what the vibes are like in the courtroom. So, some days are definitely more high tension than others. Obviously, a lot of people were anticipating Caroline Ellison's testimony, so those were really packed, high anticipatory days, and I think a lot of us have just been looking to see what Sam Beckman Freed's reactions have been and what his parents' reactions have been. Sam, first of all, is not the most emotional person in the first place, so you don't get a lot of facial expressions from Sam, but you do see a lot of reactions from the parents. So there

Patrick Boyle:
Yeah.

Tiffany Fong:
are some days where they're like very clearly visibly upset, very understandably so.

Patrick Boyle:
Yeah.

Tiffany Fong:
Sometimes a lot of tension in the room, but it's been interesting to watch it all unfold in person.

Patrick Boyle:
What were the big ones? Was Caroline and Sam, were they kind of the two most important or the most interesting people at the trial?

Tiffany Fong:
I feel like everyone was looking forward to Caroline's testimony the most, but I actually thought that Nishad Singh was, to me, the bombshell to listen to. I think Nishad just described everything in an almost theatrical way. He was describing private one-on-one conversations with Sam Beckman Friede and was really setting the scene. He was describing the time of day and where they were sitting on the balcony and Sam was reclined on a chair while he was pacing around in some of these conversations. Nishad was actually the most interesting to listen to out of the testimonies, in my opinion, and I think other journalists felt the same. But all of the star witnesses had bombshells, so

Patrick Boyle:
Yeah.

Tiffany Fong:
every day has been, there's just been so much information that it's all just becoming sort of a blur in my head.

Patrick Boyle:
And to me, like the big thing, or I guess the thing that the press didn't really expect was Caroline's story of the bribes to Chinese politicians and the Thai prostitutes.

Tiffany Fong:
Yeah, Caroline really just threw in a banger there with the, they weren't actually, the prosecution, or I think, I don't remember if it came up in the direct or the redirect, but, or the cross-examination, but she wasn't actually asked anything about the Chinese bribes or Thai prostitutes, but she just threw in a banger and she gave it as an example of something they were doing, and she was like, oh yeah, well, there was that one time when we paid... the Chinese government $100 million. And I think that whoever was questioning her asked like, oh, can you elaborate on that? And then she just decided to throw in that apparently Thai prostitutes were somehow involved in Alameda's attempt to regain access to $1 billion of funds that were essentially being held hostage by the Chinese government or were frozen in some Chinese crypto accounts. And... Apparently, somehow Thai prostitutes were worked into their scheme to regain access to that money.

Patrick Boyle:
I think it makes sense if you have a story like that, you should tell it. This is your one time on the stage, you've got a good story about Thai prostitutes,

Tiffany Fong:
It was a

Patrick Boyle:
get

Tiffany Fong:
good story.

Patrick Boyle:
it out.

Tiffany Fong:
She did. She certainly did. Made headlines. Good on you, Caroline.

Patrick Boyle:
And I guess other things that she put forth was related to Sam's morality, that he felt that rules like don't lie and don't steal weren't necessarily justified. Do you believe, because it seems Michael Lewis fell for this story, that Sam's overwhelming charitable giving and that almost any crime is justifiable based on that. Do you think he believes that? Is this just a story? Like what's your take?

Tiffany Fong:
Yeah, I mean, I've talked to Sam quite a bit. I talked to him a lot over house arrest, and I actually do genuinely believe that he does believe in effective altruism, but I don't know if it's necessarily for the reasons why other people in the EA community do. I think that Sam mostly just feels like he's the smartest guy in any room. He tends to think that he's superior to most people. I think I've even asked him once, like, if he felt he sort of was superior to people, and he was like, yeah, I don't know if I would put it that way, but I kind of agree with that. So I think that Sam believes in this idea of effective altruism because he believes he is best equipped to decide where money should go and how money should be spent to make the world a better place. So I actually think he believes in EA, but more because he thinks he's the smartest guy in any room.

Patrick Boyle:
One of the things that confused me with some of his giving, because you read all of this EA stuff and about how much he cares and this idea that if there's a starving person in the other side of the world, that you should really care about them. But then when you look at his spending, there's a lot of real estate private jets, there's a lot of American politicians, there's celebrities. There doesn't like... I haven't yet heard of the starving person who received a loaf of bread from Sam. What are your thoughts on that?

Tiffany Fong:
No, I agree. I mean, looking at the spending, they spent a lot on venture capital. They are venture VC investments, real estate, political donations. I think there were some charitable contributions as well, but the government certainly didn't want to talk about those. But to me, obviously, there's a disconnect. I'm like, OK, so you're spending. billions of dollars on, I don't know, like advertising and everything like that. I think in Sam's mind, I've posed those questions to him. And in his head, I think he saw it as sort of a stepping stone to get access to more money. So, I mean, in his head, buying this real estate where you in this real estate in the Bahamas might attract top-tier employees to FTX and Alameda. Then it makes the company a better place. And then in his head, I think he was thinking then we'll get more revenue ultimately. But obviously looking at it at face value, I'm like, I don't know. And things like things like private jets. He spent, I think, 15 million dollars on private jet travel, which I guess for a billionaire maybe isn't so much, but obviously, you know, that could have been going to starving children in Africa, Sam.

Patrick Boyle:
Yeah, yeah. Well, onto that, what do you think the goal of his testimony even was? Because there was sort of a build-up that he, you know, he was obviously advised not to. I think he sort of thinks he's smarter than his lawyers and decided to testify. And then I think many people felt there'd be some Hail Mary pass where he'd sort of pull a rabbit out of a hat and, you know, dazzle the jury with something. that would get him off the hook. And then when I heard your account of his testimony, it seems that he largely just, sort of the opposite of Nishad, he didn't remember anything apparently, and just sort of annoyed people. Do you think he accomplished anything by speaking?

Tiffany Fong:
I mean, you know what? I went to every single day of trial and I felt it was going so poorly for him and the picture was obviously being painted in such a negative way that by the time he decided to testify. I kind of felt like, you know what? I don't know if you can make it any worse at this point, because prior to that, I would have said he should not testify, obviously. But there was so much damning evidence and obviously all of his closest confidants were testifying against him. So I just felt he was screwed pretty early on into the trial. So I kind of think it wasn't even the worst decision he made because

Patrick Boyle:
You think

Tiffany Fong:
obviously...

Patrick Boyle:
there was just no coming back?

Tiffany Fong:
Yeah. Like after watching the trial and watching other witness testimonies, I was like, I don't see any shot that any of these jurors find him not guilty. Like I thought there was no shot in hell. So at that point I was like, yeah, I don't know. I don't know if you have anything to lose and it might be good for Sam to sort of attempt to get his side of the story out. So if he's tell you, I don't think it was

Patrick Boyle:
But

Tiffany Fong:
horrible.

Patrick Boyle:
did

Tiffany Fong:
And

Patrick Boyle:
he

Tiffany Fong:
I...

Patrick Boyle:
even do that? Because when he did testify, it's not like he sort of spun a story. As you said, he just largely claimed to not remember things and then the prosecution would read

Tiffany Fong:
Right,

Patrick Boyle:
his text

Tiffany Fong:
like put an

Patrick Boyle:
out

Tiffany Fong:
exhibit

Patrick Boyle:
to him.

Tiffany Fong:
A of where he said that. So Sam, there is the direct testimony where he was just telling his side of the story and basically answering his own lawyer's sort of softball questions that seemed very pre-rehearsed. I actually thought Sam did a decent job in that section as he should, it'd be horrible if he wasn't able to answer questions he already knew were coming. So he actually did a decent part, or a decent job there where he was able to sort of explain things that might look sinister and explain why those things came into place. For example, obviously a lot of us know that Alameda research had a lot of special privileges on FTX. But Sam was able to explain his side of the story in that in the early days, Alameda was the primary market maker on FTX. So there were actually some reasons why they needed some special privileges so that they, so that Alameda and FTX didn't just both basically implode immediately if there was like a tiny issue. And obviously those things still don't look great for him, but he was able to give some excuses and reasoning for why they weren't necessarily sinister from the start. some of these um some of the choices he made. So I actually thought he did decently well in those but once he started getting cross-examined by the prosecution he just wasn't able to answer a single question straight. He claimed to not recall anything. The prosecution actually counted and said that he basically evaded questions or claimed not to remember things over 140 times in his cross-examination and So obviously that was very frustrating to watch, especially I'm sure all the jurors would just, he just didn't look like a transparent guy. And after we had seen him sort of retell his story in his direct testimony where he was retelling the story of how FTX and Alameda started and we started in Airbnb. So you look at this guy and he remembers everything dating back to 2017 about how things started, but once he starts getting questions about things that came much later, but made him look pretty bad, he suddenly. has no recollection, doesn't remember a thing. So the direct testimony I thought went okay for him. Most of the other journalists felt that way too. And then the cross-examination absolutely demolished him.

Patrick Boyle:
And so what happens now, like I guess, you know, in my intro to this, I put forth that there was a chance that they would withhold the sentencing until after the next trial and it looks like that actually is what's happening. Is that what you believe as well?

Tiffany Fong:
Yeah, so obviously Sam was found guilty on all seven charges and he's already, he was already scheduled to have a second trial. I believe it starts on March 11th of 2024. And those are on, I think, five additional charges that he received in superseding indictments after he was extradited to the United States. So some of us, some of us journalists and even some like sort of lawyers in the room feel a bit uncertain about... whether or not that trial will actually go through since he was found guilty of all these other charges. Sometimes apparently those second trials get dropped, but his sentencing is scheduled currently for I believe March 28th if I'm remembering the date correctly. So I guess he could technically do the second trial and then be sentenced for both together, but right now there's

Patrick Boyle:
Yeah,

Tiffany Fong:
some

Patrick Boyle:
because

Tiffany Fong:
uncertainty.

Patrick Boyle:
it would be the same judge, right?

Tiffany Fong:
Yes. Yeah. And I'm sure the judge isn't too pleased with Sam at this point.

Patrick Boyle:
No, it's an interesting thing. One reason I think that they might do the second trial is quite simply because it could look like a bit of a political cover-up if they don't. Because a lot of, in fact, the real fireworks might be at the next trial because it will relate to all of the illegal campaign donations and things

Tiffany Fong:
That's

Patrick Boyle:
like that. And I

Tiffany Fong:
very

Patrick Boyle:
believe

Tiffany Fong:
true.

Patrick Boyle:
the judge is a Clinton nominee. So if he were. sort

Tiffany Fong:
Oh,

Patrick Boyle:
of

Tiffany Fong:
it's-

Patrick Boyle:
seem to be covering that up. It might not look good, but who knows.

Tiffany Fong:
I didn't know that about him being a Clinton nominee. No, that makes sense. Yeah, that's actually been what other journalists I've spoken to have said, that like, because of the campaign finance charge, the second trial has more likelihood of getting the green light.

Patrick Boyle:
Now, when you're at the trial, like the people you speak to there, I saw that Michael Lewis has attended a lot. Are there many people who, like do people generally sort of sit there, hear the testimony and say, gosh, you know, kind of your take that this looks pretty bad? Or are there many people who feel that sort of Sam should be let go? Like what's that like?

Tiffany Fong:
Well, yeah, so Michael Lewis was there and I didn't actually speak to him, but I talked to someone who apparently spoke to him in the elevator and apparently Michael Lewis walked out of there and said, like, I thought he did pretty well. So I think Michael Lewis had a pretty positive take on how Sam did on the stand. But he didn't say that to me, so I'm not I'm not saying that

Patrick Boyle:
Yeah.

Tiffany Fong:
is a fact. But um. I do think that most journalists, we all tend to sort of congregate during the breaks or during lunch and sort of be like, what did you guys think of that? And the consensus is typically pretty unanimous. And we all we all did think that Sam did pretty well on the direct. And then we were all after the cross examination, we were like, he screwed himself. He screwed himself. Doesn't look so good.

Patrick Boyle:
Now, what happens to the others, to people like Caroline and Gary and so on? They've pled guilty. Do they get sentenced at the same time as Sam or is their sentencing separate or something

Tiffany Fong:
Right.

Patrick Boyle:
that's been pre-agreed?

Tiffany Fong:
Yeah, so they pled guilty and they're cooperating with the government, obviously, against Sam. So apparently, based on how helpful or useful they were, apparently they'll get sort of, I believe they're called 5k letters to, I'm not a lawyer, so I'm just trying to remember this from their testimonies. But apparently that will drastically help to reduce their sentence if they were found to be useful to the government. And I... I haven't spoken to actual lawyers about this, but I've had friends who spoke to lawyers and have said that some lawyers who were actually former AUSA prosecutors have said that there is actually a chance that they could walk out of this with no jail time, which in my eyes would be shocking because I think that out of the star witnesses, I actually think Caroline Ellison is nearly almost as guilty as Sam Baichman Fried because she was actually the one to be. doing the dirty work and pulling the trigger on a lot of the, I guess, I was going to say alleged fraud, but I guess Sam's been convicted now, so on a lot of the fraud, because she was actually the one to make a lot of these misleading balance sheets that were sent to lenders and,

Patrick Boyle:
Yeah.

Tiffany Fong:
you know, directly communicating with people. So I would personally be surprised if she walked out with zero jail time. That would seem sort of like an injustice to me. So I've spoken to other people who have said that they could maybe expect the single digits in years in jail time.

Patrick Boyle:
Yeah.

Tiffany Fong:
which I guess seems pretty light given the scale of what happened.

Patrick Boyle:
Well, when you read the series of events, it seems like a criminal conspiracy. There wasn't one criminal in the room and the other's kind of going, have you seen what he's doing?

Tiffany Fong:
Yes.

Patrick Boyle:
And actually, even if you were saying, have you seen what he's doing, you're sort of guilty as well.

Tiffany Fong:
It's funny though because I feel like they each apparently, according to their testimonies, learned about what was happening at very different times. So I don't know if it started from the beginning as something where they all got together and huddled up and said, let's steal customer funds. But it sounded like Gary Wang understood what was happening a little bit before Caroline and then Caroline understood. And then Nishad Singh claimed that he found out about what was happening in September of 2022, which was only months before the collapse. So in some ways it is a conspiracy, but it also sounded like they weren't all like huddling up from the start to steal customer funds. So it's been sort of interesting, yeah.

Patrick Boyle:
Yeah. Well, I guess your big thing is YouTube and Twitter, right? People can follow you. And it's Tiffany Fung. I'll put a link in the description for people to follow you.

Tiffany Fong:
Thank you for

Patrick Boyle:
Tiffany's

Tiffany Fong:
the plug Patrick.

Patrick Boyle:
channel is both informative and hilarious. I think everyone will enjoy it.

Tiffany Fong:
Uh

Patrick Boyle:
And

Tiffany Fong:
oh.

Patrick Boyle:
yeah, and you're on Twitter as well. You're very big on Twitter. And so

Tiffany Fong:
You're welcome.

Patrick Boyle:
yeah, I would recommend people to follow Tiffany.

Tiffany Fong:
I'm so honored Patrick, you're the best. I also want everyone to know how hilarious Patrick is off camera.

Patrick Boyle:
Ha ha ha.

Tiffany Fong:
Patrick is like one of the funniest people I know. I mean, you're also funny on camera, but anyway.

Patrick Boyle:
If you enjoyed today’s podcast, you should go to Tiffany’s YouTube channel to subscribe.  I'd love if you could write a review on iTunes, Spotify or wherever you listen to podcasts.  See you next week.  Bye.