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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 revisionist 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. Sam is the founder of a cryptocurrency exchange called ftx that at one point was worth forty billion dollars. Some thought that he'd bring cryptocurrency into the mainstream. Others thought that
he might save the world with his philanthropy. But instead his fortune is gone and he's been charged with financial crimes that could put him in prison for the rest of his life. I spent a year and a half reporting on Sam. I was there for the good days, which were astronomically good, and I was there for the catastrophic collapse. While Sam was under house arrest, I visited him often, and I wrote a book about it all. It's called Going Infinite, The Rise and Fall of a
New Tycoon. You can hear more about the book in Sam's Backstory in our last episode. But now we're picking up where the book left off and following the trial that will decide Sam's fate. I won't be able to go every day, but producer and reporter Lydia Jane cottwill and she and I will be talking regularly about the twists and turns of the proceedings and will bring you more like interviews with experts, eyewitnesses, and sources I've developed
throughout my time reporting on Sam. In this episode, lydia Jene has questions for me and Rebecca Mermelstein, a defense attorney at the law firm Omelvini and Myers. We'll talk about what we can expect to happen today, which is the first day of Sam's trial. So, Lydia Jean, what's on your mind?
Thanks Michael, and welcome Rebecca. We're recruiting this on September twenty six. But it's exciting to think that when this episode comes out, Sam's trial will be underway. As I'm getting ready to report on it. I have a few questions for both of you. Michael, I'm going to start with you. So, I was wondering if maybe we could go back to the beginning of this chapter of Sam's life. Where were you when you heard that Sam Makmin Freed had been indicted?
God, you know, it's funny. I don't remember where I was then because the trouble had been brewing for so long before then. I spread God, I might have been in the Bahamas. I was back and forth for this period, from the point that FTX collapsed in November of last year to the point when he's extradited in end of December. I was in Bahamas at least half the time.
Yeah, And what were you thinking when all of this was beginning? How did you process it at the time.
And unravel so quickly? It went from being a company that venture capitalists were valuing at forty billion dollars to a company that was bankrupt in like three days. And when that happened, I had a couple of thoughts at once. Some of them. Several of these thoughts I had were ignoble. The ignoble thought was I wasn't quite sure how I was going to write this book, And now I know how I'm going to write this book, and the story is unbelievable, and I can't believe I'm sitting in the
middle of it and getting to watch it. The immediate thought was the incredulity at the panic in the air that there were hundreds of employees of FTX in the Bahamas who just ran for the airport, and it was this wonderful quiet where it was just me and Sam, and Sam's parents and Sam's therapists and one or two
brave souls from FTX who hadn't fled. I also thought how curious it was the speed with which it went from this pretty widely admired and reputable operation to being viewed as this vast criminal enterprise without there being a whole lot of new data except for the fact the money was in the wrong place. The money wasn't there. There was supposed to be fifteen billion dollars inside of FTX. That and a lot of that was not inside of FTX.
It was clearly inside of Sam's hedge foot, but before the most important executives in the place could explain what had happened or had any idea what had happened, everybody changed their mind all at once, So there was it was It's just like how fast it went from one judgment to another judgment.
Was there a part of you that was like maybe this swall blow over or were you like this, there's a before and there's an after, and now this is an after. Thanks will never be the same?
That's a good question. No, I thought things would never be the same. Sam thought for the first five or six weeks that he was going to revive the exchange with the help of some aging crypto people and that this was all resolvable. I couldn't really see that path, and that the things run on trust and it went from being very trusted, like nothing in crypto is that trusted.
But as things going, Crypto maybe the most trusted. I mean, it's brand was trust to being completely not trusted, and once that happens, it's very hard to kind of get it back. So I didn't think. I didn't think he was coming back. It was interesting to watch him flop around trying to figure out how to get it back. The other thing I remember, and Rebecca could speak to this.
The lawyers came in and out. His lawyers came in a couple of times, and I remember talking to them early December, mid December, how long it would take before the United States government actually felt it had its case and it was strong enough that they wanted the Bahamas to extradite him and then bring him to the States. And I remember the lawyers thinking they had many months like that. They didn't think this was going to happen that fast because it's too complicated and everybody needed to
understand what happened first, and that was it. So that was a shock to everyone, even the pros, like how fast they got him out of there and how fast they got him here.
Rebecca, could you maybe just summarize what exactly Sam has been charged with?
Sure, I think they largely fall into really three related issues. The first is there's an allegation that he defrauded the investors in FTX basically by lying, right, And that's going to be a theme here again and again and again about misrepresentation. So there's some charges that relate to lies and defrauding of investors in FTX, there are alleged lies
to lender. So there's were loans that had been made to his entities, and there's allegations that he lied to those lenders both to get money from them and then to keep money from them to keep them from taking their money back. And then of course lies to FTX customers, to people who were sending a currency right dollars yen lira two accounts that were purportedly held at FTX, it turns out they were largely held at Alameda, it's part of the problem. And then stealing that money from his
customers without their knowledge. So that's the big framework. I think those are the three areas you're going to hear the most about at the trial. That breaks down into seven different charges in this case. Often you're going to see a what we call a substantive offense that he did a certain crime, he committed a certain crime, and also a conspiracy, which is a companion to it. Right, it's a separate crime to agree to commit the crime with other people, and so you're going to see those
go together a lot. So you have a wire fraud on the FTX customers and a conspiracy to do that same thing. You have a wire fraud on Alameda's lenders, you have a conspiracy to do that same thing, and then you have conspiracy to commit securities fraud in relation to FTX investors, a conspiracy to commit commodities fraud on FTX customers, and finally money laundering, which basically is an allegation that he was hiding the money he was stealing.
It's interesting to me if a lay person reads the charges, there's no they can't visualize the crime. I think of the problem is like all one big problem. The money was in the wrong place, and that's pretty simple, like money that should have been in cold storage and FTX was in hot little hands of alimeter research. And then it gets framed with all these complicated words and in
kind of abstract terms like why are fraud? How does that even come about as an idea that we're going to charge him not with the money being in the wrong place, but in him sending electronic messages that hide the fact that the money is in the wrong place.
Yeah, it's a great question. I think it's really a quirk of the federal system, which is to say, some thing happens, everyone has the feeling it's a crime. You have to match it to a statute. There has to
be something that makes it a crime. But the reason wire fraud is a federal crime is because after you have to have the misleading statement and the effort to defraud, you have to have an interstate or international wire, and that gives the federal government the power to regulate it, and it gives federal prosecutors the power to prosecute it. So it's a little bit of a funny quirk.
If Sam is found guilty on all seven counts that he's been charged with, how long could he go to prison? For?
The maximum as a matter of law is a little over one hundred years. Is that likely?
Though?
Would you serve them consecutively?
It's a great question, so you can structure a sentence a lot of different ways. Will he actually get one hundred and ten years in prison? It would be a very extraordinary sentence for a white collar defendant, even a white collar defendant at this scale. I think it's unlikely.
The statute'd say this is the most amount of time a judge could give him in jail, But the sentence and guidelines are a very complicated algorithm that gives judges a recommended range for someone, and in a fraud case, the overwhelming the most important factor is the loss amount
in the case, and this one's obviously off the charts. Yeah, and so his guidelines range here, I haven't looked at it, but I'm almost certain will be life in prison, which is not very useful as a recommendation to a judge. So I would say, he's looking at a lot of time, but you shouldn't use the statutory maximum sentence as a presumption about what he's looking at.
Sam's now in jail at the Metropolitan Detention Center in Brooklyn, and his lawyers have been saying that the fact that he's held there has been making it hard for them to work with him. You've had clients at the Metropolitan Detention Center?
Is that right I have?
Can you describe what it's been like to work with them?
There's no question it's extraordinarily harder to help someone prepare for trial or even for any part of their case when they're in prison. For any number of reasons. Prisoner's by and large can't make phone calls. They do have some access to phone time. Those phone calls are recorded.
In every instance, there is inmate email. Again, the government has access to that they are almost certainly reading Sam Bankman's freed'ze emails, and you don't want to risk that they're going to look at something you're saying to your client. So if you think about what that means about visiting your client, that means every time you want to see your client, you have to go out to Brooklyn, MDC is kind of a little bit in the middle of nowhere,
relatively speaking. It's not an easy place to get to. You have to go through prison security, You have to lock your possessions in a locker, you have to go through a metal detector. That are very strict rules about what colors you can wear. You can't wear colors that are the colors of inmate uniform, so no khaki, no orange.
And then there's a lot of waiting. There's a lot of bureaucracy, and you are really at the mercy of a bop prison guard who's not all that interested in being helpful, and so you wait, You wait to be let into the visiting room, You wait for them to bring your client down. Twice a day inmates are counted. That is, the whole prison shuts down so that every single person can be counted and nobody can leave or enter at that time. Sometimes it takes an hour, so
you could get stuck. You're done but you can't leave, or the other way you could be waiting to get in. So everything is very, very very slow and without seeming rhyme or reason. There's often just a shut down and you get there and you can't go in, so it's extremely frustrating, as you might imagine.
Yeah, I actually tried to visit the MDC yesterday a half an hour uber and they were doing prisoner account and I wasn't allowed in and they made me stand in this basically bus stop area where I couldn't see anything that was happening at all, and I gave up and went so.
Did you actually knock on the door and say can I come in?
I stood in front of the door, and then a guard came up to me and asked me what I was doing, and I said I was a journalist, and he said, you can't come in.
You had no one to see though, you're no purpose.
There, I know, I just wanted to see how far I lead got.
You're the only one in America trying to get into jail.
Yeah, I did not make a very I made it right to the front steps.
We'll be right back. Welcome back to judging Sam the trial of Sam Bankman.
Freed, Rebecca.
I was wondering if you could give us a preview of what we should expect to happen on the first day.
Sure. So the first day I expect will largely consist of jury selection, which is to say that people will be brought in in a veneer thirty forty fifty people at a time typically, and these are people who live in the New York City area. So it's going to include Manhattan, the Bronx, Westchester, and a few of the southernmost counties of the Southern District of New York. And they're going to have received a summons in the mail that tells them to come in. They won't know that
they're coming in for any particular case. And actually there'll be hundreds of people sitting in a main room called up one of the you know, in groups to whatever courtroom needs to pick a jury that day. It may not only be Sam bankman Fried next week. And then the judge will ask a series of questions, some of which are virtually standard for every single criminal trial, and other of which the parties have asked the judge to ask and he's agreed that are specific to this trial.
To try to ascertain a few things, is this a person who can sit at this trial or any trial? For example, if you don't speak English fluently, then you can't be a jur right, if you have a medical condition that means you can't sit for a long period of time in a chair, you can't be a jur Do you have a small child at home and you're not able to stay until five o'clock because you have
to do school pickups. So you're going to get a lot of people who just say I can't be here for logistical reasons, some of them really can't, and some of them just don't want to be on a jury. And then you're going to get people who have strong opinions about facts that are related to this case that they are going to say or the parties are going to determine make them unable to be an impartial juror if you lost money in the FTX bankruptcy, you probably
can't be a juror on this case. If you are be friends with Chris Everdale, who's one of Sam Bankman's Freed's lawyers, then you probably can't be on this jury, and so you'll have a long process of trying to weed through people who can really be impartial and sit in a fair way and listen to the facts and learn them for the first time and not be affected by what they may have heard other places and decide.
And I could be wrong. Judge Caaplin's a very efficient judge, but that is very likely to take the whole first day, and that will be all that happens. And it's a little interesting for a few minutes, and then it gets a little repetitive.
Is it possible it goes on for a much longer time? Can it?
Case?
Certainly could. I would say it's not unusual for it to spill into a second day. It would be pretty unusual for it to spill into a third, but it could.
You mentioned that Judge Coplin is pretty efficient. So yeah, the judge in this case, his name is Lewis Caplan And Rebecca, you're a former prosecutor in the Southern District of New York. That's the office that's bringing this case against Sam.
That's right.
What can you tell us about Judge Coplin?
So I never tried a case in front of Judge Caplin, But I would say his reputation is as someone who is very smart, very confident in his own decision making. He makes decisions quickly. Some judges have a reputation that
whoever spoke last kind of convinces them. I don't think that's true with him, and I think on balance he's seen as someone who's a good judge for the government, both because I think he's friendly to the government's purpose, which is not to say that he's not impartial, but he's not an aunt, doesn't have an anti prosecutor bent, and at the end of the day, I always felt as a prosecutor and now I still feel this way as defense lawyer, that judges who are rigorous about enforcing
the rules of the court room, about enforcing limitations on what's admissible and the rules of evidence, are better for the government because the government is more likely to be playing by the book, and as defense lawyers, we often are trying to find a little more wiggle room, and so a judge who doesn't allow that is better for the government than for the defense.
Right It's like the rule followers versus the rule breakers.
I don't know that I like to think about myself now as a rule breaker, But it's a fair point the rural skeptics, Yes, the rule skeptics. I think that's right. And of course, the other thing that's interesting about Judge Capelin here is that the defendant has really pissed him off by his pre trial antics, if you will. And I don't think that Judge Kaplin is going to let that affect the way he handles the trial itself. But I think it's a bad sign for sentencing ray.
I was going to say, in a case like this, what difference does who the judge is make? Because at the end of the day, right, it's the jury that decides whether Sam is guilty or innocent.
Oh, but I think the judge makes an enormous amount of difference in lots of ways. The first is that there are lots of evidentiary rulings that could go either way that reasonable minds can disagree, And trial judges have an enormous amount of discretion to control the flow of evidence in their courtroom. Some judges, even though they tell a jury, you shouldn't read anything into my questions, you shouldn't read anything into how I rule on objections. I
don't have an opinion. Juries love judges. They watch judges for signs and they interpret every single thing the judge is doing. So again really matters. And then judges have an enormous amount of discretion at sentencing. And so if you can they're actually our statistics published on this, you can see some judges are really light sentencers, some are really harsh sentencers. Again, it really matters.
Okay, another question for you, Rebecca. Let's move forward to opening statements. If you were to make a bingo card for what you would expect the prosecution and the defense to say in their opening statements, what would you put on those cards. Let's start with the prosecution.
Okay, that's a fun question. You'll see. I predict that the government's opening will have the same form it always does. It's going to have what's called a grab, a quick, pithy, kind of interesting way to grab the jury's attention, and then they'll kind of pause. They're going to explain what happened here. They're going to tell the story of the downfall of FTX, and then they'll talk about how they're
going to prove that to the jury. Who's going to come talk to them what kind of documents they're going to say, So they're going to talk about lies. They're going to say, lie lie lie, lie to FDx investors, lied to customers, lied to lenders. I think there's a possibility that you'll hear some kind of victim vignettes, right, the little lady in Topeka who lost her life savings in the downfall, right, because it puts a human element on it. Otherwise it's a little abstract, and you want
to really say, these are real people. This wasn't monopoly money. It mattered. So I expect you'll hear about victims. I think you'll hear the word victim. I wouldn't be surprised if you surprised if you heard things like greed, right. And I guess that's not enough words for a BINGO card, but I think that's probably the top ones i'd pick. And if you're the defense, you're going to hear a
lot about cooperators. I predict, as I think has been sort of widely published at this point, there are people who have pled guilty and agreed to cooperate in this trial, and so the defense is going to have to go on the offense there and You're going to hear a lot about why those people can't be trusted, what their incentives were to cooperate, and why they're lying. I also think you're going to hear a lot about a rush
to judgment. This moved really fast, and so it moved so fast in ways that the jury won't actually get to hear about that. Charges had to be dropped because they weren't brought fast enough and the government got over at Skis. And you're going to want to say they don't understand what happened. They saw this thing, these young hungry prosecutors wanted to make a name for themselves, and they jump the gun and they don't really understand it. And I think tied to that theme is going to
be complexity. Right, this stuff is hard to understand. It's easy to make a mistake, either that the government has made a mistake or that Sam Bankmin freed himself. Didn't understand certain things I would expect to be part of the defense theme.
For a final question, it's for both of you. You both have talked about how on the trial, right the prosecution is going to say a story about whether Sam is guilty or innocent, and the defense is going to say a story about whether Sam is guilty or innocent, And Michael, you called it a story war. I guess I wonder what do you think the bigger story is? Like why should listeners care or why do they care so much about Sam's skilter innocence.
It's a great question that it's puzzled me. Like I thought when all this thing, when it blew up in November, that I thought by January everybody'd be bored with it. The culture moves so fast from one story to the next, and its memory is so short. This story has not done that. People have had an enduring interest, consuming interest in FTX and Sam Bankman freed. My first guess that's why that is is they don't feel like actually, no matter what they say on Twitter, they don't feel they
actually understand it. So it hasn't resolved itself in their minds as a completely clean story. There's a tendiness to oh, crypto crook. He was a crypto crook from the beginning. You know, we already fooled everybody. That story's kind of a boring story. They know it's more interesting than that. They just don't know that they don't know and that they don't know bothers them, do you know, I think so. I mean, I think his best is I've tried to describe it. I hope the reader puts down the book
and feels their own conviction about what happened. But it's never died down. You know, Sam Bagman Freed is discovered to be living on peanut butter and bread in the in the Metropolitan Detention Center in Brooklyn, and it's front page news in the New York Times. People can't get enough of it. And I think it's because they don't. They think they don't completely understand it.
There's something about this story that's not adding up.
That's right.
We're bothered by that. We want to know. Yes, what do you think, Rebecca, Well.
It's interesting because you ask two questions, which is why should we care and why do people care? And actually I'm not sure we should care as much as people do. You know, this is in some ways just one of so many crimes, and you know, especially when we talk
about something like the food at the MDC. And I think you've seen some statements in the press by the federal defenders saying like we hope this press attention on this one person will actually motivate change for everyone, because these are not new things, right, Lots of these things are true for every person who's in jail, and MDC is a jail for people, by and large awaiting trial, So every single one of them has not yet been found guilty and they're subject to these conditions. And why
should we care so much about this one person? Why do we care? I think part of it is an Icarus story, right, there's a shot and freud to it, which is, here's this boy, wonder King who seemed to be using his you know, brain to just print money and become so successful. And there's a little bit of human nature to say, kind of good, right, I knew it couldn't be that easy. If it were that easy, we'd all be doing it. And it must have been must have been a fraud. And I'm glad to see
him kind of get what's coming. And so I think that creates kind of an interest in it. And then of course it is important because I think for a lot of people, Crypto felt like an area where you could print money, where anybody could make money, and it's important for people to understand sort of what the cost is of having an unregulated currency. It's more and more regulated, of course, but the dangers of crypto writ large are a little bit on display when you talk about how
this could fail so spectacularly. Whether it was a crime or not, it certainly failed spectacularly.
We'll be back in a minute with one last thing. And we're back with one last thing. Our one last thing today is about a lawsuit against Sam's parents. Recently, lawyers for FTX sued them in an attempt to get money back to repay their creditors. In this suit, FTX alleges that Sam's parents either knew or willfully ignored signs that Sam was quote orchestrating a vast fraudulent scheme. I should also note here that my boyfriend is a lawyer
at Sullivan and Cromwell. That's one of the firms that's been representing FTX in the bankruptcy, but not Sam Bankman Freed. He and I have a firewall up about this case, and Sullivan and Cromwell is not involved in this particular lawsuit against Sam's parents. Rebecca, I wonder what stood out to you most about this suit against Sam's parents.
I should preface it by saying that I am not a bankruptcy lawyer. This is really sort of outside of my area of interest. But I think one question it raises for a lot of people outside the law is are they next right? Are they going to be charged with a crime?
Yeah?
And what can we interpret from the fact that this lawsuit was brought? And I think the short answer is not that much. And I should say that I did some homework for this one and spoke to one of the partners at my law firm, a Melvini named Daniel Shama, who's an expert in bankruptcy. So here's what I learned that was really interesting, which is there's something called a clawback in bankruptcy, which is, once a bankruptcy happens, you can clawback. You can take back money from people who
got money from the entity that went bankrupt. And there's rules about how that works. There's time limits, there's all kinds of things, but the one that's the most relevant here is called a fraudulent transfer. And what that means is that within a window of a number of years before the bankruptcy, you can take back money from people who got it. If two different kinds of things happened. One is that there was an actual intent to defraud creditors.
That's the legal language. And what I mean by that is you knew the ship was sinking, so you gave a lot of money to your parents so that it would be there for you. Right, that would be a fraudulent transfer because you were doing it to keep the money away from creditors in the bankruptcy people who were
owed money. The other one is when it might have been that the person who got money didn't even know that they were doing anything wrong, but they received something for quote less than reasonably equivalent value or fair consideration. So what does that mean? If I give you a monet right from my company and I only charge you a dollar for it, you have not paid reasonable consideration for it. Right. It's another way of getting the money out of the entity before the ship sinks.
So the idea is still you you gave me the monet because you wanted the money to be safe.
It doesn't have to be that. That's why, In other words, if I gave it to you and it wasn't really justified, even if there wasn't necessarily a nefarious intent, there can be enough for a clawback. And so you know, you can Imagine, for example, you know, the person who delivers copy paper to FTX realizes things are not going well and they say, we'd like you to pay our bill in full right now instead of normally gets paid every
sixty days. That's not there's nothing fraudulent about that. But now this creditor might have gotten more than their fair share than someone else, right, So that's another kind of place where you'd have a clawback. You'd say, well, wait a minute, we have to get all the money back on place and give everyone their fair share. You don't get to paid in full, right. So I think the question with Sam's parents here is, you know, were these
fraudulent transfers? And obviously the allegation is yes, that they knew or should have known that this money that came to them was not legitimate. What's the punchline? That is just a totally different standard than a criminal standard to say that they should have understood that something was awry or that they got money that they didn't really deserve. Right, did they earn that for some reason? What were they
doing that justified these huge payments. That's different than they knowingly participated in the crime, and they themselves did things in further owns of it. So I don't think you can read from this civil lawsuit that charges against them are likely, But I also don't think it's impossible. There are allegations that Sam's mother in particular, told him to hide certain donor identity information in connection with campaign contributions. That's a little if that's true, that's kind of a
suggestion that she committed a crime. And of course his father was involved in the business itself. So could they be charged. I think time will tell, but I wouldn't read too much into this lawsuit.
Well, michaelis Rebecca Ramolstein. I am excited to cover the trial and check in with both of you.
Thank you, Alja anytime.
This episode of Judging Sam was hosted by Lydia, Jean Kott, 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 Wagons Symphonette. Judging Sam is a production of Pushkin Industries. Got a question or comment for me, There's a website for that ATR podcast dot com. That's atr podcast dot com to find more Pushkin podcasts. Listen on the iHeartRadio, Apple Podcasts, or wherever you listen
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