Pushkin.
For most of this year, I've been sharing some of the interviews I've been doing for background research for my book Going Infinite, the rise and fall of a new tycoon, the tycoon being Sam Bankman Freed, the founder of the cryptocurrency exchange FTX.
It's been a kind of.
Crazy journey, and this series has been an experiment for me. I've always done these kinds of background interviews and their interviews where I know it's not going to end up in the book. I'm just trying to educate myself, but I've never done them on stage, so to speak.
And I appreciate you listening in.
It's forced me to think creatively about these things, and the experts i've talked to have been really gracious with your time. Well, now the book's almost done and I have just one more conversation to share, but maybe the most important one I've done in this series. This is on background from Against the Rules. I'm Michael Lewis. Sam Bekman Freed faces federal charges of stealing billions of dollars of customer funds. His trial is supposed to begin this fall.
But what sort of sentence is he likely to get? Really? How are the prosecutors building the.
Case against him, and how can his defense team prepare him for what looks like it will be a really complicated trial. Rebecca Mermelstein is the very best person to answer my questions, short of the prosecutors themselves, who aren't talking to me on background or otherwise these days. Rebecca's a defense attorney at the law firm of Omelviny and Meers, but before joining the firm, she was a prosecutor in the very southern district of New York. That's prosecuting Sam
Bankman Freed. My father used to practice law, and he absolutely hated it. So I couldn't stop myself from asking Rebecca what drew her to the profession in the first place.
I was always the kind of kid who liked to argue the point. But somewhat coincidentally, I was a senior in college. I thought I was going to take the summer off, and my best friend wanted to go to the public interest job fair, and she didn't want to go by herself, and we went together and I dropped one resume in the District Attorney's office paralegal box, and I ended up there, and I fell in love with it. She, by the way, also ended up there and then got
a PhD in art history. So it wasn't for everybody, but I decided that's what I wanted to do, and so I went to law school knowing I wanted to be a prosecutor, and then I followed that path, and for about twelve years I was a prosecutor in the Southern District of New York.
Before we get to Sam Bankman Freed, I am kind of curious, like, why did you fall in love with it and your friend didn't?
For me, it is a combination of things, and one is how mission driven it is. And so I think prosecutors, and definitely prosecutors my home office, so to speak, really feel that they work in pursuit of a particular mission of pursuing justice, which is a little different than what defense lawyers do because you don't really have a client when you're a prosecutor. Your client is the people of the Southern District of New York, the people of the United States.
But your job is to do the.
Right thing, and it's not to win unless you think winning is the right thing. So prosecutors investigate cases all the time that they don't charge they decide either nobody committed a crime or probably someone committed a crime, but they don't have enough evidence to be sure, and that mission really drives people's I think, interest in doing it.
You know, what you reminded me of is the way I hunt stories that I will spend all kinds of time on all kinds of things.
And then just decide there's not a story there and move on. Here.
To guess what percentage of the things you thought about prosecuting do you actually prosecute, I.
Would say maybe eighty percent sort of go somewhere and twenty percent don't.
Okay, if I had to guess.
It's a reverse of my process. Twenty percent goes somewhere in eighty percent don't.
But it's interesting that you say that you sort of are interested in this finding the story, because I think once prosecutors decide that they want to do it, crafting that narrative, making something comprehensible to a jury, distilling things down,
appealing to people's emotions. Telling a good story is also a big part of what lawyers do, and doing it in a live format on a stage is a little more like being a stage actor, because when you get in front of a jury, the cameras are rolling, there's no kind of redos, there's no pause, and that excitement in that sense that you never one hundred percent know what's going to happen. I think also is something that people who want to be prosecutors think is fun.
I have a weird question for sure, if I've often found this with reporters, like newsrooms, I've always been surprised at how they can write quite bland stories about things when they're out to dinner talking about them, they make sound thrilling and fun. They actually have great material, and they kind of leave it on the cutting room floor.
And I'm wondering if there's a phenomenal like that with prosecutors where if you're sitting around they sit around talking about a case, that it will be vastly more entertaining to listen to that what goes on in the courtroom.
I don't think so.
I think the courtroom is a pretty exciting place, and I don't think they leave things on the cutting room floor that are the best parts. I do think you will hear prosecutors when they talk about how to structure trial evidence, how to prove a case. They'll use the phrase thin to win. And what they mean by that is a streamlined body of proof. That sometimes you have a piece of evidence that can be used really effectively for the prosecution, but it can be twisted exactly on
its head and used for the defense too. And now, of course a prosecution is obligated to give the defense all the materials it has, so the defense could call that witness yep. But as a strategic matter, the defense really doesn't generally want to call any witnesses because they don't have a burden of proof. So as a prosecutor, you may say, you know, I could call this witness.
They have this one great fact, but I don't need it, and I'm opening up a can of worms, and so we're gonna We're gonna sort of leave that on the cutting room floor.
This is there's a version of this in writing.
It's the famous eb White victim that writing is about killing your darlings. That you have this one pungent thing that you just think has to be in and in the end you realize you need to thin to win, that you need to streamline it for the sake of the story, and you've got to get used to that feeling of getting rid of something you just really attached to. You just said something that I kind of knew but
I didn't completely know. Is it really true that everything the prosecution has gets given to the defense before the trial.
So it's a little more of a I think a nuanced answer than just yes. But fundamentally that is the intent of the various rules that govern disclosure, and it goes in phases, so there is if we want to get technical about it, there's a rule in the Federal Rules of Criminal Procedure are called Rule sixteen that governs what you have to give to the defense as quote, discovery materials, and that starts getting turned over as soon
as charges are brought yep. And that's going to include sort of all the paperwork, right, every document in the case, every recording in the case, any kind of physical evidence or expert testing so DNA testing, fingerprint testing, all is going to get turned over as part of that. And that requires the production of all statements of witnesses who
are expected to testify at trial. And then the third category is impeachment material, which is to say, if you know something that undermines what someone's saying, you have to tell the defense that too. So if, for example, you have a witness was a conviction, you're gonna have to turn that over as well. And so it should really
be that the two sides have the same information. Of course, it's a little more nuanced than that, and prosecutors have huge institutional advantages, and they're not going to turn over that witness information until relatively close to trial. When I started as an ASA, that was turnover the Friday morning before a Monday trial. Oh my god, that's not true anymore. Now you're talking in a white collar case four weeks
six weeks out right. But even so, that means that if you're a defense lawyer trying to prepare for a white collar case and trying to decide should we go to trial, you're not going to know what the witnesses against your client says until very close to the trial.
Right.
Two questions about this. One is does the defense have the same obligation to turn over what it has to the prosecution.
No, is the answer.
They do have some obligations, so they have to turn over things they actually intend to use a trial. Prosecutors knowing that they can't know until the moment every single thing they're going to use just turn over all the paperwork in their possession. I think the defense has a lot more leeway to say, look, we don't have any burden of proof. We don't know what we're going to do till we see what the prosecution is going to do, and so they get a lot more leeway with that
sort of thing. So you don't see it going in both directions evenly.
Gotcha?
But is there a way Is there a possibility for the defense to show up with a just total shocker and the prosecution just didn't see it coming.
Yes, I think it is.
Okay, that's interesting to me.
And the other thing is that this is I'm just kind of curious how sneaky can prosecutors be about what they turn over and don't turn over. I mean, what is the likelihood that the defense turns up and finds, oh, my god, they've got this thing we didn't know about.
Well, you'd like to think it would never happen, but I think that that is obviously not true. You read about things all the time in reporting, about situations where prosecutors acted with malice to withhold relevant and exculpatory information, right, and then of course there's human error, right.
I mean, you're talking.
About in a white collar case, millions of pages of documents, and I think people can make mistakes, you know, I think federal prosecutors as a group are acting with careful and good intentions, and so I don't think that there is sort of a pervasive problem of things being intentionally withheld.
I think if you think about, you know, what the universe of documents a person has on their phone, on their laptop, on their Google's history versus what it was twenty five years ago, it gets harder and harder to keep up with.
YEP.
I have two more general questions about prosecutors, and the first is, if if I spent a whole bunch of time with a whole bunch of prosecutors, what would I notice they had in common? Like what kind of person ends up in this role?
Rule fall?
I would say, I don't think there's one type. I think there are lots of types. There are people who really love the law, There are people who do it, who love the facts, there are people who love the performance. They're all joined I think by that same sense of mission. And I think in a similar way as you'd see in say a military unit, that kind of this is a hard job and a serious job, and an intense job kind of bonds people, and so you'd see that. I think it's a group that takes its job seriously,
but not themselves seriously. But they are also all people who hold themselves to a higher standard, because I think when you send other people to jail, when you make decisions that alter the course of someone's life, you realize that you have to live your own life. I think sort of above reproach.
Stay with us when we come back from the break.
Rebecca and I turned to Sam Bankman Freed and how prosecutors might argue their case against him. I'm back with Rebecca Mermelstein, a former prosecutor in the Southern District of New York. So can you just explain to me your relationship to the office that is actually prosecuting Sam Bankman Freed.
Sure.
So, I was a prosecutor in the Southern District of New York until August. So I left before any of the started, but not that long before any of it started, And I spent a few years in the Securities Fraud Unit, which is one of the units principally responsible for this case, before leaving that to supervise what's called the General Crimes Unit, which is where new prosecutors start and get their training.
So I'm very familiar with the institution and with the players, but I don't know, I have no inside information about this particular case.
So you didn't even hear a whisper of Sam Bankman Freed being investigated.
Before you left.
I did not.
Okay, there are a bunch of things I'd love for you to explain to me about the case. But you have paid life at least casual attention to it. I have you have what interests you about it?
Well, look, it's it's on the front page of you know, the Wall Street Journal, on the New York Times on a regular basis. As a matter of scale, it's obviously among the largest crypto prosecutions to date. And I think that the fallout from it or it has real implications for the crypto industry writ large, and so you know, I think it's something that white collar practitioners are probably following pretty consistently.
Now Here.
What happened is a little complicated, and you have to back all the way up to the way this played out, which is you remember the timeline is that in November of twenty twenty two, the Alameda financials are leaked and people start to have concerns about what's going on, and the Southern District moves very fast, so by December they have an indictment against Sam Bankman Freed.
Is that unusual to move that fast?
Very very unusual.
I would say it surprised you.
Yeah, I think it did surprise me. White color cases are complicated, it's hard to get things together, and so that speed was more than someone unusual for this kind of case.
What would justify in their minds moving so fast or why would would there be such a hurry.
I think you can think of a number of reasons they might have felt that they had to move so quickly. The first is Sam Bankminfrid was in the Bahamas. The United States has an extradition treaty with the Bahamas, so there was the possibility of charging him and having him
brought back to the United States. But when you launch a big investigation and you start talking to people and demanding documents, the people you're investigating are going to know you're investigating them, and there's of course always the possibility that someone decides, you know, i'd rather live in Venezuela where there's no extradition treaty and just never come back.
Yeah.
Right.
So one possibility is that a concern that you won't be able to rest the person if you don't move quickly. The other is the government has alleged that in those final days where there's a run on FTX, investors are trying to pull their money out, that Sam bankman Fried and some of his cohort are moving money out of it for their own purposes. And so if you're trying to protect investors and you want to make sure you stop that, you want to move quickly to sort of
charge people and start locking down the money. So I think there may have been very good reasons to do it, but they did move sort of very very quickly here, and one effect of that is that they brought an indictment that had very limited description of the charges and also didn't include all the charges that they ultimately decided
to bring. And so he gets charged, he agrees to be extra righted it comes to the United States, and then because of that, there's something called the rule of specialty, which basically means that if the Bahamas, let you know, let you take someone from their country based on an agreement that they were going to face a particular set
of charges. You cannot add new charges after that happens. Now, it's interesting because the party who's wronged if you add new charges is not the defendant under the law, it's the Bahamas. So the Bahamas can agree to let you proceed on more charges. So what happens here is the government added additional charges twice, they superseded, brought a new indictment with more charges, and then another one after sam
Bankman Freed had been extradited. And now what's happening is the government has gone back to the Bahamas and said, will you approve this? But that process is going to be slow, and there's been a determination by the Bahamanian court that Sam Bankman Freed can challenge it and can be heard in the Bahamas. So as a practical matter, it's not going to be done before the October trial date in this case.
And the Bahamas has the power to squash all that.
Yes, and the government has said if the Bahama squashes it, the United States will not proceed. They agree that if that is the decision, then that's the end of it.
But if the Bahamas, lets them go forward with these other charges. In any case, there will be a second trial, even if he's convicted it the first one.
Well, I think as a practical matter, that's pretty unlikely if you look at sort of what the first set of charges are and what the second set of charges are. The first set of charges are very serious, and they contain the majority of the core criminal allegations with respect to FDx and Alameda. Yep, it's really not necessary if that happens, to do a second trial, right yep. So I think as a practical matter, it's unlikely if the first trial results in a conviction that they will actually
pursue the second charges. I expect they'll dismiss them or they'll be a plea agreement, but they'll be resolved in some way.
We're going to take a short break.
When we come back, I ask Rebecca about the pros and cons of Sam Bankman freed taking the stand. I'm back with Rebecca Mermelstein, former federal prosecutor. So, if SBF is convicted and he receives the maximum sentence, we're looking at multiple decades in jail, probably the rest of his life. Right, Yeah, what's the like the range of likely outcomes.
Look, you know made off got life right, that's among the largest scale white collar frauds to date, and he pled guilty. He did not challenge the charges. This case is in front of Judge Kaplan, who I think is seen as a on the spectrum of judges, probably a more harsh sentencer. I think Judge Kaplan is clearly lost some of his patients with the defendant's conduct, which is not a place you want to be. There are two
different sets of rules in operation. One is the statutory scheme that's going to give you a floor and a ceiling on what the possible sentence is. Often the floor is zero. That's what it is here. In theory, the judge could if he wanted to give Sam Mgminfrey nothing.
There's no floor here.
There's no floor here. So it's really up to Judge Kaplin to do it whatever he wants. But then there's a thing called the sentencing guidelines. And the sentencing guidelines are a distillation based on for the most part, actual data of how sentencing was historically done. That tries to assign pluses and minus values to various things, and it spits out a proposed range for a crime.
It's like Zillow does a house price.
It's kind of I think that's kind of right. So here, right, the principal guideline is the one that governs fraud cases where there's a monetary loss, and so you're going to have a plus factor for the amount of money that was an issue here now here that seems to be extraordinarily high, and.
So it's going to be off the charts, right.
The highest category is if it exceeds five hundred and fifty million dollars, which.
I think that's chump change in this one.
I think that's probably right. And then there are all these plus values and minus values. How many victims were involved? Did you use what's called sophisticated means? Did you have a minor role in the offense where you a leader in the offense? And then you get credit if you plead guilty, you get a reduction if you accept responsibility.
And so I think he's looking at probably a range of either three hundred and sixty months to life, so thirty years to life or life itself, depending on exactly how the math comes out, which in some ways is unhelpful to the judge because you know, what does that
mean is the right sentence? But I think he's looking at a long sentence if he's convicted, if you look at comparable data points, right, Elizabeth Holmes, someone also young, you know, on the younger side of a white collar defendant, not maybe this scale, but pretty big.
I think he's looking at a long time.
What about his colleagues, the other FTX executives who've played.
Guilty, They obviously are in a completely different category because they are cooperating and assuming that they fulfill their cooperation obligation, the average white collar first time defendant who's a cooper in the southern distrie f New York, I would say, typically does not go to jail really. Now, to be clear, right, cooperators don't always get get no jail time.
They get big benefits.
You may remember famously, Sammy the Bull cooperated having been involved in nineteen murders, and I think he got maybe five years in jail.
Look, cooperators are.
Always hard because and here it's clear that they have three at least three that we know of. And you know the problem with cooperators, of course, is that these are people who are going to have to come to court and say I lied to investors, to customers, to colleagues. I did it, you know, for my own purposes in some cases. But now I'm telling the truth.
Yeah, now is when you should believe me.
And it's no coincidence that I'm telling the truth now.
By the way, I'm also hoping not to go to jail, yeap, And that's hard, right, So you know, making sure that the jury is in a position to credit what's being said is always a challenge.
Now.
I think it's a little easier when you have three cooperators, because that line of cross examination of aren't you just doing this because you don't want to go to jail? And aren't don't you have all these incentives gets a little old the third time, and really you start to think, okay, maybe one person would do that, but do you really think they're all kind of doing it together. That's one challenge.
I think the other challenge is, which is always true in complex white collar cases, is you have to take a jury of twelve people, a real cross section of the community, and before you can start explaining why this was a crime, you have to give like a tutorial first on crypto and hedge funds and trading and trading algorithms and what it means. And then you have to start explaining why what happened here, you know, as they allege, was a problem, and why it was illegal and why
these things weren't true. And that's hard to distill a complicated story down to something that everyone can understand.
You're telling me, I know, it's yeah, exactly, no, it's it's I have my own way of dealing with this, But I don't envy them. Turning to Sam himself, if you were his defense lawyer, what would you be doing right now? How would you prepare him for the trial?
Well, there's a big question, of course, which is is he going to testify? Right? And the general wisdom is always don't, because you have an absolute right not to say anything and it can't be held against you, and
you don't have to offer any narrative. And the minute you tell a story as a defendant, the minute you explain your version, even though the judge of course instructs the jury on the burden of proof, I really think you lose a lot of that advantage because now there's two stories and the jury is going to evaluate, well, which one do we believe?
And that's that's not the burden of proof, which one is more likely.
Yeah, and you.
Really, I think you don't want to do it now. Sometimes defendants feel, and this can in some limited circumstances be right, that the government's narrative is too powerful not to be rebutted in some fashion. There's no way to challenge it except for them to hear from you. And of course testifying is completely up to him. His lawyers can't control it. They can advise him. So one thing I'm sure they're talking about is is he going to testify?
And if you were his lawyer, you would say.
I think probably not. But I haven't seen the government's proof, which.
You said I never really thought about.
But the problem with testifying is instead of them having to evaluate just the government's case, you're giving them something else to evaluate.
Yeah, and if the government's case has holes in it, then as defense layers, we get to show the jury that. But if your case also has holes, right, that's not a good look. It's easier to poke holes in someone else's story than to come up with a completely coherent narrative.
So I think that's dangerous. What else would I be doing?
Look, one interesting thing here is that by all accounts, the kind of executive group which includes the cooperators was very interpersonally close, many of them or living together. They must really know each other's secrets. And you know, if you're going to attack a cooperator, you're not only going to attack them based on small inconsistencies and things they've told the government. You want to know everything about them.
You want to really investigate them. They government has cell phones and laptops that belong to the cooperators, and you're going to want to really spend a lot of time looking at everything on those.
All right, this was fabulous. I have one last question for you, and then I'm gonna let you go. If you could give them one piece of advice right now, what would it be.
I think he should probably think about a disposition.
What does that mean?
If I were him, I'd be thinking about whether or not there was a plea offer that made sense. There are two reasons that going to trial often results in longer sentences, and one is that the guidelines themselves give credit for people who accept responsibility, and so you can think of it as a benefit to people who accept responsibility or as a penalty to people who don't. But
either way there's going to be a delta there. And the other is that there is a difference in the way a judge views you, I think on a cold record, on written submissions by lawyers, and at an actual trial where you're going to sit for weeks and weeks and weeks and read every text message and hear from your ex girlfriend and your closest friends about the conversations that you had, and where victims of the crime are going to come and talk about the consequence of having lost
all their money. It sort of it affects judges who are their people, and so look, I don't know the government's proof, and I don't know what defenses he may have, but it doesn't look good right from the outside. And I think that he's a young person and his best chance of having a life outside of prison is probably to take a play.
If you were his lawyer, plea, would you what deal would you happily accept?
I don't think there's going to be a plea in this case that anyone's happy to accepts my guess. I think that given the nature of federal sentencing, there's an enormous amount of uncertainty in any plea in any plea agreement, the government and the defense will agree on the charges to that are being pled to and what the math is on the guidelines. But all that's going to give you is a range. You'll see that in the Southern District of New York, most sentences are below that range. Right,
Most judges are less harsh than the guidelines. And you could take a plea and get a sentence that you felt was too much and then you're kind of stuck. Gets more holistic assessment of what's likely to result in the least bad outcome.
Okay, thank you so much for the time, my pleasure. Rebecca Mermelstein was once a prosecutor in the Southern District of New York. She is now a defense attorney at Omelvinie and Myers. Thanks for listening to our On Background series. My book about Sam Bankman Freed Going Infinite, The Rise and All of a New Tycoon, will be in bookstores this October. And watch this feed there'll be a new
season of Against the Rules before Long. On Background is hosted by me Michael Lewis and produced by Catherine Gerardeau and Lydia Jean Kott. Our editor is Julia Barton. Our engineer is Sarah Bruguer. Jake Flanagan helps us with licensing. Our show is recorded by tofer Ruth at Berkeley Advanced Media Studios. Our music was composed by Matthias Bossi and John Evans of Stellwagon Syphonette Special Thanks to a few
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You're investigating, you're issuing subpoenas, you're drafting search warrants, you're interviewing witnesses.
That sounds like reporting.
I think that's right. I think ways that beginning phase is a lot like reporting. If reporters had subpoena power and could issue search wards.
Right, that'd be fun. That'd be really fun.
Well, it's a very powerful tool, right, Really, if you read someone's email, if you can look at everything they've every Google search they've run, that tells you a lot about what's really happening.
I would have so many best sellers, well, you.
Have kind of a lot of best sellers.
Never know how many more I would have if I could just hit buttons and gather all that material.