Ep. 89: [PILOT] SBF Trial Briefing, Day 7: Caroline doesn't take the bait

[00:00] This is Voice Club. We're back with day seven of the SBF trial. Natasha, our court reporter, reporting for duty. I'm in my gossip girl era. Okay, so diving right in. Today was a cross-examination of Caroline Ellison. For those of you who do not know, Caroline Ellison was the CEO of Alameda Research, which was the trading firm that was co-mingling with the company. [00:25] with FTX. They were in bed together, literally. So today, the defense attorney basically cross examined her, which means that he's asking her questions. And it's lunchtime. So we've only had a few hours of cross examination. But the main takeaway is that IMO, he's repeating himself a ton. He's going through a lot of stuff that is just verbatim in her original testimony. He's being a major stage five clinger with the judge. They're constantly sidebarring because the [00:55] is incredible and a hero and I aspire to be her one day and she's just on it like white on rice she'll be like objection we've covered this in the testimony this is verbatim and the judge will be like I agree or at one point the judge was like try again it's not working okay a question tell me do you think [01:14] He is having a bad day. [01:16] or do you think it's a tactic it could be a tactic this afternoon will be very telling some would say that he's building his case to then in the afternoon [01:25] flip it on her to like catch her either in a lie or in a misstep. But I feel like he's tried to do that a few times and it's been unsuccessful. So what has he been asking her? So a lot of what he's been asking her is confirming facts. There's a lot of conversation about bank accounts and which bank accounts were being used for what. This is some context, but essentially FTX, when they first started, they could not get a bank account. So they were using Alameda's bank account called North Dimensions. They keep referring to this bank account called North Dimensions. And for

[01:55] customer funds were being funneled into this Alameda research bank account. I remember that part of... [02:01] when everything was going down, people were [02:04] all of a sudden like, oh, when I'm depositing into FDX, [02:07] it says right here that it's an alameda exactly bank account like that's where i'm wiring my money into as a customer which is like so sus it's so insane so they had a system gary wong had written basically some sort of code to calculate what in that account was alameda research trading capital and what in that account was customer funds that were funneling into this account what's the party money and what's exactly the non-party in this world it was all party money [02:37] slush fund for them coming back to this code that was written. It was revealed earlier last week that there was a massive bug in this code that was written to calculate what was customer funds and what was capital for Alameda Research. And they've talked about this bug over and over. They talked about it yesterday. They talked about it last week. And again, they were confirming today what happened. But a little bit more interesting was that [03:00] In May 2022, Caroline basically ran a balance sheet and the NAV showed that they were essentially insolvent. There was no money left. There was nothing for them to do. And she had called a meeting between her and Sam Bankman-Fried and Gary Wong to figure out what to do. Should they file for bankruptcy? And she said, Gary Wong said, oh, and by the way, NAV is off by several billion dollars because of the bug. [03:22] And turns out that it was several billion dollars. I think yesterday she said up to nine billion dollars that this balance was off in their favor that had been miscalculated by this bug. Okay, so there was an additional seven billion dollars.

[03:35] that was missing. Yes, which essentially bought them time from May 2022 to when everything went down in November. The nuts and bolts of it are very hard to get into because it's like different asset classes, illiquid asset versus liquid assets, tokens that they're holding, venture investments that they've made, personal loans. It's a disaster. And I believe he's trying to build a case that the books were impossible to maintain. He went on a whole questioning around [04:03] the employees at Alameda, how they had a hard time keeping an accounting team, how she was running the accounts at some point. Oof, the accountants. I know. The churn on the accountants at FTX. Brutal. They're out of there. And so that was some of the questioning. He went on a whole line of questioning around different definitions of terms. He asked her when people refer to a haircut what they mean. He asked her BNB, what was that token, what is FTT token, which feels repetitive because we've been talking about these things. So she's... [04:33] She's onboarding. She's doing the God's work of onboarding. [04:37] Oh my God. Exactly. So anyway, okay. Any new, any new reveals, two things that were the most interesting of this morning was he went through a timeline of basically when everything imploded for her. And so he went through November and December and then went into a questioning around how much she's been working with the prosecutors. So I believe he was trying to demonstrate that

[05:07] to turn on Sam so that she gets a lighter sentence. Because-- Sure. I mean, we know that though. Of course. Yeah. But it's, I think, putting some doubt in the jury's mind that she's credible. Because-- OK. [05:18] he basically read her to filth on what she pled guilty to and that she could have a max sentence of 110 years if she had not turned on Sam. Two things that were revealed in going through this time then that were interesting. [05:32] One is that she was on vacation in Tokyo, and then she went to the Hong Kong office, FTX, and Alameda Research Hong Kong office in November. Then she goes to her family home, which she doesn't reveal where it is, but around November 11th, November 16th, the FBI raids her family home. And she's in the home with her boyfriend, which we were like, oh, she has a new boyfriend. It's revealed that that new boyfriend works at either FTX or Alameda Research. [06:02] who that boyfriend was, but that was news to me. And her mother's housekeeper was also at the home. There's a search warrant. [06:10] They go through the house, they seize her computer, her mom's computer, her boyfriend's computer. And then from there, essentially it demonstrates a timeline of her going to New York. [06:21] meeting with getting her own counsel, meeting with prosecutors. And just, I don't think there was a moment where she considered not turning on Sam, like it was like, and then the 8th, the 10th, the 13th, the 14th of December, like she's in, let's go left. I'm going to cooperate with the government. And.

[06:39] The whole time that she's cooperating with the government, it's unclear if she's actually going to be able to get a plea deal. And then there's also something called a 5K motion, which is essentially a letter that the prosecutor at the end of the trial provides to the judge to make essentially their recommendation. The details of this, I'm sure a lawyer would say are not exactly right, but on what her sentencing should be at the end of the day. So he was really demonstrating like you really wanted the 5K motion. You really wanted to work with prosecutors. [07:09] it of course she did otherwise she's going to prison until she dies like totally well of course of course so that was those two things were revealed sort of the timeline of when [07:18] She everything went down for her and how quickly she turned and immediately went to work with prosecutors that she has boyfriend that worked at XCF in Alameda who knows who that person is unclear if they're still together. Big lesson for Caroline. I hate this phrase and it's really ugly and I really don't like it. [07:35] But you know the expression, don't shit where you eat. [07:37] Totally. She loves to. She needs to get that through the cabeza. [07:43] Come on, Caroline. I think that she's a workaholic. [07:48] Where's she going to meet people when you're committing wire fraud up to 110 years in prison? Where else are you going to meet people besides where you're committing wire fraud? You know what I'm saying? A few other things. There was unprecedented amount of sidebars. They just kept sidebarring. And it's really, you don't hear. What does it mean to sidebar? It means that the defense attorney and the prosecutor go up to the judge to basically. Have a little chat. Have a little chat on what. What.

[08:11] they're talking about and what's permitted for them to talk about and the grounds of the evidence privately so they'll turn like a white noise machine on so that you can't hear it it is then it is then um transcribed and if you're in the press corps you do get to see the transcript at the end of the day i am not in the press corps so i will not be receiving it um but that is there okay then there was one other funny moment that was just like just a weird courtroom moment so they're [08:41] . [08:42] and the UST loss and [08:46] The defense attorney, again, defense attorney asking Caroline questions. And the defense attorney is asking her about what happened and how much they lost. And she said, we lost around $100 million. Or he had asked her, would you have done things differently? And she was like, yeah, I would have not had that trade. I would have not done that trade. Bad trade, bad trade. Bad trade, bad trade. And the... [09:11] Defense attorney goes, always easier in hindsight. [09:15] as like a cute little comment, which like if you're not in the courtroom, it sounds normal. But in the courtroom, it's like so jarring for it to be all of a sudden conversational. It's not conversational. So then he was like, always easier in hindsight. And there's a little laugh. [09:28] from the crowd and the prosecutor goes strike that from the record and as she's saying that the defense attorney goes at least something i said and then sort of like goes off into his own world and the judge goes we have to strike this no matter how true it is and the defense says anyway i lost my place him saying at least something i said there was this moment where i was like oh

[09:50] He knows... [09:51] It's not going great. [09:52] He knows that. And he knows he's not delivering. He's bombing. And he's recognizing in that moment that he knows he's bombing. That was my take. Exactly. You know when you're watching like a comedian... [10:03] And they're bombing completely. And their only way through is to start making fun of themselves. [10:10] And it was like a little moment of that. And it was tough to watch. So we'll see. But I would say the main takeaways from the Caroline front is that she's visibly less comfortable. She's very uncomfortable. That does demonstrate that she spent a lot of time working with the prosecutor. And she's very comfortable with the prosecutor. To me, it's like night and day in terms of the way she's holding herself and the way that she's talking and answering questions. Said like a veteran court reporter. Second, we've already talked about it, but defense attorney, I don't [10:40] for him. And then lastly, I would say, I think she's holding her own, not like a fan of Caroline's at all. So I'd want to make that really clear, but I do think that she's really smart. There's a lot of times where he's answering, he's asking her a question and she's seeing that it's a trap of some kind. And she's like, well, stop. And she'll think about it. And she'll be, she'll have an answer that will retort in a way that doesn't get her into a trap of having to answer questions. [11:08] That I'm like, man, this girl has been prepping. She is a girl that always did her homework and never hung out with anybody. And she's been doing that for the past six months. She has been in the books. And...

[11:20] I imagined myself up there and thought, would not be doing the same. Oh, my gosh. Just filling the silence with talking. Oh, 100%. I'd be like, well, I mean, you know, anytime you make a trade, you try to do well in the trade. It would be a disaster. So that's my second day in court. We'll see what happens this afternoon. But... [11:40] Hopefully, but yeah, you'll be back tomorrow. I'll be back tomorrow in the manana. Come find me overflow room 23 B.