Hello and welcome you are listening to Patrick Boyle on
Finance, a podcast exploring ideas from quantitative finance,
examining events occurring in markets right now and financial
history to see what lessons can be taken away, including
interviews with some of the most interesting people in the world
of finance. To learn more about the podcast,
visit on finance.org. A federal prosecutor told.
The 12 person jury on Wednesday that Sam Bankman freed 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.
Bankman Freed was convicted on all seven charges by a New York
jury that's likely to send him to prison for decades.
Prosecutors plan to try him on several other counts in a
separate trial that's expected to take place early in 2024.
Evidence was given that some 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 Alameda's
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 to get higher bonuses when
he worked at Jane St. This may be true, as he had a
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.
Sam's longtime friend Gary Wang began his testimony by saying
that he had committed financial crimes with Sam explaining 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 of customer money.
During his testimony, Wang was shown an SPF tweet claiming that
FTX had $100 million insurance fund.
He explained that this was untrue and that the number that
they publicized was calculated. By taking the daily trading
volume, multiplying it by a random number, and dividing it
by 1 billion. All of this is bad.
And if you've been considering doing any of these things,
hopefully you're learning from Sam Bankman Freed's mistakes.
The jury 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 quick.
Bankman Freed is said to have shown no emotion as the verdict
was read out. Now it's quite possible that he
was playing video games at the time and didn't hear what had
happened. I I don't really know of what
the rules are around that. Some could still face further
charges in the trial scheduled for March of next year on
allegations including bribery of foreign officials and campaign
finance violations. There's apparently a chance that
the judge could hold off on sentencing until after the
second trial, though I'm not sure how likely that actually
is. Additionally, it's possible that
Sam receives such a severe sentence on these seven charges.
That the prosecution dropped the additional charges against him,
the 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 Free decided, against
his lawyer's 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's been
convicted of and she is here to explain the highlights of the
trial. OK, so welcome to the video,
Tiffany. You've been covering this whole
thing for quite some time. In fact, I think it's the the
best coverage on the Internet. Can you tell me what the vibe
was like at the trial? Like what it's like being there?
God, I mean, the days vary at first of all, they're early
days. For anyone who wants to actually
attend the trial in person, there were some.
Days that I was heading to court at one or two.
AM. 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 Bateman Freed's reactions have been and what his parents
reactions have been. Sam first of all is not the most
emotional person in the 1st 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 are some days where they're like very clearly
visibly upset, very understandably so.
So a lot of tension in the room, but it's been interesting.
To watch it all. Unfold in person and.
What were the big was was Caroline and Sam, were they kind
of the two most important or the most interesting people at the
trial? 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 theatric way. He like he he was describing
private, one-on-one. Conversations with Sam Bateman
freed 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. So Nishad was.
Actually the most interesting to listen.
To out of the testimonies in my opinion and I.
Think other other journalists. Felt the same but.
All of the star witnesses. Had had bombshells.
So every day has been, there's just been so much information.
That it's all just. Becoming sort of a blur.
In my head. 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.
Yeah, Caroline really just threw in a a banger there with the
they weren't actually the prosecution or I think I don't
remember if it came up. In the director or the redirect
but or 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 100,000
or $100 million. And I think that.
The. 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.
I think it makes sense. If you have a story like that,
you should tell it, you know, like you're this is your one
time on the stage, you've got a good story about Thai
prostitutes. Get it out, you know.
She did. She certainly did.
Made headlines. Good on you, Caroline.
And I guess other things that she put forth was related to
sort of Sam's, what can we say sort of morality that that he
felt that rules like don't lie and don't steal weren't
necessarily justified. Like do you, do you believe
because it seems Michael Lewis sort of.
Fell for this story that Sam's overwhelming thing is this urge
to do good through charitable givings and that almost any
crime is justifiable based on that.
Do you do you think he believes that?
Is this just a story like? What's your take?
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.
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 that 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.
One of the things that confused me with with some of his giving,
because you read all of this EA stuff and about how much he
cares and this idea that you know, if there's a starving
person in the other side of the world that you know you, you
should really care about them. But then when you look at sort
of his spending, there's a lot of.
Real estate, private jets, there's, you know, a lot of
American politicians. There's celebrities you know,
there doesn't like, I haven't yet heard of, like the starving
person who received a loaf of bread from Sam.
Like, what are your thoughts on that?
No. I agree.
I mean looking at the spending they.
Spent a lot on venture capital. They or, yeah, 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 and then in his head I
think he was thinking and we'll get more revenue ultimately but.
Obviously looking at it at. Face value I'm like.
I don't know. And and things like things like
private jets, He spent I think $15 million 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.
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 dazzle
the 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 like is is that like, did do you think he
accomplished anything by speaking?
I mean, you know what? Like I 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 and evidence. And obviously all of his closest
confidants were testifying against him.
So I I just. Felt.
He was screwed pretty. Early on into the trial.
So I kind of, I kind of think it wasn't even the worst decision
he made. You think there was just no
coming back like it it? Like after watching 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. But did he even do that?
Like because when he did testify.
It's not like he sort of spun a story.
He as you said he just largely claimed to not remember things
and then the the prosecution would read the.
Right. Like put a Exhibit 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. Lawyers 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.
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, 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 100. And 40 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. These the story of how.
FTX and Alameda started and oh, 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, you know, 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.
It went OK for him. Most of the other journalists
felt that way too. And then the cross.
Examination absolutely demolished him.
In my intro to this, I 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 is that what? You you believe as well?
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. The some of us journalists and
even some like, sort of. Lawyers in the room feel a bit
uncertain about whether or not that 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. Yeah 'cause it would be the same
judge, right? It's.
Yeah. And I'm sure the judge isn't too
pleased with Sam at this point. 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 like that. And I believe the judge is a
Clinton nominee. So if he were.
Sort of seem to be covering that up.
It might not look good but. Oh, I didn't know that about him
being a Clinton. Nominee No.
That makes. Sense.
Yeah, that's actually been umm. 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.
Now when you're at the trial, like the people you speak to
there, I saw that, you know, Michael Lewis has attended a
lot. Are there many people?
Who like like do 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 that
sort of Sam should be let go like.
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 that is a. Fact.
But 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. 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 that's been pre agreed or?
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 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 Bateman
freed 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 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.
Which I guess seems pretty light given the scale of what
happened. When you read the.
Series of events, it seems like a criminal conspiracy.
Like it's not. There wasn't one criminal in the
room and the others kind of got, have you seen what he's doing
like and and actually even if you were saying have you seen
what he's doing? You're sort of.
Guilty as well, so. Right.
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 Wong
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 for the start to to steal customer.
Funds. So it's been sort of
interesting. Well.
I guess your big thing is YouTube and 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's channel is both
informative and hilarious. I think everyone will enjoy it.
And yeah, and you're on Twitter as well.
You're very big on Twitter. And so, yeah, I would recommend
people to to follow Tiffany. I'm so honored, Patrick.
You're the best. I also want everyone to know
how. How hilarious.
Patrick is off camera. Patrick is like one of the
funniest people I know. I mean, you're also funny on
camera, but anyway. Thanks for tuning into this
week's podcast. If you'd like to help out, I'd
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Grow, have a great. Week and talk to you again soon.
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