Ep. 96: SBF Trial Briefing, October 27. Sam Bankman-Fried Takes The Stand, This Time in Front of a Jury

[00:02] Hey, Natasha, what is crypto to you? Crypto is so much more than charts and gains. It's a whole new financial system, entirely new technological rails to enable creativity, ownership, wealth building, and more. Free of credit scores and spending habits, Kraken is your easy to use, newbie friendly bridge to this whole new world. Everything can be better. So why not finance? To get started, go to kraken.com backslash boys club, sign up in just a few minutes and see what [00:32] of loss. Cryptocurrency services are provided to U.S. and U.S. territory customers by Payward Ventures Incorporated. PVI, DBA, Kraken. [00:41] Hi. Last day of week four of the SBF trial. A marathon. Yes. What a day we had. [00:49] at the Southern District of New York. So we're going to get into it. You and a lot of other people. I saw some tweets this morning that was a line of many, many, many humans that were waiting to get in. [00:58] For sure, the most amount of people that there's been. I think there was like four plus overflow rooms. Are you feeling any camaraderie with your journalist friends? I wouldn't say that. I mean, everybody that I like make an effort to talk to is super nice. Yeah. People have sort of formed their cliques already. Okay. But I talked to a bunch of people today. And I think one of the things that struck me is just the... [01:26] types of people that are there. I was sitting next to, at one point, a high school student who was there who was really interested in the case. I was sitting next to a trader who used to work with SBF at Jane Street. Then there was someone from the Associated Press. And then there was this podcaster who had this podcast that I loved called The Shrink Next Door. And then you have all types of like very legitimate reporters and then crypto people. And it's just a very random

[01:56] and see his testimony, but it was a lot of people. So we get in and basically what was happening today is the defense was [02:04] questioning Sam Begman-Fried. So if you listen to the podcast yesterday, we left on a cliffhanger where yesterday we went through this whole line of questioning, both from the defense and then the [02:17] sort of line of questioning that the defense wanted to include, that [02:21] there was pushback from the prosecutor and the judge is trying to make a decision. And he was like, I need more information. So basically all day was them questioning him without the jury. Yesterday was like a dress rehearsal. [02:31] A dress rehearsal. No jury. Or what they call a hearing. Okay. But it did feel like theater. And then the judge left us on a cliffhanger. And as we talked about yesterday, basically there were five different sort of lines of questioning. Broad strokes, long story short, the judge allowed today one person. [02:48] portion of one of those five. So, [02:52] We don't need to get into weeds, but basically there was a data retention policy and he was saying we can talk about Sam's understanding of that policy. And that's basically all you can ask him. So it was interesting because all of the things that we talked about yesterday, they can't get into today besides that one piece. [03:07] Struck from the record. Well, yeah, that's not exactly how it works, but sure. [03:16] Okay, so the defense had their moment to shine today. [03:20] How did it shape up for them? So they took all day, which a lot of people said was a strategy on their part, because frankly, SBF did really well today. He came off as respectful, as smart, as prepared.

[03:38] kind, maybe even a little bit nerdy. You hate to hear it. You really hate to hear it. He was very composed, very night and day difference from what we saw yesterday with the cross-examination where he completely fell apart. But that, again, the jury wasn't there for that. So this is the jury's first experience of hearing him and like getting to know his perspective and him as a person. And so the defense had a really good strategy of, okay, basically if he's doing well, let's push [04:08] So that the jury leaves and has a full weekend sort of with this impression of Sam before they get into next week. Some warm, fuzzy feelings about Sam. So for people who maybe are not familiar with how courts work. [04:21] like me and I'm learning. But what I'm understanding is that what today looked like was Sam getting questioned by his own [04:29] lawyers. So presumably he was very well prepped and prepared since it was his [04:35] own team that was questioning him. So [04:38] You could say that... [04:41] his composure was practiced and that might not remain the same when he is cross-examined by the prosecution 100 he will not be 100 this was [04:51] rehearsed. This was line by line. [04:54] prepared, [04:54] with his defense. And there were even moments where you could tell that he had messed up [05:00] his line. And those were the only moments that you could see him get a little flustered or apologize or seem insecure about what he was saying. And at one point he said, I messed up the order or something. So there's, he's like line, line, line, line.

[05:17] Exactly. So the strategy is give the jury the weekend with that version of him to sort of cement into their mind before you go into cross-examination, where if it's, [05:26] even a quarter of what it was yesterday, that picture is going to look totally different for them because of how erratic. And it's like the facade is broken. But I will say there were moments today where I was like... [05:41] Is he telling the truth? [05:43] Wow. He's not, and I know that, but I... [05:47] Yeah, there were moments that I... Just a testament to how compelling he is, or he can be. I don't know if it's even compelling. There's something about him that I felt like... [05:55] I pitied him or something and felt bad for him, which I think is, is, [06:02] more a product of like how... [06:05] the society, I guess, I don't know, than him specifically as a person, because I didn't find him [06:11] Pelling or... [06:13] I wanted to believe him today. [06:15] And I have not felt that before. [06:17] where I was like, maybe it was just mismanagement. [06:24] And I've not had that feeling at all at any point, but there were small, very small, like 2% of me, 3% of me. And I could recognize that feeling because that's not... [06:33] how I've experienced it at all up until now. So my perspective of what the defense is trying to do in the story that they're trying to build is that the hole at FTX and the issues that Alameda had all came down to growing pains during hyper growth of early stage companies, over delegation on Sam's part, entrusting people on his team to handle and manage situations without his heavy hand involved.

[07:01] that we're dealing with complicated computer systems and deep financial modeling and financial apparatuses and [07:10] and products and platforms that are complicated and hard to understand and so complex. I was at the school [07:17] of SPF's financial institution. In the first three hours of the day, [07:23] Basically, all we were talking about was defining different financial terms, spot margin, long versus short, an arbitrage, front running, margin trading, spot margin defined again. Like they kept coming back to those types of things and delayed liquidity. All of these different terms around the financial system and how these financial institutions work and how Alameda worked. And so that's a huge part of it. And then talking about the code and what they built at FTX. [07:53] So really complicated computer and financial systems. Another overarching theme is that he was overworked. At one point he talked about how some people try to get to inbox zero, but I was trying to get to inbox 60,000. And I'm like, my dude. [08:07] That's your problem. You've done something wrong if that's where you're at. He would take responsibility for mistakes that were much more minor or say, I should have had my eye on this. Or I take responsibility for specific situations where something went, hey, boy, are on the platform or there was a weird trade that happened, but not an overarching responsibility, obviously, of everything.

[08:32] a really tried and true manipulation tactic, which... [08:36] I see. Gay recognized gay. No, I'm just joking. I'm not going to feel like that, but I do. No, you don't have the stomach for it at all. So I would say the story is like gross mismanagement. [08:50] That's sort of what they're going for. And he claimed that he didn't know about the hole until September, October of 2022. Essentially. Yeah. Ish. Around that time. The afternoon was much more about all of this testimony that we've heard from other people on his team that he continued to sort of. [09:12] in a indirect way blame. [09:15] where he would say like they're managing that like Caroline Allison was [09:20] managing... [09:21] Alameda Research or she had a project or Gary Wong wrote that code. It was always sort of redirecting back to these people that he had delegated tasks or specific aspects of the business to. And then the rest of the afternoon was really him going through... [09:35] all of these different testimonies that we've heard or stories that we've heard from Caroline or Gary or Nishad and giving his perspective of what happened. Were those perspectives matching up? No. Okay. Very different. I mean, okay. [09:49] I would say it's totally different language. They never said the whole. They would always say the liabilities. There was a way of couching it so that it wasn't a reminder of customer funds, essentially. Totally.

[10:03] point would be like, he was concerned about liabilities. He was concerned about marketing spend. So there's some corroboration with his version of the story, but the details and the [10:17] All of that, the details are different, but the high level [10:20] overarching idea, it's the same. So here's my perspective. Here's my high level takeaway. They're trying to make this argument that he's [10:27] polymath, genius, once-in-a-generation mind. And that he was misunderstood, but it was because he was just so smart. Okay. And... [10:39] he was so good at finance and he was so good at seeing an opportunity and [10:44] but he was also... [10:45] grossly mismanaging this entire operation and that he had over delegated. They never said this directly, but they're implying it with the line of questioning and the way he's answering and that these were just growing pains. And it was like, it's unfortunate, but like things happened because things happen. And this is my take on that perspective. When you look at the figure of Jesus Christ, [11:09] hit me. People will say a few things. People will say, you know, I don't believe that Jesus Christ is the son of God, but I do believe that he was a great person and a great historic figure. And we should respect that. And we should look to Jesus for some principles, but he wasn't the son of God. [11:28] And many people will say, [11:30] That doesn't make any sense. [11:32] Yeah. [11:33] Either Jesus was crazy.

[11:35] and told people he was the son of God and was mentally ill, or he was the son of God. [11:42] And he is an incredible historic figure who is also the son of God. There's no in-between middle ground. Okay. And that's how I feel about Sam Bankman Freed. [11:51] He is either. [11:53] A mastermind criminal. [11:55] or a bumbling idiot. [11:58] And he can't be a mastermind [12:00] and not have seen everything that was going on. [12:03] And not be a criminal. Yeah. And he's obviously not a bumbling idiot. So... [12:07] *laughs* [12:08] He's a criminal. Right. Great take. Great take. He's too smart to have not seen the mismanagement that was happening. If that's what they're saying. 100%. [12:17] Right. 100%. And they're not saying that directly because they know that that will get them in trouble, but they're saying it indirectly with how he's answering the questions and the ways in which he's discovering that, [12:27] the issues that came up that caused the implosion of ftx and alameda research so a flawed defense strategy says natasha hoskins i mean i actually feel like i have more respect for the defense than i've had this whole time because i'm like [12:42] Wow, they found some way to build a case, a defense. [12:51] when I was like two days ago, what's this guy going to talk about? There's nothing to talk about. Like done deal case close. What are we even doing? There's a waste of time. And I was like, okay, they found a way to talk for six hours, seven hours today on what they believe to be his side of the story. So yeah,

[13:06] I have respect for... [13:08] Everybody in the room, honestly, besides SPF. Two other things, and then we can call it for the day. One is that it's really funny because there is a leveling of people in the courts. Like, the judge was, like, grabbing his lunch with his wife in the cafeteria. And I'm like, what? You're holy. Like, what are you doing here with the peasants at the cab? No one's going to have to talk to him, right? That would be... [13:37] I think that would be an uncouth. Yes. Right. And or just like an invasion of his time. As people have said on the Internet, he is a work life balance king. [13:49] And the other thing that was crazy is at one point I was waiting to be let into the room and I'm in an overflow room. I've been in an overflow room every single day. Unless you get there like three o'clock in the morning, you're in an overflow room. But I got a great seat today. So I was very happy. But anyway, I was waiting to be let in. [14:06] And you're in like these hollowed halls that are beautiful. And you're on like a very high floor. We're on the 24th floor, sun beaming in, very minimalist. And when you're waiting to get light in the room and you're [14:19] i look through the elevator bay and i see this woman walking in and she's walking down the stairs and it's sbs mom and she's just right there and then a ton of his defense attorneys come out and i was like oh they were meeting on this other floor during the lunch hour to figure out their next line of questioning and it's just so strange that you're all sort of in there together you're

[14:40] all experiencing the same thing. [14:43] But a lot of people have completely different relationships to the whole experience than I do or the person sitting next to me. And it's very weird. Wow. So where do we go from here? [14:54] So they adjourned the jury and then the judge was like, [14:58] You know what I'm going to ask Mr. Cohen because he is got everybody on a clock. He's trying to get this thing moving and closed. And basically what we have left is we have a morning call. [15:10] With the defense still, he said he has about a few more hours of questions. And then the government, the prosecutor said, we will have significant cross-examination. So she's like LFG. She's just been waiting. She's just sitting there. So that will continue Tuesday, maybe all the way up until Wednesday afternoon. And then they'll do their closing arguments. There'll be something called a rebuttal. Then the judge will, I guess, there's this thing where he informs the jury, I guess, of their job and what they're to do. [15:40] We'll go all the way through next week. [15:42] whether or not we go all the way through next week. TBD. Huge question mark. How much longer I can sit in the courtroom is... [15:51] is... [15:53] I'm starting to feel like there's a very specific scent of the soap. [15:58] in the bathroom that's sort of like a hospital vibe a municipal [16:02] energy exactly someone's got a large contract for all of the government buildings [16:07] and the smell was like making me nauseous today where i was like i feel like i'm at a hospital i gotta get out of here on that note on that note we'll see you next week we'll see you next week

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