Ep. 95: SBF Trial Briefing, October 26. SBF Takes The Stand And Throws His Lawyers Under The Bus

[00:00] Hello, hello. Hi. SBF trial. Start of week four. SBF takes the stand. Big day. How are you feeling? Very tired. I mean, you look beautiful, but you look tired. Thank you. Thank you. I didn't want to say you look tired, because you do look tired, but you also look beautiful. So thank you. I appreciate it. Okay, we're gonna just dive right in. Let's go. So morning with busy, high energy, ton of people there. Like everybody's there to see him take the stand. Including Ben McKenzie. [00:30] wow you found him i couldn't remember his name yeah he uh is the blonde in the oc who hates crypto and so i saw him in line and then i texted you quickly and told you that and then we were in line together and i had a boys club hat on and i was like he's gonna see us roast him on twitter but he was there yeah high energy lots of people everybody bummed out by the morning because it was so boring and then we break for lunch and everybody's dying to get into it is he gonna [01:00] at two o'clock we all get seated and what happens is i'm walking in and they had just gotten started and a woman is walking out and she was like he's not taking the stand [01:10] And I was like, fake news. What? [01:12] I was like, I sat through all of this. There's nothing interesting that's going on the pod today. And I was like, oh, brutal. And then I almost left. I almost was like, I can make it home for my next meeting. Like, yeah. [01:24] "I'm just gonna bail." And then I was like, "I'm just gonna go in "and understand what she means." And so I go in and fake news.

[01:31] But essentially what happened is Judge Kaplan sent the jury home because there's a line of questioning that the defense wants to bring into Sam's testimony that the prosecutor wants to prevent from bringing in front of the jury. [01:42] I'm a little bit of like the math girl meme. Okay. The jury was saying home. I get it. I'm tracking. Okay. Basically, they have some story they want to tell, and Judge Kaplan is not sure that it's going to fly. More like the prosecutor thinks that it shouldn't. Judge Kaplan is like, I don't have enough information about this to make a clear decision. So what's going to happen is you guys are going to song and dance and do the whole thing here, and then we're going to have a hearing. [02:09] which is basically both of them [02:11] questioning Sam and then cross-examination of Sam and then the judge is going to make a decision [02:16] on whether [02:17] he thinks the line of questioning is fair or not to bring in front of the jury. Theater. Theater. Exactly. So we could be watching this all over again tomorrow. So the jury was gone, but the press corps was still in attendance. Everybody else is still there. Yeah. And then when he let the jury go, he was like, do not read anything. Do not look anything up as always. But even more importantly than ever, the jury has to stay pure. I could never be on a jury. I would be reading

[02:47] - They're like, "Sir, you know I'm addicted to Twitter.com. "There's no chance." - No, literally, I was like, "I don't know how you could, "how you could avoid the news." So basically, the main line of questioning is around [03:00] a council defense and Sam getting advice from his lawyers that providing him some comfort about his actions and then him continuing to act in a certain kind of way. Okay. Council defense means he got bad advice from his lawyer. He got bad advice from his lawyers. Okay. And the defense is saying we're not arguing a pure advice of council defense. [03:22] But they're not not arguing it. So it's like they're towing a gray line of saying like, well, he did get bad advice from his lawyers and it did affect his decisions. But that's not the only thing that happened. But it is a very important thing that happened. And they're trying to tow this line and do the stands. And the prosecutor's like, no, that's not fair. Why would they not want to say that he got bad advice? Who? The defense. Why is the defense towing the line? Why would they not just come out? [03:52] have any legal counsel. [03:54] And they can't prove that he got legal counsel for all of these decisions. So their argument would fall apart if it's solely about legal counsel. Does that make sense? [04:02] Okay, I guess I am not a lawyer. So I have a little me neither. I'm following the thread there, but I'm kind of tracking. So what's his vibe on the stand? Is he confrontational? Is he arrogant? Is he me? He's so annoying. I cannot stand this guy. He is you know, this kind of guy. He's a guy that's right about everything so smart that he can't actually have a normal fucking conversation.

[04:32] No, because he's getting absolutely fucking roasted by the prosecutor. Like she's just in a normal conversation. If I was talking to him, he would make me look stupid and I would feel stupid because I wouldn't be confrontational with him and being like, that doesn't make sense. Like he's the kind of guy who he's talking and one word after the next doesn't seem to follow the word before where he's like just talking in circles. [05:02] Bahamas under the regulatory environment. You're like, what? What? And she's just asking him a very clear, very simple question. Are balance sheets [05:11] business decisions. [05:12] And we're going down this like all over the place. Yeah. And and then she was like, that's not what I asked you. [05:18] That's actually not what I asked you. Actually, you didn't answer the question. And just like continually bringing it back to that. So that was the vibe the whole time on the cross. [05:26] And when the defense was asking him questions, it's that's what it's called. [05:33] I love it. I'm in an episode of suits again. Um, [05:39] OK, so yeah, that's the vibe. So basically what they did is went through a line of questioning around five main areas. And the defense went first, and then the prosecutor cross-examined him. The five areas were data retention policy, [05:53] Payment agent agreement between FTX and Alameda. [05:57] loan and promissory note for the personal loans that he received and other people received on the team, the terms of service, and then the safeguarding of customer assets.

[06:05] So those are the five different areas that they went into these lines of questioning. And basically when the defense starts, it's clear that he's continually bringing it back to the legal counsel he received and who he sought. [06:18] for specific decisions around it. So with the data retention policy, basically that is [06:23] talking about why there's no evidence because everything was auto deleted. There's no signal messages. Anything on Slack was not really that pertinent to this case. Oh, data retention policy just means [06:36] Why did they delete everything? [06:38] Yes. Why do they use signal? Everyone uses signal though. [06:41] That's what's sort of interesting. It's very common in crypto and in our industry, but it... [06:46] is... [06:47] If you're Judge Kaplan, you're like, why are you guys deleting your messages? You're like, what the fuck? Why are you deleting everything? And also, like, there's no evidence to him giving direction. There's no... [06:56] There's all of these things, like there is evidence, but there's no direct evidence. [07:01] proof that he said do this do this do this there's enough corroborating story that at this point you're like oh he definitely directed all these people to do this but you have to speak to why and it seems really sketchy so he was saying dan friedman and fendwick and west who used to be our lawyers fendwick and west was in the combo today they had entered the chat fendwick and west created this data retention policy that basically was like rules for ftx to abide by around the ways in which [07:31] different communications. And essentially he's like talking through it, talking through it.

[07:37] And [07:38] Basically, he was like, unless something was memorializing a business decision or was KYC information for regulatory purposes, that it didn't need to be saved. So any informal chatter did not need to be saved. That's bullshit, but fine. Oh, absolute, absolute to meant bullshit. And so then the cross-examination is like starts pulling out all of these things that he... [08:00] were basically like, oh, these weren't key business decisions. Like the balance sheets that Caroline Ellis created that you distributed to your lenders. That's a key business decision. And he was like, not in my opinion, not in my regular mission. So essentially they have this whole conversation about data retention policy. And then a really funny moment that happens around this policy is the judge was like, [08:23] Well, I'd love to see this policy. [08:25] Where is this policy? [08:26] And then it's just quiet. This is when the defense is asking questions about it. And then the judge is like, well, let's move on. Because it's like just quiet and they don't say anything. Basically, this policy cannot be found. [08:36] There's no... [08:37] No one knows where this policy is. [08:41] During the cross-examination, SBF kept being like, "We've asked for it many times." And I'm like, "Who are you asking? You're the boss! This is your company! What do you mean?" It's that sort of thing where you're like, "This is a clown show!" The whole argument around this specific thing, you don't even have the policy that you're claiming dictated all of these decisions. An example of the type of conversation that continued to happen during it would be, would you consider balance sheets important to business decisions?

[09:07] Do you recall Caroline sending... [09:10] a spreadsheet with alternative tabs via signal. And then he would say, I can't speak to that with certainty. I'm not sure. [09:16] Rough drafts didn't need to be formally memorialized. And then he would be like, I don't recall. I can't remember. [09:23] Just based on my memory, but I don't have it in front of me. I'm not actually sure. Like, that's just the whole time. All of my notes are... [09:31] basically him [09:32] trying to get out of all of these different questions with the cross-examination. And it was, I don't recall, I don't recall, I can't think of anything, like that sort of thing. And you're just like, my dude. But taking 15 minutes to get there through like trying to act smarter and like he understands something that nobody else in the room can possibly even understand about the situation that we're all in. And... [09:55] It is so annoying. We can run through a few of these other things, but the payment agent agreement, there's this whole thing about the North Dimension subsidiary that had a bank account where basically all the customer funds were coming into. And that was owned by Alameda Research. So there was this agreement that was written up between Alameda Research and FTX that they were an agent of FTX to process funds. [10:15] So he was saying, yes, my lawyers put this together, blah, blah, blah. And a shining moment for the prosecutor is he's not saying this directly, but he's implying that they could spend customer funds in different sorts of ways besides just custodying them. And she was like, where does it say that in this agreement that you can spend customer funds? [10:32] And there's like a long pause. And then she's like, we can turn the page for you if you need us to turn the page. And there's like a long pause and he's like reviewing it. And then he's like, well, I'm not a lawyer. And I don't know. And starts doing this whole thing. And she's like...

[10:46] Any line. [10:47] any line that authorizes Alameda Research to spend customer funds. And he like can't get there. And it's just like building and building. And then he was like, oh, finds this line that's like hold and transfers and then like fumbles over. We're calling it and everybody's just like, man, this guy is just like totally shitting the bed. Couldn't have shit the bed. [11:04] in any way worse. The whole time I was like, this would be a perfect, like a class for people who want to take the stand that they should not. [11:13] Even think about it. This is what you don't do. This is what you don't do. Wow. Anyway, they went through the other areas, the promissory notes about loans, the terms of service. He was claiming that some of the ways in which they... [11:24] held customer funds and safeguarded customer assets. [11:28] was common and he did a horrible job and couldn't have done worse basically in my opinion and then judge kaplan at one point was like he has a funny way of answering questions the judge was so annoyed with him and just kept being like answer the question directly answer the question directly and he just couldn't he just couldn't because he's just lying like you're just watching it and you're like this guy's just lying like the reason why he's talking around and around on it is because he's just lying yeah he's got a web of lies and he's trying to remember the lie that he told previously and it's not good wow so [11:57] Last thing that was really funny, at one point, [12:00] when they were talking about how you should safeguard assets, what the appropriate way to safeguard assets were, the defense was asking him questions that safeguarding customer assets had to do with like protecting against tax and phishing and things like that. So the prosecutor was like, is that the only way that you understand safeguarding assets is against tax? And he was like, oh, no, no, no.

[12:21] there are many ways and she was like okay well what are the ways and he like starts doing the thing where he's not making any sense and he's talking around all the and she was like no no like very clearly what are some ways he does it again and then she was like for example [12:32] Does... [12:33] safeguarding assets mean not embezzling customer funds. And she was like sort of doing it as like a joke because she knew that the defense would [12:41] object and they did and he answered he was like yes yes of course [12:47] And then his lawyer was like, you don't need to answer that. You don't need to answer that. And he was like, I just felt like I should. Everybody was like, dude. And the prosecutor starts laughing and is like, what the fuck? You're an idiot. Just shut the fuck up. Okay, so where do we land with, does he get to do this show again in front of a jury or not? We don't know. We don't know yet. [13:10] The judge is going to tell us in the morning. [13:12] Oh, okay. [13:14] Cliffhanger. [13:15] In summary, my lawyer said I should do it, but I can't remember when or how or any conversations I had with that lawyer. That's basically what it was. [13:23] Bad way for friend work in West. [13:25] And terrible week for Dan Friedman, who apparently was previously a lawyer, general counsel for a company that had an insider trading scandal. [13:34] So Sam Bankman-Fried was on the look for a certain kind of lawyer and it seemed like he found one. Yeah. And now he's pinning it all on that guy. So anyway, he's back on the stand tomorrow. Judge Kaplan is so smart. And I have so much respect for that judge and for the prosecutor and honestly the defense because they were handed a really bad, bad, bad hand. We'll be back tomorrow and the judge will make his decision on what the jury can and cannot hear. Wow. Thanks for your work. Anytime.