Halfway via Sam Bankman-Fried’s cross examination, as prosecutor Danielle Sassoon went via a brutal line of questioning like a scorching buzzsaw via a butter cow, I discovered myself reflecting on how good the typical particular person is. Possibly they don’t know calculus. Possibly they’ll by no means learn Ulysses. Possibly they will’t code. However they positively know the way to determine bullshit once they see it.
So should you, like Bankman-Fried, have moved into the Clintonian territory of “it is determined by the way you outline ‘buying and selling’’” you accomplished fucked up, son. Make no matter “refined” argument you want; even the silly will see via it.
At numerous factors throughout Sam Bankman-Fried’s cross examination, I noticed jurors shake their heads, frown so laborious their lips disappeared, and make extended eye contact with one another. Personally, I now have a Pavlovian concern response to the phrase “Is it your testimony that…”
On the stand, Bankman-Fried’s demeanor prompt a spoiled youngster complaining he didn’t get the most important scoop of ice cream at his party. He didn’t need to reply the prosecutor’s questions, or his lawyer’s questions — he wished to reply his personal questions, which he appreciated higher. He usually replied to yes-or-no questions with nonsense.
This did reveal Bankman-Fried’s priorities: getting accounting proper was ranked ninth
The day didn’t begin as an precise catastrophe. The truth is, Bankman-Fried’s direct testimony was the strongest he’d given to date: clear, coherent, plausible. On his residence territory of direct examination moderately than cross-examining the prosecutors’ witnesses, protection lawyer Mark Cohen improved his capacity to order a easy chronological narrative, even when he as soon as instructed us to maneuver ahead in time from November seventh to… November seventh.
However Bankman-Fried’s recounting of occasions was supported by little or no different proof. Gary Wang, Caroline Ellison, and Nishad Singh all had textual content messages, paperwork, code snippets, and so forth to corroborate their variations of occasions. Bankman-Fried’s testimony had little or no of that, and what little it did have was fairly thin.
We had been launched to a doc the place Bankman-Fried listed his priorities, together with: “getting accounting proper on FTX.” Cohen and Bankman-Fried used this to indicate how devoted Bankman-Fried was to attending to the underside of the overall fiasco with Alameda’s cash. The concept was to show in actual time FTX’s income and bills, the place its financial institution accounts had been, how a lot investor cash it had, and so forth. This did reveal Bankman-Fried’s priorities: getting accounting proper was ranked ninth.
So for the tales Bankman-Fried wished to inform, we needed to depend on… Bankman-Fried. We moved on to Bankman-Fried’s argument about hedging, which I nonetheless don’t perceive besides as a means for him to say he’s a wiser dealer than his ex-girlfriend, the previous Alameda Analysis CEO Caroline Ellison. The precise proof suggests Ellison is each a greater dealer and far savvier than Bankman-Fried. She modeled out a threat state of affairs that matched nearly precisely what occurred at FTX, as an example, to attempt to maintain him from sinking $2 billion in enterprise investing. She can be cooperating with the federal government. If I’ve to wager on considered one of them, I’m going “balls long” Ellison.
Bankman-Fried’s different main process was determining the way to clarify away the notorious “FTX is okay. Belongings are high quality.” tweet. Based on Bankman-Fried, he actually believed that on the time. On November eighth, Alameda was nonetheless solvent, he stated. Virtually all the different occasions occurred precisely as others had described them, besides that Bankman-Fried sounded extra heroic on this telling, if solely as a result of he was not doing any crimes this time.
Bankman-Fried claimed to have been “not concerned as a common precept in daily buying and selling,” however this turned out to rely extremely on how one defines buying and selling
Then we acquired what I had been ready for: the cross examination. And whereas Bankman-Fried’s direct testimony was brief on contemporaneous proof, the cross was not. Sassoon was a matador in kitten heels, baiting Bankman-Fried earlier than driving her sword via his shoulders.
Bankman-Fried claimed to have been “not concerned as a common precept in daily buying and selling,” however this turned out to rely extremely on how one defines buying and selling. Sassoon shortly launched the “Vertex” Sign groupchat for discussing Alameda’s buying and selling. In it, we noticed messages the place Bankman-Fried requested the group how a lot of two tokens, OXY and MAPS, the group had purchased. He then prompt Alameda can buy $1 million to $2 million of every over the subsequent few days. (Bankman-Fried denied that this was him giving directions, which relies upon extremely on how one defines giving directions.)
We additionally noticed Bankman-Fried giving instructions on Japanese authorities bonds. Hedging is a type of buying and selling, and Bankman-Fried had simply testified about giving Ellison instructions on hedging. Then, switching to a December 2022 recording of a Twitter house, we heard Bankman-Fried say he was “in no way concerned within the buying and selling and hadn’t been for years” at Alameda. “I used to be deliberately not getting concerned in it” due to attainable conflicts of curiosity. Additionally in an interview with the Monetary Instances, Bankman-Fried stated he’d walled himself off from buying and selling.
I glanced over at Barbara Fried, the defendant’s mom. She seemed to be biting her nails.
Sassoon moved on to a collection of questions on whether or not Bankman-Fried recalled extraordinarily particular issues. Did he recall saying that FTX had reformed how crypto exchanges labored? That he had constructed a accountable system? That FTX was a considerate change? That FTX was offering readability and transparency to the crypto system?
To every of these questions, Bankman-Fried replied, “No, however I may need.”
After which Sassoon performed a clip from FTX’s official podcast. You’re by no means going to guess what he stated on the pod.
Each single query was adopted by proof of Bankman-Fried publicly utilizing the exact language Sassoon had supplied
There was extra. Had Bankman-Fried referred to FTX as protected in quite a few public statements? He couldn’t recall. Did he bear in mind tweeting that the suitable variety of points with regards to a shopper’s cash is zero? He couldn’t recall. Had he tweeted that mendacity to prospects broke “sacred guidelines of conduct” everybody is aware of to comply with? He couldn’t recall. Did he keep in mind that he supported regulation solely so long as it protected shoppers? He couldn’t recall.
Each single query was adopted by proof of Bankman-Fried publicly utilizing the exact language Sassoon had supplied. A number of journalists had been within the courthouse — some even within the courtroom — as their articles about Bankman-Fried had been learn aloud. It was apparent to everybody within the courtroom what was occurring. Bankman-Fried caught to his “don’t recollects” anyway.
Nonetheless, he hadn’t made any of these statements below authorized oath, had he? Nicely… that remained true till we reached his Congressional testimony. Bankman-Fried learn aloud testimony he’d submitted to Congress: that buying and selling platforms’ obligations included sustaining ample liquid property that prospects might withdraw on request. That platforms ought to guarantee acceptable bookkeeping to stop misuse of buyer property. Guaranteeing acceptable administration of dangers. Avoiding conflicts of curiosity.
Sassoon instantly adopted this with direct messages Bankman-Fried had sent to Kelsey Piper, through which he stated this was all simply public relations, and “fuck regulators.”
The autumn of FTX was in a means extremely infantile: a nerd posse working away with a bunch of different folks’s cash within the stupidest and easiest way attainable
At this level, my notes merely learn “Jesus fucking Christ” in all caps.
Because the day wore on, I noticed the temper within the jury field darken. A minimum of three jurors had been visibly fed up with Bankman-Fried’s “don’t recall” adopted by the precise assertion he’d been requested about. The exceptional factor was not that Sassoon had used Bankman-Fried’s many public statements to make him sound like a liar. It was that by denying he remembered making them so persistently, Bankman-Fried made himself sound like a liar.
As soon as that was completed, Sassoon moved on to the meat of the cross. A number of statements, from a number of interviews, featured Bankman-Fried saying that Alameda had some particular privileges — which was, in fact, one thing Bankman-Fried had additionally denied to prospects.
Then there’s the large loss from MobileCoin that Alameda took on whereas below Bankman-Fried’s official management. Not one of the different backstop liquidity suppliers wished the place, Sassoon requested, as a result of it was a “loser” — proper? As Bankman-Fried hemmed and hawed, Sassoon identified the loss value Alameda a whole lot of tens of millions. Had Alameda not taken it on, FTX would have booked the loss itself, she identified. And FTX, in contrast to Alameda, needed to share its books with buyers. Scapegoating Alameda let FTX stay pristine, which made it a lot simpler to draw VC funds.
However Sasson didn’t go away it there. The loss occurred as a result of somebody had exploited a number of loopholes on FTX in an effort to make the commerce, she famous. Did Bankman-Fried inform buyers about this exploit? He didn’t. Did he inform prospects? Nope.
Behind all of the finance sheets and code bases, the autumn of FTX was in a means extremely infantile: a nerd posse working away with a bunch of different folks’s cash within the stupidest and easiest way attainable. I perceive Bankman-Fried went to MIT and majored in physics and was a profitable dealer on Wall Road. However sitting on the stand, he resembled nothing a lot as a baby who’s damaged a household heirloom and is insisting his invisible pal did it.