Pushkin. Hey there, it's Michael Lewis. Before we get to this episode, I want to let you know that you can listen to each episode of Judging Sam The Trial of Sam Bankman Freed ad free by becoming a Pushkin Plus subscriber, and with your subscription you'll also get exclusive access to ad free and early bingeable podcasts like Paul McCartney's new podcast McCartney A Life and Lyrics, Malcolm Gladwell's Revision Is History, The Happiness Lab from Doctor Lorie Santos,
and tons of other top shows from Pushkin. Sign up an Apple Podcasts or at pushkin, dot fm, Slash Plus. Welcome to Judging Sam, The Trial of Sam Bankman Freed. I'm Michael Lewis. Court is on a break until Thursday, October twenty sixth, the day we expect the prosecution to rest their case and the defense to begin there possibly
even with the beginning of Sam Bekman Fried's testimony. I'm here with Rebecca Mermelstein, defense attorney, former prosecutor and partner at O'melvinie and Myers, and also with Lydia Jean Cott, our intrepid courthouse reporter. I should note we're recording this conversation on Monday, October the twenty third Lydia Jean, I imagine you have some questions you're dying to ask, Rebecca, and I understand you might have some for me too. Where do you want to start, Rebecca?
I would actually love to start with you. The prosecution has pretty much wrapped their case, and I wonder, from a distance from how you've been watching, what stood out to you.
I think that what stands out is really how overwhelming the evidence is. The prosecution has put on a very strong case. We've talked about before how many cooperating witnesses there are, but you don't know until they testify if they're going to be good witnesses, if they're going to be good at explaining what happened, if they're going to fall apart on loss examination. And we do know the answer to that now, and I think they were strong
witnesses for the government. I think the cross examination did not buy and large undermine the core testimony, and so I think the government's done a good job.
How do you feel the defence is done? You're now a defense attorney, so you can look at it through that lens.
I am and I feel compelled then to preface it by saying, this is a really hard case to be the defense attorney in, and so there's only so much they can do. I think from a distance people often look at a trial and they look at the two sides and you say, well, sort of, who's the better lawyer. That's who's winning. But it's not a mock trial exercise.
The two sides don't have equal evidence and ammunition, and the defense has to play the cards that they got dealt, and so often the deck is very, very stacked, and it's not really a battle of better lawyering. I don't think they've really scored a lot of points. Were there points that they could have scored and they haven't scored. It's hard to know from from this distance if there's
more they might have done. But at the end of the day, they haven't really undermined I think the core allegations. To me, they haven't suggested that these cooperators are lying. And if these cooperators are telling the truth, he's going to get convicted. So I think it's not going well for them.
One thing that stood out to me a lot about the prosecution is the extent to which they're really telling a story, like to the point where it feels like a movie almost. There was one moment when Nishad saying one of the cooperating witnesses, was on the stand and he talked about this heated conversation he had with Sam bankman Fried when he said he realized that Alameda had
taken money from FTX that it couldn't pay back. And this conversation was on the balcony of this penthouse in the Bahamas, and the prosecutors showed a picture of the balcony, and then the picture was in the evening and they had Nishad explain where he was standing and like where Sam was. It didn't seem to be part of the legal making of the case, but it feel like for the screenwriters who are in the courtroom, and I think there were some, they were just handing them a scene
on a silver platter. And I wonder what you think about that, Rebecca.
Well, I totally agree with you. That's not a piece of evidence that's important to the key facts of the case, but it really does give you some of the color about being able to think back and sort of think about what it would have been like on this luxurious balcony, and I agree that the prosecution has done a nice
job of bringing moments of drama to the trial. People think criminal trials are all going to be a few good men and big moments, got you moments, and really actually it's often a slog of evidence that you have to get through. But they have done a nice job
of finding those kinds of moments. One I really liked was that the lawyer for FTX was testifying mister Son, and he was describing a conversation that he had with Sam bankman Fried after Apollo had it started to ask questions about the missing money, and in mister Son's recitation of it, he says, you know, Sam asked me for explanations,
like what might we say about this? And Son's reaction was, well, like, you could try to say this, or you can try to say that, but these are not legitimate explanations, and he was clear with Sam that they're not legitimate, and Sam understood they were not legitimate. And then the prosecution immediately played a clip of Sam Bekminfried on kind of his post collapse press tour giving those explanations to a
reporter and then turned off the tape. Circled back to Son and said, you know, is that the fake explanation you gave him? Essentially? You know, yes, no more questions. Prosecutors and all lawyers are thoughtful about trying to end on a note that's really strong. We know just about the way people's minds work, that there's a recency and a primacy, right the thing that happens first, that the thing happens last, and you want to really nail those moments. And they're doing a great job.
You know, you just answered a question I had after it collapsed and Sam started doing all this media and the lawyers we're saying to me like, this is just not going to help. And I kind of thought, like, how could he make it worse? It was so bad already, and I wondered how that stuff would ever be used, And this was an example like how it gets used.
Yes, I think a lot of us wondered if it would come back to bite him and predicted it would, and it did.
Judging Sam will be right back, welcome back. What are the arguments for and against him testifying?
Arguments against are the obvious ones. He has a right to remain silent. People are familiar with that idea from television, from movies, and he doesn't have any burden of proof. He doesn't have to do anything. And so what his lawyers are presumably trying to do is poke all kinds of little holes in the government's case to give themselves enough ammunition and closing to say, look, we don't know exactly what happened here, but we don't have to tell you.
They fail to do their jobs. That's the story. If he gets up and he puts on an affirmative narrative by telling his own story, then the government gets to poke holes in that story. And even though that doesn't change the presumption, the government keeps its burden of having to prove its case beyond reasonable doubt. As a practical matter my experiences, the minute the defense puts on that
kind of real affirmative story, you lose that presumption. It becomes really like, well, which one do I like more as between the two, And that's a very bad thing for a defendant. And of course he's made, as you say, a lot of public statements. The government has a sense of what story he might try to tell, so they're going to be armed and ready. If he tells the story he's been telling, and if he tries to tell a different story now, then it's a different problem, which
is he's already locked in. He's already committed to what his explanation is in his big press tour. He can't now offer a third explanation because the government's going to come out after him with that too. So I think the downside in that respect is obvious. In terms of what the risks are to conviction. I think in a case like this where conviction is looking very likely, the other big risk of testifying is pissing off the judge.
Yeah, that's what I wonder, right.
And this is a judge who's been kind of cranky with him for a while. So you don't want to do that. If you testify and you tell a story that, by virtue of its verdict, the jury essentially says it
doesn't believe. Right. If you get up and you say I didn't know this was happening, or I knew it but I didn't understand it, or I thought it was okay, and the jury convicts you anyway, then the jury has more or less said we think you were lying, and there are specific enhancements that's sentencing for having done that and more than that, you really then have a judge who says, sitting here a year later, after all of this,
you're still not sorry. You still haven't accepted responsibility, and that's going to put you really in a very marked difference, I think, to all these cooperators in this case, because one thing that's really noticeable about these guys is how fast they started cooperating with the government, right, how quickly they came in and said, we did it, it was wrong, we knew it was wrong. And how remorseful they've been
on the stand. I think how much they've owned that they were wrong and that they knew it was wrong. Not all cooperators are quite as good at that, And so you have everyone else saying we knew this was no good all along, We're really sorry, and the minute the wall came tumbling down, we tried to accept responsibility. And here you have Sam being a holdout, fighting and fighting and fighting against it, and I think you might see real additional sentencing exposure from doing it. So big risk.
What's the upside. It's a hail Mary, right, it's a hail Mary. Things are not going well. I think if you asked one hundred white collar lawyers one hundred are going to tell you he's going to get convicted, and what can you do? At this point the government's proof is in. There's not much you can do left to undermine it. The defense has said they may need a week for their case, so maybe there's evidence. I'm not predicting. There may be things coming, But the hail mary is
you put him on the stand. You either get the jury to believe that he was naive enough or not paying attention enough or sympathetic enough to not have known what was going on. I don't think that's going to be a likely outcome for him. You'll know from knowing him better, Michael, what he's going to seem like on the stand. But I'm not sure he's going to do himself any favors there either. But it's a hail mary because there's nothing left to do about that.
What do you imagine the effect on his sentence could be if he gets up and he pisses off the judge.
It's really hard to quantify. So the Sentence and Guidelines are a very long and complicated book that provides judges with recommended ranges for sentences for every kind of case. And so for every kind of crime there's a base number, and then there are pluses and minuses. If you sell drugs and you had a gun, that's a plus factor. If you only played a small role, that's a minus factor.
And it's an algorithm, it pops out a number, and then there's a whole part of the algorithm that relates to people's prior criminal history, which won't be relevant here. So as a technical matter, you get a two point enhancement on that algorithm for having lied. And how much of a bump that is in mathematical months depends on where you started in the analysis. I think because of the loss amount here, the recommended sentence is going to be off the charts anyway, so it won't actually move
the needle in terms of what the recommendation is. How much does it move the needle for the judge, it's really hard to say. Very occasionally judges in imposing sentence will say, I was going to do acts, but because of this, I'm going to do Why you might hear that here, you might not, you know, twelve to twenty four months. I'm making it up. No one really needs, but that's my guess.
That's what you think you would add, Yeah, but on top of what thirty years?
It is so hard to predict what Judge Kaplin is going to do here. I think the recommended sentence is going to be essentially life because the loss a mounts so high. That's not useful to anyone, right. I think it's going to be between ten and twenty five years.
Huh, You've been right about a lot so far.
Well, this one's very hard to predict. I've been wrong about sentencing many times in my career, Michael.
I'm curious, as someone who has spent time with Sam Magmanfried, what do you think we could expect if he were to take the stand.
You know, he's expected to take the stand. I would not be surprised if he changes his mind. I think his lawyers think that the likely effect of taking the stand is not twelve to twenty four months, but a lot more. I think they think the judge is just waiting to pounce on that. So he's going to be sitting there thinking am I going to get fifteen years? Am I going to get forty years? I think they
feared that kind of effect. So there's a part of me that thinks if as a betting man, and you gave me the odds right now, and the odds are probably twenty to one that he's going to testify. I take those if he takes the stand. You know, it's tricky because if you look at the whole case, I mean, nobody disputes like what they agreed all agreed was true was so damning just to start with, right, all his money was never in FTX. It started out in Alameda, so the funds were mixed all the way back in
twenty nineteen. The argument's all about when in state of mind. So it seems that the prosecutors and their witnesses have sort of agreed that people really started to wake up to this as a big risk in June when the crypto markets collapsing, And so I see, Sam is going to try to tell a story about how out of touch he was from June until November, and it's not going to be believable because he's got all these other people saying we told him. There are a couple things
I've learned that have been interesting to me. One was the way he active avoided the meetings to discuss the subject that came up. Nobody made a huge deal about it. But that was interesting to me, and that it was almost like a willful act. I mean, if someone tells you that there's a bug and it looks like we're short sixteen billion dollars, but maybe actually know that we're short less than that. You're in that meeting, right, You don't avoid that. So he just has too much to
explain how he will seem. I bet the jury after they listened to him for a couple of days, it's not going to change their decision, but it's going to make them feel a little differently about it. They'll see a person I don't see how they do anything but convict him, but it will change the tone of the conversation a bit. The whole thing's been riveting to me, Rebecca, I it's been interesting to me to watch the way a lawyer tells a story it's and also the way
the court constrains the story it can be told. Let's say all the money's actually there, and after a sentenced John Ray says, oh, we found it all. It was all just in these weird accounts in Asia or or the things he bought are worth way more. The customers can get all their money back now that actually doesn't affect the legal outcome, right, nobody cares. Nobody cares. However, people when you tell the story story, people care. That's interesting.
So it's not just all stolen and gone. It's there, but that you can't get that in the courtroom.
I think you'll hear prosecutors say all the time thin to win, and what they mean by that is, don't take on problems you don't have to take on, don't prove more than you have to, don't open the door to some side, show that's going to be a distraction and confuse the jury. And this definitely feels to me like it's in that zone. Who cares, Right, it's still a crime either way. Lots of the money went where
it wasn't supposed to. Don't sweat the details. Maybe we'll find out the bankruptcy could be relevant at sentencing, right, It will be interesting to see if at sentencing, assuming there's a conviction, I imagine you'll see an argument which is, look, this was a huge mistake, but at the end of the day, everybody got paid back. Maybe there was. You know, Sam will say I always thought it was going to
work out. The prosecution will say he got really lucky with this completely other thing that he couldn't have predicted was going to save him. But bottom line, sort of everyone got their money back, and so that should be taken into account. I expect you'll see that argument.
Yeah, but it doesn't seem like the judge would be that receptive to that argument.
I don't think so.
Yeah.
I think the judge will say, you got lucky, and that's great, and I'm glad people got their money back, But what you did, right, had the risk of losing everyone's money, and you did it for your own selfish purposes. It didn't care, right.
I got a question Rebecca that I it's just been flicked around in the back of my mind. So as all as started, what does it mean to prove intent? Intent to what? Intent to misappropriate the funds?
Is?
What are they What intent do they have to prove?
Yeah, so it's an intent to defraud under the statute. But I think you're right that here it's really an intent to misappropriate the funds because well, I'm certain you'll see this in the jury instructions. A standard instruction in a case like this is going to be that it is not a defense if the defendant believed it would
all work out in the end. Right. So if you work in a small company and you take money out of petty cash to pay your rent, but you know you're going to be able to pay it back, right, that's still stealing and that is going to be the instruction you're going to get. I would expect in this case, it doesn't really matter if Sam thought he could work it out in the end, as long as what he was doing was taking customer money that he wasn't authorized to take.
Gotcha.
So, best case scenario, what could Sam say on the stand that would help him.
I'm not optimistic there's anything he could stay on the stand that would help him. I think that in a ideal world that is really hypothetical. A defendant could be so sympathetic that they could encourage a jury to nullify right. So in our system we allowed jury nullification. It's a very strange concept. We don't tell the jury they have the right to do this. In fact, if they asked, they would be told that they could not do this.
They're instructed they must follow the law, that it is not for them right punishments for the judge, and they have to follow the law. But if a jury nullifies, if after the fact you discover that the jury got in the room and said, oh, yeah, that guy totally did it. But we really don't think this should be even be a crime, right, we think marijuana should be legal, So we're not going to convict him. That there's no recourse for the government. That's it double jeopardy and the
case is over. So you could imagine a defendant, and I don't think this is a good case for that. You can imagine a defendant who was so sympathetic, so young, so naive, so compelling, that even though the jury really thought they had done it, the jury didn't want to convict them. Is that gonn happen here? I don't think so, and I'm not sure he has the right personality for that. But best case scenario, a defendant could hope for that, And so if I were his lawyer, I would tell
him not to testify. I think I would understand why someone might feel it was the only alternative. But I don't think he's going to help himself. And there's so much to confront him with. He's made so many public statements that I think it would be a mistake, and I don't think he's going to because no one knows. But I think that he has learned his lesson now that he has seen at the trial the way in which the government has used his words against him, and
he's going to decide to sit quietly. But we'll see.
If he doesn't testify, what will happen? What will the defense do?
They may have other witnesses they've suggested that they do. Many of their experts have been precluded, so I don't know who's left, but you can imagine them calling a few small witnesses or nothing. They'll do nothing. They could offer some documentary evidence if they wanted to, but they could have a very small.
Case stick around. Judging Sam, we'll be right back, Welcome back.
Now that your book's been out for a while, has anyone any characters in the book reached out about either what they're thinking about the trial or the book.
Lots at least ten FTX people, most of them like Zaane Tacket or Ramnik Aora or pretty main characters in the book have reached out to say that it captured the feel of their experience, and I think people like being reminded of why they got charmed into the situation in the first place. Some of these people are still as furious as hell at Sam and most of the employees FTX are furious because they went down with him. You know, they had all their life savings on the exchange.
So that's how they feel. They feel like I imagine the jury will feel if he gets up and talks. They're furious it happened. They're angry with his decision, but towards him. Mainly they feel just sadness, a kind of sadness slash pity. It's been kind of interesting. The stuff in the trial has been their details that have been riveting to me. You listened to it in one way, Rebecca, I listened to it in another. I'm not actually paying a whole lot of attention to is he going to
be convicted or e quitted? Because I just assumed it was done when it started almost. I mean, the whole thing was a mess from the start. You should never have all the funds in Alameda. Put that to one side for a second. All the problems are so concentrated
in such a short period of time. There are a couple of exceptions, but mostly they're talking about the period from June to November of last year, and watching them talk about it and talk about how they felt about it is so interesting to me because I was with them and there was no surface indication that anything had changed in their mind except Nishad had started to talk about we shouldn't spend all this money. That was the only thing I noticed, and I was in a viewing
all of them. I'm not Gary because Gary didn't speak. If it's true the story they're telling, and I don't have any reasons to doubt the veracity of it, how good they were at not seeming like anything had really changed. And I think the truth is that part of their brains didn't want to believe that anything had really changed, the part of their brains thought this is all going to work out, because they'd been through this once with
Sam before, you know, back in twenty eighteen. They'd watched this chaos ensue, money be lost, everybody calling him a criminal, and then they find the money. You know, I think they thought I kind of thought Sam had magical powers.
How did it feel for you to be learning that they It seems like knew this thing and were acting like it wasn't happening while you were there.
So I didn't know what Sam knew, what Sam didn't know, I knew who what Sam told people he knew and didn't know. A couple things surprised me. The first thing, that really is it surprised me that not all of them knew that, that Nishah doesn't know that till September. It surprised me that Caroline was so insistent about her interactions with Sam because they were busted up. In Sam's telling, they weren't talking very much because none of this stuff comes up in her memos to him. So how did
I feel about it? It tilted my calculation just a bit towards it's really not likely that he didn't know anything. And this shacker was like be willful, not wanting to be at the meetings, that kind of stuff. That was sort of a tell I have all kinds of questions about the decisions he made. The questions that are all right.
So this thing blows up in May or June that the crypto markets collapse and these people who are lending US crypto demand their eight billion dollars back, and Sam makes the decision to give it to him, and what he's given to him is an effect customer money. Why didn't you just let it go? Like it's just a crazy decision, It doesn't matter the lawsuit, But I would like to poke and prod him on that that is
the active decision. There is a moment where he could have just said, we're stiffing these lenders and Alan Mete his bankrupt. But FTX is fine. And I mean, I have theories about it's sort of the psychology of it. My theory is that it is his identity was all bound up in being this great trader and it just cut to who he was to let that thing go, and he just couldn't imagine the shift in his perception, the perception of him.
I think it's interesting that you say that it was his identity was bound up in being the successful trader and that's why he made the decision, because it also goes to why he went to trial. Right, Why didn't he look for a plan. Now we don't know that he didn't, but it sounds like there really were never any serious plane negotiations. Right, he was never interested. It
was clear there was going to be a trial. Wh he knew what happened, right, he knew what Caroline and Nishad and Gary were able to say, and in advance of the trial, he was given all of the they're called three to zero two's right, the reports the FBI wrote of the interviews with them, he knew what they were in fact going to say, but he still went to trial. And I think when people do that, it's often this inability to accept the mantle of failure, of
embarrassment of admitting that you knew. It's even in the face of all that, it's easier to be able to maintain to yourself that it's not true.
In his case, if you look over his life, he preserves a kind of romantic notion of himself in a totally socially isolated situation, and that romantic notion of himself isn't paid off, isn't confirmed until he collides with wall Street, and wall Street says, yes, you're absolutely right, you're a genius, that you're a genius at this this kind of decision making, and Alimeda was home to that kind of decision making. FTX wasn't I mean, FTX was just a dumb exchange.
It was the risk taking was all in Alameda, and it was such a threat to who he was to have that thing go down.
This was fun, This was fun. I have a homework assignment for LJ. What's my assignment? Okay, So it's a maybe an urban legend among trial lawyers, but everyone says that if you look at the jury when they come in with their verdicts, because what'll happen is, at some point the judge is going to say we have a note, or he's going to say we have a verdict. They're going to bring the jury in and there's someone's gonna
be the four person. They're gonna have an envelope in it, and it's very dramatic, right, They're going to pass it to the judge. He's going to quietly open it, he's going to look down, he's going to read it. Everyone's looking at his face and he gets to know what the verdict is before everyone else. Then he passes it back to the to the juror, and the juror stands up and the judge's deputy will say, as to count one, how do you find and they'll go through each of
the counts. Everyone says that if you watch the jurors faces when they come into the courtroom for that, if they look at the defender they're going to acquit him, and if they look away, they're going to convict. And I don't think it's true, but I do think you sometimes see what's happening. Sometimes they stare down the defendant in anger, and you can tell that they really sort of are personally angry at him. And sometimes you can't get anything from them. So we're not there yet, but
I won't be in the courtroom. I'm curious to see what they do when they come in. I will report back, all right.
Al Jay, I will see you on the courthouse steps on Thursday.
See you soon, and thank you so much. Rebecca.
Bye, guys, bye bye.
We'll be back in your feed soon with more expert analysis and news from Sam bankman Fried's trial. Thanks for listening. Olivia Gencott is our court reporter. Catherine Gerardeau and Nisha Venken produced this show. Sophie Crane is our editor. Our music was composed by Matthias Bossi and John Evans of stell Wagon Symphonet. Judging Sam is a production of Pushkin Industries. Got a Question or Comment for Me is a website
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