Special Episode: The Trial of Sam Bankman-Fried

Pushkin. Hey, it's Jacob. As you may recall, I interviewed Sam Bankman Freed on this show back in twenty twenty two. Sam was a crypto mega billionaire when I interviewed him. Several months later, his company blew up and he was indicted on fraud charges. Right now, Sam is on trial in federal court in New York City. Michael Lewis, who hosts another podcast here at Pushkin, just wrote a book about Sam Bankman Freed, and his podcast is covering the

Yes, I came to the courthouse bright and early, and it was a day that reporters were particularly excited for. There are a lot of us, and I interviewed a few as we were waiting for the court doors to open, And I'm going to play some of that tape for you right now.

I'm Sam Kessler, I'm an editor at Coindesker.

What are you looking forward to learning from Caroline Ellison's testimony?

Aside from the testimony itself, it's going to be really interesting to see the line of questioning that, particularly the defense decides to follow, and they're also going to maybe touch on things around drug use and whether that makes her an unreliable narrator. All that is going to be really fascinating to see.

I'm Lose Lopato. I'm a senior reporter at the Verge. I am super curious about why she did this, Like, I don't know that she's going to talk about that, but she didn't have equity and the boys did. I've had some like lousy ex boyfriends in my time, but nothing on the scale.

What's your name, I'm Kevin Dugan with New York magazine The Sex.

I want all the details.

I want all the stories, all the spine tingling kind of sensation of all the sex that happened in the Bahamas. Yeah, that's really what I'm looking forward to.

Most, Lady Jean, I don't want the details of the sex.

Well, good news for you. There wasn't a lot of sex, and there was a lot of spreadsheets what happened.

I mean, this is like truly a high drama moment, right, Like you have this romantic history, you have this executive history, and you have this alleged crime. So like, what's the like Caroline walking into the courtroom moment.

Yeah, so the courtroom was packed and the prosecutor said that they were going to call their next witness, Caroline Allison. You could tell the reporters are all really excited. You know, usually when there's an intermission, people start to talk, but no one was talking. Everyone was looking at the door. Someone whispered that it was a bit like a weird wedding since we were waiting for her, walked down the aisle.

Oh, very good.

Someone went like, don don done, And then the door opened and she walked through. She was wearing like a reddish pinkish dress. She had on a blazer. She's really small, she's even shorter than I am. She was holding a water bottle and she walked really confidently down the aisle as everyone was watching, to the witness stand and then she sat down. The prosecutor immediately had her admit that she had committed Finngel crimes, and she said that she had committed them with Sam.

And just to be clear, she's already previously pleaded guilty to these crimes.

Right exactly, she has. And then the prosecutor had her point out Sam. She was sitting down, and then she kind of stood up and she looked all over the courtroom for him. She was looking in the jury box, she was looking in the where the reporters were sitting. It was a full thirty seconds, and it was the

So I have a couple questions about that, one like, wasn't he just sitting at the defense table or whatever? Like, was she putting on a show? Did she act actually not know where he was? What was going on there?

I don't think she was putting on a show. I think it must be really overwhelming. Was probably her first time in this courtroom. It was really packed. There are a lot of people there. I'm assuming that that walk down the aisle when we're all staring at her was pretty terrifying, and I'm thinking it probably took her a few seconds to orient herself. People have also speculated that she hasn't seen him since he got his hair cut, and she's never seen him in a suit.

Okay, I have another question about that. Why do prosecutors do this? I mean I've seen it in like the movies or whatever. You know, is he in the courtroom with us? Can you point him out? But like Sam Agrinfried was like there were pictures of him on TV and in magazine, like, we all know who he is and what he looks like. Is there some legal reason they do it? Is it theater? I don't know.

There's a lot of pointing in court. Also, I learned that our opening statements, it's really common to point at the defendant.

Okay, so she's there, she's identified, Sam Bankman freed. We got our drama. Like, are there a few key moments, whether they are emotional moments or kind of substantive moments in terms of, you know, the case itself that stand out to you of what happened today? Like what are the most important things that happen?

Yeah, Well, the prosecution started pretty early by having Caroline talk about her romantic relationship with Sam and to characterize a little bit what it was like. And she said that, and I'm quoting from my notes that there is a general theme where I would want more, but he was being distant and not paying attention. So she kind of characterized their on and off again romantic relationship as one

And what do you think is going on there? I mean, I kind of get it, but like, what's the point of that part of it?

Well, there's something that lawyers do called taking this sting out, where they bring up things that they think the defense is going to bring out on Cross and they say it during direct So that way it kind of makes it seem less bad because I'm sure that on Cross the defense is going to say something like you dated Sam and it didn't go that loud.

So the prosecution is just preempting the you're just the bitter ex girlfriend kind of defense.

And they're also setting something else up, I think where they talked about Sam and Caroline's professional relationship and they talked about how in that relationship, Sam also had the

That makes sense because I mean, clearly, very bad things happened with FTX and Alameda, and the key question is did Sam do them? Everybody else has admitted to doing them. Did Sam do them? And the prosecution is trying to prove that yes, he did. Okay, so they got there, both their personal and their professional relationship. What else?

She also give us some interesting insight into Sam as a person. They asked her about what his goals were for himself for FTX, and she said that he was very ambitious and that actually he told her one time that there was a five percent chance that he believed that he might be president one day.

You know, I'll say, when I interviewed him, like the hubris was striking, which I mean, I guess that's probably true for everybody. It's not like, oh my insight, but it really is striking. When I interviewed him is when he talked about helping trillions of people, not just the billions of people who are alive today, but he said the trillions or even hundreds of trillions who might someday live. But then it was like, look, therapy, who have had a huge impact on the world, why shouldn't it be me?

Yeah, I talked to some reporters who were like, there was a time where it wasn't that crazy to think that there is a five percent chance that he would become president. The prosecutors also asked her about Sam's approach to risk, and she said something that I found really interesting, which is, imagine if you flipped a coin, and if the coin landed on tails, the world would be destroyed, and if the coin landed on heads, the world would

You know, it's funny you should mention that because again, before he got indicted, he was on this podcast that I like called Conversations with Tyler, with this kind of economist public intellectual, Tyler Cowen, and there was a similar thing in that interview where Tyler Cowan said said, if there was a fifty one to forty nine percent chance of a similar thing, either the universe twice as good as the universe gets destroyed, do you take the bet?

Was like what.

And then when everything blew up, that was what I thought back to. There was another interview where this other smart person, Matt Levine, sort of gets Sam to say that what he was doing was kind of a Ponzi scheme. Was basically a Ponzi scheme. But to me, the more Sam thing was that I'll keep taking the bet. And it seems like that is a sort of perfect metaphor for what he did, or at least a very good metaphor for what he seems.

To have done.

Yeah, I underlined in my notebook, like this is the crux of the story is he flipped a coin and it landed the wrong way.

For a while, it landed the right way right. That's how you get to be worth many tens of billion dollars when.

You're not thirty.

I would never flip that coin. I would not only not flip that coin, I would leave the I would leave the house.

That's why we're making podcasts, low risk, low return. Presumably the prosecutors called Caroline Ellison because you know, they're trying to convict Sam of a bunch of crime. So so you know what was sort of the crime part of her testimony?

Yes, okay, So remember that the crime that Sam is accused of is using money that FTX customers thought that they had safely deposited onto the FTX cryptocurrency exchange and instead investing it through his investment firm, Alameda. Caroline is the head of Alameda, and she said that when Alameda used FTX customer funds, it was at Sam's direction.

Uh huh. So like that's the core, that's it, Like, that's the.

Thing, that's the thing.

Yeah, that's like a good portrait of the day. One of the things I've been interested in listening to the other episode episodes you did with Michael and with Jacob Weisberg, was what's the jury doing? Who was asleep today? I find it striking that jurors are asleep, Like, were there jurors asleep today? How many? Was it the same? Was it the juror who works the overnight shift?

I think the jurors just like the journalists were actually really interested in what Caroline had to say. And she also sounded I had heard her on an interviews before, and she sounded much more confident. I think her voice was deeper, So I wondered whether she got some voice coaching, and I wonder if that was part of why she was able to keep the juror's attention. It was honestly a very technical testimony. They showed a lot of spreadsheets

That is a real testament to how Compella and Caroline Ellison must have been. So how did the day end? Where did you get to in the trial? Today?

The prosecution didn't finish asking Carol questions, so they're going to continue with that, and then I think we're all really interested to see what's going to come out on cross examination.

I'm very curious to hear what comes out in cross examination. We'll be back in a minute with one last thing. Ladya, Gene, we're back. Can you please give me one last thing?

Our one last thing today is about Gary Wong's testimony.

Okay, you and Michael talked about Gary Wong. He's the guy who doesn't talk right. If there's one thing to remember, he's co founder, but mainly is the really quiet guy. And then when he talked, apparently said on the show, we talked really fast.

It's kind of interest.

Yes, the guy get it over with once he took the stand, did actually talk. And today was cross examination, okay, and everyone was really impressed with how the defense lawyers did. I think up until now they seemed really nervous. I think, I said earlier one of their hands seemed to be shaking, and today they moved very quickly. They hardly got interrupted

Interesting, So those are like the vibes, which is interesting. What was the substance of the cross examination?

So to me, one of the most interesting things in this trial is Sam tweeted shortly before FTX declared bankruptcy FTX is fine. Assets are fine, And this has been pointed over and over again to an example of Sam lying, and on direct Gary said this was a lie because FTX was not fine. Assets were not fine, right, But the lawyers pointed out how Gary, in earlier conversations with the prosecution, did not characterize this as a lie because he said that depending on how you looked at it,

Which is in fact a classic hard problem in financial crises. Right liquid assets basically means assets you can turn into cash right now, and ill liquid assets means, yes, we have the money. Whatever I own a house, say, but I just can't sell it and turn it into money this minute. And so did he say on cross that, like, maybe if you're considering I liquid assets, it would have been reasonable to think that that FTX was fine.

He did seem to say that he said that Sam's tweet was misleading since he was talking about ill liquid assets, but he admitted that in early conversations with prosecutors he did not call this tweet a lie. And I found that cross examination to be really compelling.

Makes me only more interested to hear what happens when Caroline Ellison undergoes cross examination. Thanks for having me, Lydia, Jen.

Bye Jacob talk to you soon.

This episode of Judging Sam was hosted by Jacob Goldstein. Lydia gen Caught is our court reporter. Catherine Girardeau 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