Sam Bankman-Fried is Guilty

Jacob Silverman


Paris Marx is joined by Jacob Silverman to discuss the trial of Sam Bankman-Fried, why he was found guilty, and how his negative traits are common across Silicon Valley.


Jacob Silverman is a journalist and the co-author of Easy Money: Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud. He’s also the host of The Naked Emperor. Find more of Jacob’s work on

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Paris Marx: Jacob, welcome back to Tech Won’t Save Us.

Jacob Silverman: Thanks for having me.

PM: Always great to have you on the show. I’m sure the number of appearances you have now is really starting to stack up. You’re getting up into the leaderboard.

JS: When do I get residuals?

PM: [Laughs] I’ll need to check on that. You and Brian Merchant can start collectively bargaining with me. Obviously, you were on the show recently to talk about the Sam Bankman-Fried which was just kicking off as we were talking, and we have the verdict on that now. And so I wanted to have you back on to talk about what we learned through this whole process and where things go from here. But the first reaction has to be, of course, you have been covering crypto and Sam Bankman-Fried for a long time, quite in depth. You’ve even had direct contact with him in a way that most people haven’t. How did you feel seeing the verdict delivered that he was guilty on seven charges?

JS: By then I wasn’t surprised because just by normal prosecutorial standards, as a slightly informed observer, it seemed like the prosecution had done a good job and the defense had done a very bad one. And sometimes I tried to think of it from the mind of a juror who may not really know much about this guy, or this industry, probably to their good fortune. And it was hard to think that people would come out of there finding him not guilty. On the other hand, of course, to actually see it blaring across Twitter and other headlines — there’s something very strange about that. And then, just a little bit personally it hit me this week, actually yesterday, I was going through some of the exhibits from the trial. And there’s that tweet that he sent exactly a year ago, this was on November 7th, 2022, where he says, “A competitor [Binance] is trying to go after us with false rumors. FTX is fine. Assets are fine.” And the version I saw was a screenshot of that tweet, stamped with the government exhibit number, whatever. A year later, he was bankrupt, convicted of seven serious charges, and that tweet was evidence in convicting him. So, that was rather striking. We could talk about how it went very quickly, and things like that. But it’s hard not to take it all in the real speed and drama of it.

PM: You talk about how quick it did go. Was it surprising to you that the jury took so little time to render its verdict, or, as you say, where the prosecution, you felt, did such a good job, it was not really much of a surprise?

JS: A few days, maybe, is what I might have expected, and maybe in the longer term, or it seemed unlikely that there’d be one person holding up the whole thing. But it can’t happen, because it has to be unanimous. I didn’t think it was going to be four to five hours, counting up pizza dinner, or whatever they had in that jury room. But again, that just shows that real people understand when the information is presented to them. A cross section of humanity understands that when they see this stuff — and it’s presented to them in a pretty direct way, and relatively simple way without the mystification of crypto and tech — that it’s just fraud and other forms of financial malfeasance. The story that was told by the prosecution was pretty convincing that you had three co-conspirators who had already pleaded guilty, who, frankly expressed some remorse, but also were very clear in their testimony: Sam told me to do this when we were in his apartment on this date, or around this time. There were documents to back all this stuff up, in general.

Some things were very specific. Sometimes they would say: We know that Sam Bankman-Fried could be looked at this fake spreadsheet, this cooked balance sheet, that they then sent out to lenders, because there’s metadata that shows that, we got that from Google. Things like that, and people get that. Whereas the defense never told a clear counter-narrative. That’s what I’ve been telling people, is that it is an object in storytelling, certainly in suasion in trying to convince the jury. I would talk to other journalists and observers in these overflow rooms where I was, at the courthouse, because there were everyday people who would come in, anyone could view the trial. There were also crypto-people and other folks, lawyers who would come in. You’d ask some of them: What are they trying to say here? And you’d get: Well, they’re trying to muddy the waters better, saying Sam didn’t really know what was going on or that maybe some of the stuff was done without him. Or you have him saying during his testimony: I do not recall some one hundred forty times. But there’s no real master narrative or just no: Caroline Ellison did it with the others and Sam was out to lunch, nothing like that. And that’s what you need to do if you want to convince a jury, or part of a jury that you’re innocent.

PM: I remember when we were speaking before the trial was kicking off, or last time we spoke, that we discussed how the prosecution reportedly was planning to not get into the real weeds on crypto and felt that that would distract from the case that they were making. Is that ultimately how they approached it, just gave the raw facts instead of trying to detail how cryptocurrency works and all that kind of stuff?

JS: There wasn’t a heavy emphasis on the mechanics of crypto, but there certainly was some. Sometimes you’re just thinking that this is a little boring, or why are they doing this? And that might be a little bit of a distraction. There were objections throughout this thing, and many of them sustained against the defense. Or against specifically Sam Bankman-Fried when he testified. He would often slip into these long monologues, even in response to yes or no questions. And there’d be these objections, either he wasn’t answering a yes or no question, or there’s something called narrative. Which I was always amused by, which means that the guy was telling a story. He was just rambling. There were times when the prosecution would object and say: The question was about FTT as collateral and he’s talking about hanging out with Anthony Scaramucci in the Middle East or something like that. It was just a little ridiculous at times, how far tangency would go.

PM: As I was saying, Sam Bankman-Fried has been found guilty on seven charges. Can you give us the lowdown on what those are what he’s been found guilty of?

JS: There was certainly a fair amount of: They made this token, FTT and this is sort of how it worked. And there would be times wher both sides, even, were overdoing it in terms of trying to explain the basic mechanics. But the charges themselves, I kind of joke, that he didn’t break crypto law, which doesn’t really exist. But broke basic financial laws, which happened to cover crypto, or could if we had broader enforcement, or, “regulatory clarity,” as the industry asked for. Things like commodities fraud, securities fraud, money laundering, or conspiracy to commit these things because he was working with other people. Again, there are three co-conspirators that was former CEO of Alameda research, Caroline Ellison — that’s the trading firm if people are just tuning in — and also Sam Bankman-Fried’s ex girlfriend. Nishad Singh, who, I believe, was Chief Product Officer, but one of the top executives there and a friend of his younger brother, Gabe Bankman-Friend. And then you had Gary Wong, who was the only other co-owner of Alameda research and co-founder of Alameda, co-founder of FTX. Sam knew him from math camp at MIT.

There are other minority owners, investors at FTX. But he was right there with Sam, the whole way. These are the three people who, before the trial even began, had pleaded guilty to basically the same crimes, and sometimes one or two other charges, like campaign finance charges. So I think that helps to in a way to reiterate some of the early stuff, which is that these are understandable crimes, if you divert $9 billion, even this covert or supposedly technically sophisticated or crypto shrouded way, you’re still stealing $9 billion. And using it for purposes you’re not supposed to. One of the main things that Sam Bankman-Fried did was, besides selling unregistered securities, he was lying to investors, that’s defrauding investors. He was lying to customers and doing different things in practice.

So you’d say things like: I’m not going to move investor funds, and then use it to buy a billion dollar crypto mine in Kazakhstan. And then you do that, you’re arguably committing fraud. It’s just these kinds of repeat actions, but it really revolves around the central deception and crime of shifting more than $9 billion, but really, that was the final hole, That should have just remained in FTX customer accounts, but was funneled through Alameda research, the trading firm, that then became this ad hoc VC firm, which is this whole other thing, and committed acts of money laundering and stuff like that. And Sam was in charge of it all. That is seven counts and he could, if they do the big show-y sentencing thing, people have been saying; Oh, you could face 110 years in prison, I’ve been saying that too. But I think he will get a significant sentence.

PM: Hopefully!

JS: If anyone deserves it, I think he does, and I haven’t been shy about that. There’s the Michael Lewis take, or some of these frankly lighter approaches towards Sam Bankman-Friend, but there’s a lot that stupid here. A lo that’s goofy here, but real people did get hurt. Like, a lot of very rich people who will be fine got hurt, of course, but everyday people who were convinced to put some money in FTX or I do feel some sympathy for lower level FTX employees who had their money there. Just a coder grunt or someone who bought in and was like: yeah, I’ll go work in the Bahamas for this crypto casino. Some people have greater degrees of culpability than others. But there were millions of everyday people — and I’ve kind of given the spiel up before —but I think most people in the end deserve some sympathy for gambling on crypto and losing. And I don’t begrudge them that. When you look at the larger picture of who this guy did business with, and where he did business sometimes, and the larger acts of money laundering, apparently — this was a major financial criminal. So if you believe in that kind of enforcement, also stopping political corruption, which he clearly was fueling, then you should probably be glad that he was prosecuted pretty effectively.

PM: I remember when he was remanded into custody during the pre-trial period, because he was messing with witnesses and a ton of stuff. There was a discussion about how the criminal justice system isn’t very fair once he was put in there, and I was like: Yeah, I think you can make your criticisms of the criminal justice system and how it works in the United States, but at the same time, this is clearly someone who has had a really negative impact on a lot of people. I feel like, especially in the tech industry, so many people have been able to get away with deceptions, and I would argue frauds as well. That they have not been charged with or held to account for. We certainly saw Elizabeth Holmes go into prison earlier this year, I believe it finally was. We’ve had some other smaller people, who people don’t know as much being charged. But I do think it’s important that people like Sam Bankman-Fried are held to account for what happens, and that you can show that if you are doing things you can be held to account. I would hope that it further sets a precedent after the Elizabeth Holmes trial, to show that this enforcement can happen in the tech industry as well, in a way that it hasn’t for quite a long time.

JS: That’s very well said. I agree, because we certainly saw a lot of cynicism. I mean, some of that is pretrial cynicism, or even before his arrest, and some of that’s deserved because, as you indicated, I mean, the criminal justice system in the US is a disaster, and a very racist and unequal one. But occasionally, things might work out or at least be, one would hope, an effective example of enforcement and applying the law to a really bad actor who broke a lot of laws and hurt some people. And might have a deterrent effect and also be a precedent to prosecute more people because there are a lot of people in tech, in the corporate world, who have broken laws and exploit others. I think also you saw some on the right, and on sort of the tech right, saying like: Oh, well, he gave all this money, and he’s gonna walk away, and even spraying sort of some disinformation to that effect.

For example, because we had a couple of these superseding indictments, and they dropped charges, but really, they moved some of them, or delayed them, kicked them down the road to the second trial, that’s going to be next March. We’ll have a better idea when that trial approaches, exactly what those charges will be. But they’ll probably be around the bribery of some Chinese officials for $150 million, which is pretty nuts. Qnd perhaps some of the political stuff. But something did work here, the system — to some mostly positive and one could say — and you can talk about also the SDNY here in New York and the US Attorney, Damian Williams, whose office has prosecuted a fair number of major white collar cases so far, including some people on Wall Street. I would hesitate before saying this is like a one off or even that people in crypto want to say this one bad apple has been dealt with stuff like that. We don’t want to put into tidy a box or anything like that. But it did seem to be rather an effective demonstration of holding this tech finance figure to account, and perhaps, like we just said, it foreshadows more of this, because that is one way to rein in the power of these industries and their corrupting influence.

PM: Absolutely. I’m all down for abolishing the prisons or reforming the criminal justice system. But I don’t think it should start with the Sam Bankman-Frieds of the world, they can get their long sentences and serve their time for what they did. Basically, this trial went on for six weeks. Obviously, there was a lot of testimony and information that came out from the trial. What were some of the most shocking details to you of the things that you learned, as you watched what was being said, and what was being presented during the trial?

JS: Overall, just the sheer sloppiness of the operation and when John J. Ray III, the central casting white shoe lawyer guy, took over FTX when it filed for bankruptcy a year ago. He was in Sullivan Cromwell lawyer, one of the top law firms in the US, and for CIA buffs, it’s like practically the feeding ground in the early years. He took it over, and he had done Enron and Nortel and stuff like that, and he had said like: This is the worst I’ve ever seen. And you’re sort of like: Okay, sure, whatever. You came in after these really immature, but adult, twenty-somethings who are so spoiled and kept no records and stuff like that. But you can understand now a little bit better where he might have been coming from. Especially after we see some of the evidence, the actual conversations over Signal. Despite the fact that Sam seemed to direct people to use disappearing messages, there are a lot of screenshots, especially from the last days of the company, and everything was really sloppy and reckless and slapdash. There wasn’t really anyone doing accounting, there were some accountants they said, which sounded like just a couple people, perhaps.

But Caroline Ellison testified in court that they would ask people to do it to do some accounting or hire people. And she said: People said no, or gave up, when they basically saw the task at hand. With the implication, perhaps being also that some people realize they’re being asked to do illegal things, like falsify accounting records. So she and other senior executives would make spreadsheets and try to account for: Where’s all the crypto and the money? And they didn’t have so many bank accounts, but they were trading crypto on dozens of exchanges. And they had internal systems that keep track of some of the stuff, but they’re using Google Docs or Excel spreadsheets to keep track, supposedly, of billions of dollars. Another thing we learned about was that — and this, I think in retrospect, is pretty dramatic, and also says something about Sam Bankman-Fried — there was this bug, and the defense tried to focus on us for a while. In a way I think it’s kind of inconsequential, but it actually had a big presence of the trial, and in the testimonies of the people.

Basically Alameda was kind of $8 billion or so in the hole for a while over the last year or so to FTX, which is to say that’s how much they stole from FTX customers. And they weren’t keeping track of it, it was just in some accounts, or in a line-item in an Excel spreadsheet. But there was a bug in some of the code surrounding that, and that it was actually being overestimated by about eight billion. It wasn’t doubled, it was just another eight billion. Whatever calculations that Gary Wong or Nishad Singh, someone senior there, coded it and were wrong. And when Sam Bankman-Friend discovered this, or was told about this, he didn’t seem bothered. He kind of took it in stride and it wasn’t fixed for a long time. At least from the testimony of some of the people close to him, those co-conspirators and a couple other people, like there’s this guy, Adam Yedidia, who’s a senior developer there and knew Sam for a long time and seemed to look up to him. Other people seem to be freaked out about things that were going wrong, they were displaying human reactions and maybe this is why Bankman-Fried was in charge and why he’s somewhat of the mastermind here.

Nishad Singh, when this was falling apart, felt suicidal. Caroline Ellison said she was relieved that it all fell apart. Nishad Singh had been asking Bankman-Fried not to spend so much money, it sounded like. The billion dollars on a Bitcoin mine Afghanistan —which just begs to be called some node and money laundering operation. He was discouraged from doing that. And every time Bankman-Fried would push it forward, just as he pushed the envelope when he was on bail, and basically harass witnesses, or tried to tamper with witnesses, as the judge determined. He called himself risk indifferent, I believe it was, no a risk neutral —that’s what it was. Which is basically indifferent to risk which, as I said in this piece in The Nation translates into bad judgment, recklessness, abuse of other people, things like that. I don’t think it means that he’s more comfortable with risk or aggressive behavior, it really means, all these things I just said in bad decision making and irresponsibility. It doesn’t display some kind of innovators courage or anything like that. So broadly speaking, it was worse than we thought.

Two other quick things. One is that, that bribe we knew about — at least it was in a previous indictment, and will probably be in that March trial, which is already scheduled — it had previously been reported for $40 million. Caroline Ellison in court said it was $150 million, probably in crypto, so take that with a grain of salt of the valuation. But also paid to Chinese officials, and she kept track of it in a document. She called it: The thing. That whole thing, a manager just tells you a lot. And then in the end, almost a year and a week ago we had this leaked Alameda balance sheet, probably sent to a lender, and then leaked to CoinDesk, published by CoinDesk, and that provoked the fall, but really just helped expose the rot that was there and the fraud that had taken place.

One thing we learned in court was that balance sheet was fake. It was a cooked balance sheet that was supposed to be a rosier view of things. Caroline Ellison had at Sam Bankman-Fried’s behest, she had made seven different ones. And he had looked at it — we knew this from the metadata, no matter what confusing stuff he says in court — and they sent that to a lender. Now, maybe it leaked because the lender was like: Are you kidding me? But it was also deemed acceptable enough, internally, that they could send it to a lender. Who then — for whatever reasons, maybe because they thought it was ridiculous — they leaked it. And then CoinDesk, and the general public, if you allow me to serve the crowd or speak to the wisdom of everyday people, they’re like: Holy shit, this is bad. So I do really think that division and perception matters too, and matters for the industry going forward. That like: At FTX, this was okay, relatively speaking. But for anyone with a brain, it’s like: No way, can you prop up a company on your own token that you invented, and that you’re marking way up in value? You just can’t do that. What are you talking about?

PM: It was pretty shocking to me to learn that that spreadsheet was actually fake and supposed to be a rosier version of what was actually going on at the company, when it was actually so bad that it caused the company to totally collapse. I also want to pick up on what you were saying there about the risk indifference, or whatever, that Sam Bankman-Fried had. It’s a bit of a diversion from the talking about the trial. But I feel like the more and more that I read about these Silicon Valley billionaires, or these people who are successful in the Valley, it seems like this trade, and these sorts of similar traits are common among them. Where it’s not just that they’re okay with risk, but they’re also okay with the consequences of the risks that they take. And if that hurts people, and if that has negative consequences, then that’s all accepted and okay, because of whatever mission they’ve convinced themselves that they are trying to achieve or whatnot. Or they’re just psychopaths and into greed and whatever. But it does seem like this is a through line there, and it does make you wonder about the type of people that our society or that this industry is holding up and putting on a pedestal.

JS: I think it would be hard to ignore that there are certain types and characteristics that are common in crypto, or tech or some of these industries. I’m not speaking of any essentialist stuff, I’m talking about personality types and behaviors, and philosophical and political beliefs that translate into certain ways of doing business and often an indifference to the law, sociopathy or megalomania. And this stuff is very common, I have to say. Sometime earlier this year, I was talking to someone — I didn’t get a chance to write about her situation — but she was in a legal battle with a company, she was working for, a crypto company. And she’s like: And also the CEO as embezzled all this money and thinks he’s Jesus. I’m like: No, that’s nuts. But also, I’ve heard those kinds of things before, those things aren’t uncommon, if you’re scratching the surface of some of the stuff. And it is shocking and cartoonish, and hopefully is adequately represented in the inevitable movies about some of these companies. I’m not saying Sam Bannkman-Fried is exactly that, but I do think he exhibits some sociopathic behavior.

JS: The Michael Lewis book, which is pretty bad. But otherwise, in that book, he does say: I don’t really feel emotions towards other people, or certainly not empathy. And he fake smiles and all this stuff. It shows a general indifference to the people around him and their well being. And you can find that over and over again, and find that in the testimony of those people who worked for him. So this is a certain type and an antisocial, harmful one. One thing I saw on Twitter near the end of the trials, before the the verdict is: If nothing else was clear, Sam and some of these other people should never have been in charge of a company like this, they should never have been given all this money. That is obviously not a legal determination. But that does speak to this culture and the milieu in which they come from, and the way these businesses work. And the deeply interconnected network of effective altruists, and libertarian-Silicon Valley types and just greedy crypto investors and stuff like that, who enabled him. It is disturbing in that these types, in that milieu, and that a big sector of our economy is dominated and controlled by a lot of these kinds of people.

PM: I appreciate you having read the Michael Lewis book, so I didn’t have to, because I subjected myself to the Walter Isaacson, Elon Musk book. And I would just say that what you are describing in terms of what Sam Bankman-Fried says about this lack of empathy toward other people, and all this kind of stuff, that is repeated in the Walter Isaacson biography of Elon Musk. Where it’s basically like he cares about humanity, but in the abstract, and he doesn’t actually feel much empathy toward actual human beings that he interacts with on a daily basis. The people who work for him, even the people in his family to a certain degree. There’s a ton of stories about him going to spend time with his family and he actually just barricades himself in his room, and plays video games, so he doesn’t have to talk to them. What are the kinds of things people that have the power in our society, and how does this shape the future and the direction that we’re going, if we have so many of these completely unempathetic and uncaring people at the top of making these really key decisions? I don’t know. It does worry you when you really kind of dig into it.

JS: This also speaks to the right-wing reactionary impulse in a lo of VCs and tech CEOs. Elon Musk and his crew, the wider PayPal Mafia. I mean, some of these people are already, in practice or in function, right wing, but there is this growing reactionary tendency. And also just this palpable unhappiness among some of these folks, like David Sachs seems unhappy and miserable. These people have so much money Marc Andreessen seems unhappy. I like to joke: What mansion is he tweeting from that day, because he has three mansions in Malibu. But these people, who may have invested in Fried or other companies, Andreessen Horowitz was all over the crypto economy. They don’t seem to like other people, they don’t like cities, they don’t like liberal mores or democratic, small-d politicians, which is fine. But it goes beyond that towards, of course, pouring their money and influence into some very unsavory causes.

Sam wasn’t right-wing really in any way, I mean, of course, he was known as a Democrat aligned person, but he was funneling money to Republicans. He met with Mitch McConnell, he had this Machiavellian indifference to party or even real belief or policy.He claimed to care about a couple things. But I think he cared a lot about the shaping crypto regulation, so he can make more money that was clear. And then he cared a little bit about pandemic stuff, but didn’t really even bother to lobby for Medicare For All or something like that, which would do a whole lot for public health, in the near and longterm. The Sam Bankman-Fried, and even some of his colleagues are part of this broader class — and it’s not just right-wing VCs, but also just tech elites and finance elites — who are very angry and seem very not content with their lot in life, and are happy to pour money into politics and craft the political process, because that’s how it works now. So looking at that broader class, I think is necessary and hopefully will be my next book, we’ll see.

PM: Fingers crossed. If we start to pivot back to the trial itself, talking about Sam Bankman-Fried, and you’ve touched on it and mentioned it. But he made the decision to actually testify himself, which, as I understand, is rare when you have these people who are facing these kinds of trials. And by all accounts that seems to have gone absolutely terribly. Can you talk to us a bit about his testimony, his defense of himself, and how that unraveled?

JS: About halfway through a trial, or even a little further in, when the prosecution was getting nearer to closing its presentation. It wasn’t clear if they would provide defense at all, that happen. Some of his proposed expert witnesses have been denied by the judge. And the general consensus seems to be, that in these cases, it’s a bad idea to testify. Most criminal defendants in these kinds of cases don’t, or encouraged not to by their lawyers. I would figure that Sam Bankman-Fried was encouraged not to by his lawyers. I don’t know about his parents, they are lawyers, but they also seem to think that he can do no wrong and he’s perfect. So maybe not. Anyway, it was a bad decision, it’s easy to say that. I wouldn’t say it was decisive, just because there was so much before he even took the stand again, this methodically told story through rhetoric and argument at the beginning in the opening statement, but then backed up by clear evidence that the jury could go over these messages and documents and a pretty clear testimony from not just the three co-conspirators but a number of insiders. And then finally, there was this forensic accountant, there was an FBI person, and other people like that, who kind of just provide context while going through some of the evidence.

Basically, a forensic accountant, I believe, he teaches at Notre Dame, kind of big figure in that world. He had charts: Here’s how the money moved. And that’s the basic crime as: This money moved from FTX to Alameda, through these bank accounts, and that was eventually used for this investment. He wasn’t allowed to do that. And that’s kind of it. Or, when Gary Wong says: I signed loans in my name, I didn’t know what they were for. Sam took the money and I think made investments with them. He told me to do this. Well, if you believe the guy, there you go. So by the time you get to stand, he’s getting very evasive answers. Of course, as I said before, he’s answering yes or no questions with long monologues. There’s some stuff, that you may have heard from, there was an initial mini hearing without the jury, that was when Sam first took the stand. And that was one of the worst portions for hin, but the jury didn’t hear this.

This was to determine whether some evidence was admissible. That day at least he would interrupt the prosecutor and then he responded a couple times like: Oh, I think you’re trying to ask about this. So I’m going to say this. This is not a discussion, man. I don’t know why people do this, or you can psychologize it if you want. I mean, Trump was actually rather like this in court this week, where he’s a diva, and he just goes off with:This is unfair. It’s a witch hunt, blah, blah, blah. It’s like: I’m sorry, but you kind of have to abide by the parameters of testifying in a US Criminal Court, which is you answer the question. And if you don’t do that, the judge is going to admonish you, you’re going get shouted down and overruled. The jury is gonna think that you’re unreliable and lying — the Trump case is just in front of a judge, no jury. That covers a lot of it. And so he didn’t show a lot of emotion, at times, there was a little bit of sort of annoyance or different kinds of responses. But he would say, “Yup.” He’d either give these extenders stem-winders of a response, or he’d go, “Yup,” which he’s known for, and which is kind of annoying, to be honest. But hey, at least he has every right to do that.

That covers a lot of it. I mean, the prosecutor would back hi, into these corners, and he would not only just say it, and remember he would try to define what memory was. This isn’t philosophy class. And I don’t know what else you can really do or say about that other than: You need to provide something for your lawyers to hang on and for the jury to really hang on to. Or, frankly, for one or two jurors to say: Well, what about this, he said he did this instead of that. But there was never anything that discreet it was just always flitting between these kind of possible excuses. None of them adequately exculpatory. Because we knew from the evidence from the articles about the company, from Sam being in all these commercials that he was FTX, he owned the majority share of both companies, and he was giving all the orders. And that is pretty much that unless you are really a partisan or just don’t believe the evidence in front of your eyes or don’t really understand it. I don’t think you can come to another conclusion.

PM: Can I ask you about Carolyn Ellison and these other co-conspirators who have already pleaded guilty to charges? What were they like on the stand? What kind of detail did they give about the company? And did they feel like credible and remorseful, what was your observation on the approach that they had? And can you tell us do we know how long they’ll be spending in prison or anything like that?

JS: We don’t know their sentences, yet. They haven’t been sentenced. One thing that the prosecutor does, somewhat to preempt the cross-examination from the defense is that everything’s very walkthrough methodically, or that’s how it’s kind of supposed to work. So they say: You pleaded guilty? Yes. What crimes did you plead guilty to? I committed these crimes. Who did you commit those crimes with? Sam Bankman-Fried. Do you see Sam Bankman-Fried in the courtroom? And they pointed to him. In a couple instances, Caroline, and I believe it was Gary Wong, they took a while to point to Sam Bankman-Fried. I don’t really understand why or is that a bit of performativity? Is that genuine confusion or nerves? I don’t know. But that happened. There were vastly different estimates, because this stuff isn’t recorded, with a video of how long it took her to point but it was noticeable. In short, these seem like real people.

I’m not trying to discriminate against people who are on some emotional spectrum or something like that. But they showed remorse, they expressed it. Caroline Ellison did break down briefly and seemed tearful, Gary Wong is more quiet and reserved. But all three of these folks and Adam Yedidia, who had an immunity agreement, One of the early things they walked them through is that they all have these immunity agreements or non-prosecution, or they’ve already pled guilty. And the prosecutor brings that up to say: You’re expected to testify truthfully, right? And the witnesses: If I don’t, I may go to prison, or may go to prison for longer. And I’m hoping to get a reduced sentence. Like it’s all very acknowledged upfront, so that the defense can’t just say: Well, your rat, blah, blah, blah. So that kind of stuff is very much acknowledged going in.

These people may go to prison. I think it will be short, though. I mean, a few years at most, it’s not pleasant in federal prison, but they may go to prison, or have a few years and then be paroled pretty early. I don’t know. I mean, it’s something that — of course, especially the United States — marks someone for life. But on the other hand, we’ve seen a lot of people already move on without facing any legal sanction, who were very high level at this company and even named in court many times, seemingly being complicit in stuff. I mean, people who are looking for a long jail term for Caroline Ellison or some of these other people, it probably won’t happen. I think Bankman-Fried will get a lengthy sentence ,perhaps 20 plus years, but we won’t know until March. And I can’t guarantee that, but for example, Elizabeth Holmes, who is probably a pretty good reference got more than 11 years and is in prison now.

PM: I want to expand it beyond the specific people who were in the trial Sam Bankman-Fried parents, of course, were very important to this whole story. There’s been a lot of reporting done on them, the money that they received from the company, the influence that they had over Sam Bankman-Fried, as he was running this company as well. There was like a Verge article last week that was kind of like: Oh, his poor parents, but I don’t know if I buy that take on it. What have been the consequences for his parents? And does it look like they might face any kind of legal consequences as well for their participation?

JS: I think they could. I certainly think if you believe in enforcing the law with some equal distribution, and holding wealthy, powerful people to account, I think they probably should. There seems to be evidence there. So a couple of specific things. One, there has been some good reporting, there was a great article in Bloomberg by Chafkin and some others, even some unintentionally useful stuff. I don’t think that article about the parents in The New Yorker was very good, but it said some revealing things. I guess, it’s a sort of moral judgment of them in approach. Because it does seem the parents were along for the ride, at the very least, and that they held a lot of influence over Sam. And they received money from him, and real estate tens of millions of dollars. And they were as part of decision making. So the specific things I was about to refer to, they’re in this lawsuit from the new leadership at FTX, against the parents that came out before the trial started.

There is, I believe it was an email, from Barbara Fried to Nishad Singh and others, and Sam was probably on it. I don’t recall offhand, but it’s instructing him how to make a straw donation of a large amount of money to her political organization. That is illegal. And she is giving him instructions on how to do it and he pled guilty to campaign finance violations, Nishad Singh did. I don’t know what else you really need there. But again, I’m not a prosecutor. The father was there a lot and was consulted on a lot of things and traveled with Sam. Actually, in some of the government exhibits, for example, I posted one on my Substack yesterday, there’s a text message, for example, Sam had numerous Signal groups, hundreds of Signal groups. A lot of them with disappearing messages turned on, but was very compartmentalized this way, and talking to a lot of different people. But often they would have the same people or different circles of people, he trusted for different issues. I think there was one called, “small group chat,” and his father was in that.

And in the waning days of FTX, he had a few top lawyers — the other people who have pled guilty already or testified against him now — and it’s like eight people, including his father, and plotting what to do, whether to stop withdrawals? This is a year ago, pretty much, this week. Whether to give all customers a haircut, basically, and cut the value of their assets, things like that. And Joseph Bankman, one was part of this, and he was taking a salary from FTX. So these are all things that have really come to light, more since FTX collapsed, of course, but in the last year. But we’re also emphasized in some ways at trial, or if not by the prosecution, but just to any observer would see that in court that his father was there. And his mother and father signed for $16 million apartment in the Bahamas. They claim that they thought that FTX was the beneficiary owner and they were just sort of occupy it, but come on.

The last thing I’d say, which I think says something about human nature is and might be worth acknowledging is that greed is fairly universal. And you can uphold yourself as an ethical person, as a scholar of legal ethics, but when unlimited money falls in your lap or in your son’s lap, it can be pretty tempting. And people should know by now that the Sam Bankman-Fried, image of a certain aesthetic workaholic who sleeps on a beanbag is wrong, or at least a constructed persona. One thing we learned in court was that he traded down from a luxury car to a Toyota Corolla intentionally and told Caroline Ellison to do the same. I mean, of course, a lot of stuff was an affectation, the way he dressed, and the hair, of course. He told Caroline in a typical pompous boyfriend way that he thought his hair got him more money at Jane Street and was significant to his image. And so when the parents see their son getting all this money, well, there are ways they can benefit from money. They’re human.

There’s an email, I believe, or a message that’s in that FTX lawsuit against the parents, or Joseph Bankman says: The $10 million you gave us will help your mom retire. Who wouldn’t want to retire? Why not? I’m sure she has her interest in her human comforts or material comforts. So I don’t know. I think this kind of stuff comes naturally maybe to you, me and your audience. But there are a lot of people out there who still remain shocked that pillars of American elite, Stanford law professors, and their, “good,” son could do such bad things or break bad. But no, we shouldn’t be surprised and of course, people from these kinds of backgrounds often do commit crimes, because there’s a sense of impunity, and there’s access to opportunity and resources. Means and opportunity are very important in committing crime. So that’s the last thing I think I would say about the parents, they’re in trouble. Their lives, frankly, are probably unraveling in some ways, because they’re spending a lot of money too. And the money is being clawed back, we should also say that the $10 million odd dollars that they were given by Sam Bankman-Fried, by their son, are being clawed back by FTX, but they probably spent a lot of it on legal fees, and they’re going to spend more.

PM: I think it’s really important context to have. And, of course, it’s no surprise that if they have access to cash, they’re going to try to grab it. In a piece that you wrote for The Nation, you talked about the bigger picture of this as well. Obviously, we talked about a certain part of FTX with regard to the trial, and because it’s focused on Sam Bankman-Fried and these top people who are next to him, but you talked about how there were a lot of transactions that he did, that are still shady, including with venture capitalists. That there are other people who are at FTX, who were also higher up — they’re not just the rank and file, code grunt people — who have moved on to other careers where they’re doing just fine, and are facing the backlash of being involved with this company. Can you talk to us a bit about what you see as the bigger picture of what has gone on there?

JS: This is another necessary counter towards the cynical argument that this might not matter, or what’s the point cryptos collapsing anyway? Or that this is somehow a one-off or anything like that, frankly, a little bit of moral laziness. I think we now understand that one, he did this with other people. Some of them pleaded guilty, some of them are still yet to be indicted. He defrauded a lot of people and worked with some very unsavory people. And there’s a lot that still unexplained. So at the company, for example, one of the people mentioned in court a lot who Sam, again, sort of tried to throw blame at the feet of Dan Friedberg one of his top lawyers and compliance people, but didn’t go so far to say: This guy told me to do this. Or it was more sort of like he kind of gave me bad advice or signed off on something. Again, Sam Bankman-Fried leaned towards pursuing this defensive counsel or advice of counsel defense. But ultimately, wasn’t allowed to really officially pursue it. This is a little bit of legalese.

Anyway, Dan Friedberg was a top lawyer there, famously, or infamously, some folks know, he worked for an online poker company that basically had a god mode where select insiders could see the other customers cards, including some very wealthy professional poker players, and of course, steal from them or beat them. And there are some recordings and actual recordings online and other reporting that indicates he helped cover this up. His colleague in that was Stuart Hoeppner, who’s now the top lawyer at Tether. I mean, it’s important to know where some of these people come from, what they’ve done and what they continue to possibly do, and who they associate with. And that’s what I try to get at in this Nation piece, which is that there’s a broader network here of financial criminals and potential money launderers. And people who just operate on the fringes and do stuff that requires some explanation, if not legal action.

After Alameda left Berkeley, basically, Sam Bankman-Fried started Alameda in Berkeley, his trading firm, then he moved it to Hong Kong the next year, in 2018, I believe. And it’s because he went to this conference and was charmed by all he saw and the people he met and saw a lot of opportunity. I think that’s right, but it’s also because Hong Kong is this nexus of capital flight of their a lot of wealthy people, they’re trying to move their money outside of Chinese control. And there’s also a lot of illegal financial activity coursing through there, as there is through any financial center. There was a lot of crypto there too and he was early to something. So he invested this company called Genesis Block, like a lot of investments that Alameda made, Genesis Block and FTX shared office space with Alameda. There’s a lot of overlap between these companies. It wasn’t just an investment for them. There seemingly was a high degree of control or more than one might expect, even a kind of integration or interoperability.

Genesis Block, by their own admission, had a lot of gray market activities. Like they had a network of what they called satellite bank accounts. They ran these storefronts where people could come in and buy or sell crypto for cash. I mean, that is a big deal. They could do it, from my understanding at least, without much KYC (Know Your Customer), AML (Anti-Money Laundering) provisions. These kinds of shops do exist. In Hong Kong, periodically on Twitter, you’ll see someone tweet a photo of one where you can basically go in and give them dollars and get Tether or Bitcoin. That’s what’s most useful for for some people, but people would also sell to them if they wanted to sell crypto for cash. And when you mix all this together, and when you add in stuff like they were talking about they went to the mainland and move money back and forth, Genesis Block, or they went to Cambodia and traded to peer markets. What you get an image of is a larger money laundering operation, and capital flight and all these sorts of things. You can have perhaps some sympathy of someone who is trying to get out of authoritarian China or some like that. But of course this does feed into a lot of very unsavory stuff. And that’s what Alameda and FTX was doing, when they were in Hong Kong and they were doing a lot of recognizable financial crimes.

So when something happens like Sequoia Capital, top VC firm, who wrote an article that they’ve since tried to disappear from the internet, that Sam Bankman-Fried would become the first trillionaire because he was so smart, when he was playing video games while pitching them. They invested over $200 million in FTX, later through Alameda, it was either Alameda or dozens of different shell companies that he would use to fund his investments in various startups. He also invested in media startups or just gave people money, or in some cases, he would invest in the funds of his own VCs. One of them was Sequoia, Sequoia invested more than $200 million in FTX, then you see some $200 million going through Alameda into a Sequoia fund. Now, perhaps they’ll explain and say: Well, by then Bankman-Fried and FTX and Alameda were doing well, we thought, if your Sequoia. He wanted to invest in one of our funds, because our funds are obviously going to do well. It just shows the close symbiosis between a lot of stuff and the closely bound networks and connections here. But most people I’ve talked to think that’s weird, and think that’s unusual.

He did it also with Paradigm. A VC from Paradigm, Matt Huang, testified in court and basically said convincingly, that: He lied to us, if we had known some of the real financial conditions of his company’s, we wouldn’t have done XYZ, we wouldn’t have given him money. If we known that he was going to use the money for some of these things, but not for the operation of FTX, we wouldn’t have invested in him. I think that’s credible. But at the same time, why did Sam Bankman-Fried then go and invest in a Paradigm fund? And this stuff didn’t really come up in court, but I think that’s strange. And when you extend that to, of course, the giving money to various political organizations, sometimes in the form of dark donations, a lot of stuff does seem as just sound broadly like money laundering, attempting to evade capital controls, and that dark money, financial crime, and influence in corruption, I think it should really be called, that should be also recognizable and should be considered pretty serious.

PM: Well, what you’re laying out there is a good picture of how certainly Sam Bankman-Fried is responsible for a lot of the stuff that goes on here. But there’s also a much larger network that probably deserves, not just scrutiny, but probably legal action as well, to hold some of these people to account for what has been going on there.

Real quick, some things people are still missing, or we don’t really know where they are. The government plays some things close to the vest. So: Where is Sam Trabucco, the co-CEO of Alameda, who left on a boat called, “soak by deck,” this the second time we talked about this boat on here. People have all kinds of theories about him, the government isn’t saying: Oh, he’s missing or anything like that. So we don’t know what the story is, maybe they’ve interviewed him, but he could be off in the Caribbean on his boat. We just don’t know. This is a guy who was mentioned a lot in court and seemed to be involved in this stuff. Or some of these other people, we’ve already mentioned their names, like we know these people’s names. And Sam Trabucco doesn’t have to tell me or you or the public what he’s doing, but I am very curious. And if you care about any kind of accountability, or that some of these people don’t continue to go on and work in these industries, which some of them already are, and they’re still on Twitter, or they pivoted to AI or whatever it is, or they’re gone back to being venture capitalists, like Amy Wu, I still would like to know more about what they did, and what they know when, and these kinds of things. Frankly, I think it’d be reasonable for people to be mistrustful or to ask questions. And to say: Well, I’m going to be a little leery of your company or your industry or you personally because you were present at one of the greatest frauds of the century.

PM: It’s just interesting to think about how these people have pivoted to AI, but also how you can be involved in something like this and they just go work for another company that does something really similar.

JS: Nuke Goldstein who’s a cartoonist, one of the many sort of absurd characters In this industry, but from Celsius. Celsius did business with FTX, we can call it relevant. Nuke Goldstein was the CTO or something like that, from Celsius, which famously went bankrupt. Was helmed by the most obvious con man in history, Alex Mashinsky, was being charged with fraud, finally, took a while. Nuke Goldstein hasn’t been charged with anything, yet he already pivoted to AI and blocked me on Twitter when I joked at him once. But these people are literally doing the thing that we joke about, a lot of them. And it’s very shameless, I mean, that’s how they got so far in the first place is that there’s a general lack of shame, and overweening self-confidence. So they’re already doing it.

PM: No surprise, no surprise. So if we cast our timeline ahead to March, what are we looking at there in terms of the sentencing, but also the possible second trial?

JS: I believe that the prosecution has to basically let the government know and the court know by February, if they’re going to go ahead with the trial. Perhaps some experienced, legal folks might say: There are reasons why they wouldn’t. I don’t really know why they wouldn’t, it seems, frankly, worth doing or there are crimes there. And again, we’re talking about a larger group of conspirators, several of whom have already pleaded guilty, or who testified to this behavior in court, in the case of the bribe that was discussed significantly in court, even though it wasn’t specifically a charge this time around. So it seems necessary from the government’s perspective. So I think it’ll happen in mid-March, you’ll hear about it. I think it will happen, we’re going to bring the same team back, I think it’ll be the same prosecutors and the same judge. And I’ll probably be there again. But the sentencing is scheduled, basically, after that trial is supposed to start. And those might have some influence on one another, perhaps they’re thinking they’re getting some kind of post-commission cooperation or something useful even out of him, then they may delay the trial or focus on the sentencing.

One thing worth noting is the government, at least by its own claim in court, did not offer Sam a deal, to not seek to open any discussions about a deal. And it didn’t sound like Sam Bankman-Fried asked for one. Certainly, the fact that he testified was probably both a Hail Mary, but also kind of an act of egoism, and a reflection of the fact that he thought he could be found not guilty at trial. And I think there is also some question of like: What does he really have, like, maybe he could say some things about CZ or Tether, or some of his business partners. But he is sort of a big fishing himself. And there’s a reason why he was prosecuted so quickly, and why they want to send them away for a while. One thing that’s rather remarkable is that Alameda existed for less than five years, FTX have visited for less than three, or about three. I mean, this is a remarkable speedrun, from billionaire and then disgraced convict. And that’s worth keeping in mind, but it also speaks to how fast this happened, the hype, how much evidence there was in the end to convict him. So I think there will be another trial. And the legal afterlife, though, is going to be very long, the bankruptcy will take a long time, people will probably get a little bit of money back, but not enough.

The one small thing that Sam might have in his favor is when he says or has said in the past: It’s a little kind of unseemly, how Sullivan and Cromwell might have a conflict of interest and is getting hundreds of millions ,or even billions of dollars, in legal fees, when they worked for FTX when the company was on its way up. I think there is a little bit of something there. I’m not saying Sam is right, he’s certainly he’s not the only one that said that. So I think one thing to watch, actually, is that there’s going to be a lot more litigation, lots of people have already been sued. But I wouldn’t be surprised to see more lawsuits and more against powerful law firms and stuff like that, because there are people who profit off the company, when it was on its way up, and who now want to feast on the corpse and people who haven’t really been held accountable. Look, it’s really unsavory that it we have this horrible legal system and that, the money is really going to accrue and power is going to accrue to the law firms who are doing an insane amount of work, but billing $700 an hour for it. And that sucks. But that system precedes Sam Bankman-Fried and will certainly follow him.

PM: And there was talk of an appeal, I remember, in the Elizabeth Holmes trial, she tried that as well.

JS: We should mention that. I would expect probably some appeal. Some people were even joking — well, not entirely joking with me — like, was he sort of putting the advice of counsel defense into practice because his lawyers seem so bad, and he’s going to actually appeal later and say I had bad counsel. I mean, it seems a little ridiculous. These are major lawyers like one of them defended Ghislaine Maxwell and I mean, say what you will about that, but people I’ve talked to said he did a decent job. I mean, contextualize that appropriately, but these are experienced litigators, but they did seem rather inept. And I didn’t really understand, in some ways, why they were so bad at telling a coherent story and these basic fundamentals, but I don’t think there’s much grounds for a real appeal, is what I mean to say. Maybe the lawyers didn’t do a good job or certain evidence was introduced, they wanted.

I mean, he got the Adderall that he wanted. Some people are even saying his prison conditions. But as horrible as prisons are here, it seemed like he was afforded the rights he was allowed and that he wasn’t abused in prison, and his requests were responded to. He also went to prison because he did witness intimidation, so it’s hard to see the cracks, maybe here. But maybe there will be something on appeal. And certainly he, or at least for now, there’s some money there to still pay some lawyers. I don’t know how long that will last, actually. But it doesn’t look good, I think for him. He will go to jail for a long time and his parents might go bankrupt, things like that. This is going to be seen through.

PM: I feel like one big difference between Elizabeth Holmes and Sam Bankman-Fried, as well as it felt like we were waiting forever for Elizabeth Holmes to finally like report to prison, because she was. Whereas Sam is already in prison, and he’s going to stay in prison until sentencing and through any further trials and all that.

JS: And some of that might count towards his eventual sentence. But you’re talking only like a year or two. And there are all these procedures that have to go through recommendations and memos made by the Department of Justice and prosecutors and stuff like that. And they’re going to do all that. But by March, you’ll have a sense and then he may have his relatively permanent home determined by summer, and we’ll then report there eventually. It just doesn’t seem like he’s going to be free for a long time.

PM: Definitely. So I have one final question to end this off. Obviously, we’ve been talking about Sam Bankman-Fried, FTX was a major player in the crypto ecosystem. We’ve obviously seen that collapse over the past couple of years. And I’ve been talking to you and other people to chronicle that collapse over that period of time. What is this verdict, this finding, mean for what is left of the crypto industry? And in particular, does it have any kind of consequences for Binance and Tether? Are we likely to see any real action against those companies in the future?

JS: I think it moves us more in that direction, then not because there’s been reported criminal investigations along with civil ones into Binance and Tether. Even the the civil settlements that Tether reached with a couple of American regulators, I think, reveal some pretty interesting stuff that criminal investigators should be aware of. But anyway, there’s supposed to be a bank fraud investigation at the DOJ into Tether. I think they moved it to to a New York office, I’m not positive about that. Biance we know is being investigated all over. Frankly, the geo-politics are kind of right to prosecute Binance or CZ, because he is a Canadian citizen, it is not purely a Chinese operation. I don’t necessarily even know if it is a CCP-controlled enterprise. I am not a China hawk. But honestly, it would not surprise me because they do obfuscate a lot. Not to go off too much on this, but they do obfuscate a lot their Chinese connections, and the fact that I have a lot of people there working for them, and they’ll even the obfuscate who the senior leadership is.

I think they’re very much could be something, specifically in the case of CZ, it probably would be a sealed indictment, and they might wait, if there are real criminal charges against him. And they might wait until he steps into jurisdiction where they think they can get him, like Western Europe or something like that. If he even does that, but they do have an office in France. I don’t know if he goes there anymore, I haven’t asked the company lately. So I think it moves us more towards that. The industry itself thinks that, it seems, the broader widely shared opinions that a lot of bad things have happened. Sam Bankman-Fried is a con man who swindled a lot of us, thank goodness he’s been convicted or good riddance. Mostly good riddance. Some tokens are doing well this year, Bitcoins doing pretty well lately, make it that way you will. So they have a little bit of idea of retrenchment. And, maybe we are on the upswing, and we can move on from this.

Specifically, Coinbase has taken up the lobbying mantle, I think this is worth noting, from FTX is doing a lot of very public lobbying, and also some more in private meeting with going to state houses all over and going to Capitol Hill. Really trying to play that role of helping shape a new business-friendly regulatory system for crypto. And the final piece of this is that the customers aren’t there and so you may still have some money in the industry or a, “let’s pull up our boots and do this,” kind of attitude from an industry that still has some true believers and still some money to mess around with. But the customers are mostly gone ,the trading volumes are down, a lot of people lost a lot of money. Even people who may have been interested in this stuff, they can’t get their money because it’s locked on FTX or Celsius or blocked by Voyager or Genesis or whatever else. Forgive me if some of those have actually paid back their customers a little bit already. But this has been a widespread devastation.

This has swindled a lot of people and the PR for crypto is obviously not good. And it’s also not good when you just sort of mock people or tell them like: Well, you should get a board because this is the future of money or X, Y, Z. I think looking forward, you’re going to see more litigation, more people getting in trouble in one way or another. The DCG and Gemini thing is pretty juicy with the Winklevoss twins and Barry Silbert. They’re facing all kinds of broad accusations from the government. There’s going to be more and I just don’t see, unless some new story is told, or there is some new use case really for crypto, why would people want to get back into this? The technological hype is faded, and that, besides speculation, it’s sort of like tech futurism or the inevitability argument, I think that gets people. But they don’t think they’re going to make a lot of money, or if it doesn’t really seem to have caught on and to a billion users, why are people going to throw some money in there? I just don’t see it anymore. But I think it will stick around, and it we’ve seen how it’s useful, frankly, it’s useful for illicit finance. I think there are technological and legal reasons to that. There are reasons because of who’s attracted the industry. But that’s the main use case and it’s pretty fair to say.

PM: The investor class has moved on to AI, at this point, and I’m sure something else after that, so they’re not running back to crypto.

JS: In that broader framework, of illicit finance, we can even put securities fraud or something like that. Nicolas Weaver likes to joke that A16z’s models securities fraud. For a while the people were making money also by being insiders like A16z and buying the tokens for 10 cents, pre-ICO, and the ICO happens and they sell them for 10 bucks or whatever. That’s gone too pretty much, so that’s another one of the few ways to extract money from that industry is gone and they just moved on to AI, so it’d be tough to juice the next crypto boom without something like that

PM: Totally. And there’s no signs that they are circling back to crypto anytime soon. Jacob, always fantastic to speak with you to get your insights on everything crypto and beyond. Thanks so much for coming back to talk about saying bank proofread and I’m sure we’ll probably have to talk again in March when we see what’s going on there.

JS: Glad to do it. Thank you.