Sam Bankman-Fried takes the stand

This is an audio transcript of the Unhedged podcast episode: ‘Sam Bankman-Fried takes the stand’

Ethan Wu
Listeners will recall we discussed the trial of Sam Bankman-Fried in the case against him last week on the show.

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This week, Sam takes the stand. This is Unhedged, the markets and finance show from the Financial Times and Pushkin. I’m reporter Ethan Wu here in the New York studio, joined today by US financial commentator Robert Armstrong.

Robert Armstrong
Actually, my role is “people too old to understand crypto” correspondent (Ethan and Robert laugh) at the FT.

Ethan Wu
Elder advocate Robert Armstrong. (Robert laughs) And once again, fresh from the New York courtroom steps, Joshua Oliver.

Joshua Oliver
Yes, again, fresh from sweating my way uptown.

Ethan Wu
(Laughter) Josh, we’ve seen now the case Sam Bankman-Fried made for himself. I mean, it must have been like a high-tension moment when Sam takes the stand. You correctly predicted last time that he would.

Joshua Oliver
Yeah. Me and apparently many other people. But there was some interesting, I mean, a little bit of courtroom mechanics, but it was interesting. But the the prosecutors clearly thought he was gonna take the stand because they had evidence that they held back for his cross-examination and didn’t kind of tip their hand before, which they would then not have been able to use if he hadn’t taken the stand, because he kind of goes last. So the fact that they were kind of keeping some material specifically for the cross, it was pretty good juicy stuff, kind of shows that they were banking on that as well. But he, you know, had the opportunity to get up there and say what he wanted to say. He, I think, was very keen, you know, to tell his side of the story.

Robert Armstrong
From the point of view of his lawyers, why put him up there?

Joshua Oliver
All else being equal, I don’t know if his lawyers would have put him up there. I mean, the white-collar defence lawyer playbook is don’t let your client testify because it’s dangerous. A couple of factors, I mean, he’s a particular client and at the end of the day he can decide. It’s better for the lawyer to act like it’s all their idea and it’s a plan rather than have Sam freelancing. (Ethan and Josh laugh) And, you know, I think Sam was determined to testify all the way through. You know, he’s just he’s always wanted to say what he has to say. And, you know, God knows he spoke to enough journalists before.

But then I think, you know, also he’s the only person, I mean, I think we talked about last week, you know, he’s the only person who really can tell his side of the story. I mean, one way of looking at this case in a super simplified, boiled-down way is there’s four people in a room. They walk out of that room and then they repay a bunch of lenders, you know, billions of dollars that ultimately, if you look at the mechanics, is borrowed from the customer. And then three of those people are the co-operating witnesses. Three, you know, Sam’s three deputies who say, yeah, Sam ordered us in this meeting just, you know, take the money and he knew it was gonna come from the customers. So how do you rebut that testimony? He’s the only person who can do it because, you know, there are four people in the room where it happened. Yeah.

Ethan Wu
We’ll get into that in a second. But why don’t we just start by recapping what happened last time on last episode of the show with the prosecution against Sam? I mean, if I had to sum it up just very quickly, it seemed like the case was basically, there was money that the customers put in, and when they came back, it was not there. Where was the money? It was in venture capital investments and celebrity endorsement deals and sports stadiums naming rights and expensive penthouses in the Bahamas. And then you have, like you mentioned, Josh, these three collaborators of Sam Bankman-Fried, including his ex-girlfriend and his college roommate and brother’s close friend all testifying, yes, no, Sam did the Sam directed this. And that, if I’m summarising this fairly, is kind of the essence of the prosecution’s case.

Joshua Oliver
Yeah, exactly. Obviously, you know, it’s four weeks of sometimes exhausting evidence. So, you know, there’s a lot of complexity. But I think you boiled it down very well. Sam’s defence is basically, partly I didn’t know and partly to the extent that I knew, I thought it was all fine.

Ethan Wu
Right.

Joshua Oliver
And you know, the phrase that his lawyer keeps using is, you know, reasonable business decisions, in good faith, had no reason to think that any of this is wrong, you know, bracket, whether you think any of this is reasonable. But, you know, if you wanna know what he was saying, you know, he’s telling the story about he’s a busy guy.

You know, on his direct examination, his lawyer got Sam to walk through like, what was your day like when you were the CEO? And he’s talking about if I had 60,000 emails unread in my inbox, that was a good day. And, you know, they made a little joke about it, or let you know, he’s got hundreds of meetings. They’re trying to show that he was so busy with so many millions of decisions, he just didn’t happen to pay attention to this part. And he testified that it was not until October that he really grokked. He kept on saying, I knew different pieces at different times. Which is, I guess, slightly to give himself some wiggle room of some of the inconsistencies.

But basically, his testimony is October, I put it all together in my mind. Oh, my God. You know, actually, the $8bn that customers deposited to Alameda bank accounts, his private trading firm, that was supposed to be there, we actually spent it. Oops. And now suddenly, you know, Alameda owes FTX $8bn more than I thought and it’s a really big problem. And that didn’t kind of coalesce in his mind until October, which is only a month before the whole thing goes under.

Ethan Wu
Josh, I just want you to try to characterise how much ignorance would be necessary on the part of Bankman-Fried for his defence of I don’t really remember, this wasn’t happening, I was confused, I was disoriented to actually hold true. And to just read a little chunk from your piece that kind of gets at this, the prosecutor said “while the defendant was fluent when questioned by his own lawyer, ‘he was a different person’ on cross-examination and ‘couldn’t remember a single detail’ about the alleged scheme, claiming some 140 times that he could not recall specifics. ‘He approached every question like up was down and down was up’, the prosecutor added”.

Joshua Oliver
What you’re quoting comes from the closing statements, which is what happened today in court. And the prosecutors are kind of, you know, calling back to their cross of Sam Bankman-Fried earlier in the week and trying to kind of remind the jury of the greatest hits of the cross-examination and, you know, the things that they should be remembering, though they want them to remember when they go into the jury room. Indeed, Sam said, I don’t recall a lot. (Ethan laughs) And they’re trying to make the point, obviously, that he’s using “I don’t recall” to get out of questions he doesn’t wanna answer.

But the main point of the cross is, guys, do not do financial crimes in the southern district. They seriously know what they’re doing and all the lawyers are good. But the cult figure who has come out of this trial is Danielle Sassoon, this prosecutor who did the cross of Sam Bankman-Fried. She was incredibly organised, relentless, you know, and a good combination of, like, forensic, having the details and then also asking kind of the obvious question that, you know, when you were asking, which is like inane. And she did this a couple of times. She was like, so, you know, did you ever tell your employees not to spend the customers’ money? Who are you saying did spend the customers’ money if it wasn’t you? And just doing these kind of common sense questions that make the jury maybe kind of go, oh, yeah, that does make sense. But, you know, you can imagine her with her notes in front of her. There’s just like, question. (Ethan laughs) And then another column, all the receipts of like, you know, here are all the numbers of all the evidence that I’m gonna call up if he says I don’t remember, if he makes this claim, if he makes that claim. So prepared.

And so you know, right at the very beginning, you know, they always tend to try and do something eye-catching at the beginning of a witness because the jury’s still paying attention, they haven’t dropped off to sleep yet. And she asks him, were you involved at all in Alameda trading decisions, which is this, you know, this key question about conflict of interest because Alameda is a trader on the exchange and he runs the exchange. And he gives a sort of answer like, I wouldn’t say I wasn’t involved at all. I would say I was mostly not involved. I wasn’t involved day to day. And so you kind of, you know, and she asked it twice. Did you say you were not involved at all in Alameda trading decisions? And then she’s got the recording of Sam on a podcast using the exact phrase “I’m not involved at all in Alameda trading decisions”. And she’s got the Signal screenshots of him directing trades and telling his employees buy this, buy that, you know. She’s tried to demonstrate all sorts of different things. But she’s trying to say his story is shifting. If he tells you he doesn’t remember or he caveats something, it’s deceptive, and drive that point home over and over again.

Robert Armstrong
I have to ask here something that is subjective. Was Sam Bankman-Fried a sympathetic witness or not? Putting yourself in the jury seats, what was the vibe you got from him while he was under all this pressure?

Joshua Oliver
It’s an interesting question. And when he’s answered questions from his own lawyer, he came across quite well, you know.

Robert Armstrong
That’s the easy part.

Joshua Oliver
It’s the easy part, but, you know, he managed it and obviously, if that doesn’t go well, you’re in real trouble (Robert laughs) because, you know, the questions are. But he’s, you know, he was making jokes to the jury, he was charming. You know, Sam is a very captivating person. And, you know, he seemed interesting. He, you know, so that all went fine.

On the cross, it’s really interesting because there was this weird dynamic in the court where they in effect, had a dress rehearsal for the cross. There was this sort of hearing they had where the jury wasn’t there. And they did some of the cross because the judge had to decide whether it was admissible. And this is tactically turned out to be just so important because Sam basically got to try out what cross was gonna be like with no stakes because the jury is not there. And his behaviour changed totally from that dress rehearsal to the actual thing when the jury was back. It almost seemed as though he hadn’t believed his lawyers when they told him how bad it was gonna be. It’s what he did the first time — jury not present — he tried to sort of wheedle on every question. It would be like, they would ask him something. He’d be like, well, you know, I wouldn’t necessarily phrase it that way and, you know, give an answer with a bunch of caveats and explanations and long answers. And the judge was getting a little annoyed with him. The lawyer was like, asking questions over and over again . . . 

Ethan Wu
The judge kind of reprimanded him, right?

Joshua Oliver
Yeah. The judge said, you know, how about this? Try answering the question directly. (Ethan laughs) And, so obviously . . . 

Robert Armstrong
It sounds like that dress rehearsal might have been very important for his chances.

Joshua Oliver
Very important. Scared straight. Yeah. And he . . . So then when, you know, the jury’s there, Sam Bankman-Fried has finally learned to give a one-word answer. It was something he was completely incapable of. You know, I have spoken to him for more hours than I care to admit, and I wish I’d had a judge there to say you didn’t answer the question, (Ethan and Robert laugh) but he would say yes, no, I don’t recall.

The other thing that he, the little tic that he had was, I wouldn’t put it that way. I can explain if you want. And then he would just stop and the prosecutor would move on. But it kind of made it seem as though, like, he’s got an answer but they’re not giving him a fair shake. And then on the redirect, his lawyer comes back. They said, you know, you said you could explain. The prosecutor didn’t want to hear it. Can you explain? And then they get him to do the thing. So they’d worked it out.

In terms of was he sympathetic, the problem was his sort of, as you say, vibe, dare I say, attitude, it really reminded me overwhelmingly of like, what, there’s like a substitute teacher and there’s a kid in the class who knows they’re smarter than the substitute teacher but knows that they’re gonna get sent to the principal’s office if they start, you know, being too much of a smart ass. And so he’s kind of like knuckling under and just saying, you know, “Yes, ma’am”, “No, ma’am”. Answer the question that he’s asked. And he knows he’s smarter and he knows he could destroy her (Ethan laughs) with his thoughts if he was allowed to speak. But he’s just gonna beha—, you know, just gonna . . . I’m not sure that comes across sympathetically because he looked as if he thought he was above it. He’s really kind of sullen, sulky, negative. And then the other thing is like, all of the “Don’t recalls” stacked on top of each other start to look shifty.

Robert Armstrong
It is an ancient principle of our legal system that nobody likes a smarty-pants. (Ethan and Josh laugh)

Ethan Wu
But I do wanna, I think, I don’t wanna leave listeners necessarily with the impression this is an open and shut case, because I think in one of your recent pieces, Josh, you identify one potential weakness in the government’s case, and I hope you can speak about this now that you’ve seen the way that the trial is wrapping up. You write: “What the government lacks is a smoking gun. There is no standout piece of evidence that unequivocally shows Bankman-Fried conspiring in black and white. Prosecutors have made much of the fact that he set his encrypted chats to auto delete to imply that he deliberately destroyed the most incriminating information”.

Joshua Oliver
Yes. I was talking about the smoking gun question with a more veteran white-collar reporter around the office, and they were like, no, there’s never a smoking gun. Usually they only have one witness and this guy could have got three. So he’s definitely screwed. This is my first federal trial. I’m not an expert on the prosecution side. Do I think that there’s no chance there’d be one juror who is like, oh, no, I don’t think so? You know, I don’t think it’s totally open and shut. All the legal experts are saying the preponderance of evidence is on one side. The government’s got a super strong case, but you never know what’s gonna happen in the jury room and . . . 

Robert Armstrong
Let me ask you this, Josh, why isn’t this a smoking gun? There were customers of the exchange that sent money from their bank accounts with the expectation that they were gonna be placed in a bank account belonging to the exchange. And that didn’t happen. The money went somewhere else. That looks on its face like a crime to me. That looks like an act of gross deception to me.

Joshua Oliver
So the customers were told sort of technically where the money was going because they got to get wire instruction. So they sort of like the kind of in a sense, it wasn’t necessarily secret, it wasn’t necessarily public. It’s the most obvious thing in the world to say, but, you know, it’s all about intent. And what did Sam think? So, you know, you can always try and find a way. And they’re trying their darndest down in the courthouse, right, to always try and find a way where he wasn’t aware of this part. He didn’t know about that. He thought it was OK. And so, obviously, you know, any prosecutor would love to have is messages where they’re kind of explicitly talking about the crime. But as I’m informed by my white-collar colleagues, you know, this is an incredibly rare thing to have.

There is one that comes close, which was brought up today in court, which is a chat where right at the very end, where in a shot saying he’s one of the co-operating witnesses, one of Sam’s closest allies is basically about to leave. You know, he’s about to get on a plane and go back to America, go live with his parents and hire some, you know, a lot of lawyers. And he says, I think you need to tell our staff that it was not, you know, a lot of people orchestrating it, because I think that will mean that more people will stay and keep working at the company. And Sam sort of goes, yeah, I think that makes sense. In court, the prosecutor wants to say . . . 

Robert Armstrong
The reference of it is the question, right?

Joshua Oliver
And the prosecutor said, very clearly says in court, right. “It” is the fraud, (Ethan laughs) but obviously we don’t know, right? It’s just two messages. So to take it out of context, I mean . . . 

Ethan Wu
It depends on the meaning of what “it” is.

Joshua Oliver
You know, it’s a gun with smoke near it. I don’t know.

Ethan Wu
Yeah. (Laughter)

Robert Armstrong
At this point in our discussion, I would like to introduce into evidence a T-shirt. Mr Wu, would you read the T-shirt (Josh laughs) for the jury?

Ethan Wu
Very happily. This is a black T-shirt, men’s medium, made with US cotton. The T-shirt reads: “Is it your testimony that Josh Oliver wrote something you didn’t say? USA versus Samuel Bankman-Fried, October 30th, 2023”. Mr Oliver, (Robert laughs) account for this.

Joshua Oliver
This is my testimony that this is not my idea. (Robert and Ethan laugh) This is a kind of very embarrassing gift for my colleague Joe Miller.

Ethan Wu
Who’s been on the show.

Joshua Oliver
Who has been on the show, who has been with me in court, my ally for these 3,000 weeks of judicial proceeding. And this is, yeah, this is a quote from the transcript of the trial where the prosecutors were using basically media interviews in their cross-examination of Sam, including our interview with him in last December, where, you know, we talked about a bunch of stuff. But crucially, he kind of gave some of the hints and earliest hints towards this June, the key June conversation where they’re talking about repaying the lenders. And this is not a question that any journalist wants to hear their sources asked under oath. Did they make up the story? For the record, I did not. And Sam’s testimony is he doesn’t remember. Honestly, probably fair enough. He did a lot of interviews.

Ethan Wu
He should have put that on a T-shirt. I do not recall.

Joshua Oliver
I do not recall. Yeah, that would be his quote.

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Ethan Wu
So Josh, do you think you can wear this?

Joshua Oliver
Absolutely not. No. There is . . . 

Ethan Wu
It’s a little self-aggrandising. (Laughter)

Joshua Oliver
I was told this was, you know, a Halloween costume. Halloween is over. And the best I could do is frame it.

Ethan Wu
(Laughter) All right, Josh, we’ll be back in a moment with Long/Short. Welcome back. This is Long/Short, that part of the show where we go long things that we love, short things that we hate. As usual, two guests on the show so I will step out. Rob, do you have a long or a short?

Robert Armstrong
Actually, I have a long and a short on the same thing: Hunterbrook.

Ethan Wu
Hunterbrook.

Robert Armstrong
Which was the subject . . . 

Ethan Wu
Pretentious name.

Robert Armstrong
A pretentious name, which was the subject of a great story in the FT today, is a start-up. And that the idea of the start-up is that it is a news organisation, but the news organisation, before it publishes its stories, will trade on them. So they’ll, you know, they’ll have journalists gathering up information, potentially market-moving information. They will put their trades in, then they will publish the story. I am short this idea if it is a hedge fund supported by a news organisation, because all hedge funds basically have news organisations. They call these people analysts. If on the other hand this is a news organisation supported by a hedge fund, then I’m long it. (Josh laughs) Give it a chance! (Ethan laughs) I mean, maybe you’ll get sued by the SEC, but maybe you’ll come up with a new way to support journalism, which God knows needs new forms of support.

Ethan Wu
A new pioneering business model over here at Hunterbrook. Josh, are you long or short something?

Joshua Oliver
I have not read any news not containing the the acronym SBF in the last five weeks. (Ethan laughs) So I will go short the chances of a verdict before the weekend. The judge seems to be in a hurry, but I don’t think it can be rushed. And I hate to put a real prediction on the record, but I will go long conviction.

Robert Armstrong
You are not good at this game, Josh. (Josh laughs) The way you play this game is you make a prediction that will not be immediately proven right or wrong (Josh laughs) so that listeners have a chance to forget the story.

Ethan Wu
That’s very important.

Joshua Oliver
No, no. I mean, this isn’t speaking of ancient traditions, of journalism, of never being held to your predictions and never making predictions that can be falsified.

Robert Armstrong
You are now a hostage to fortune. Congratulations.

Joshua Oliver
I’m a hostage to fortune. But look, you know, sometimes we gotta do these things.

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Ethan Wu
All right, Josh, thanks for being here. Fresh from the New York court steps. We’ll have you back soon, maybe when this case is decided, to talk about what we learned. And listeners, we’ll be back in your feed on Tuesday with another episode of Unhedged. Catch you then.

Unhedged is produced by Jake Harper and edited by Bryant Urstadt. Our executive producer is Jacob Goldstein. We had additional help from Topher Forhecz. Cheryl Brumley is the FT’s global head of audio. Special thanks to Laura Clarke, Alastair Mackie, Jacob Weisberg and Jess Truglia. FT Premium subscribers can get the Unhedged newsletter for free. A 30-day free trial is available to everyone else. Just go to FT.com/unhedgedoffer. I’m Ethan Wu. Thanks for listening.

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