The trial and sentencing of FTX co-founder Sam Bankman-Fried

Let’s be honest: The facts are bad for Sam Bankman-Fried. The prosecution, in the closing statement delivered by Nicolas Roos (pronounced “Rose”, though he won’t correct you if you get it wrong, as Judge Lewis Kaplan did for most of the trial) today, went through a lot of contemporaneous written evidence that suggested that Bankman-Fried was very, very guilty of wire fraud and conspiracy charges at FTX. Roos gave a confident, restrained argument, relying heavily on that evidence to argue Bankman-Fried had used FTX customer deposits as his own private piggy bank, funneling them through his trading firm, Alameda Research.

He also pointed to why Bankman-Fried had done it: “The defendant was greedy.” 

Let’s say I am the owner of a hedge fund, and one fine June day, my employees come to me and say, “Hey, Liz, we have an accounting problem. We are missing several billion dollars.” How would I react?

I have been wondering this since Danielle Sassoon walked Sam Bankman-Fried through his reaction to the FTX software bug fixed by Adam Yedidia. In my case, there would probably be shouting? Like, a lot of shouting. I would also probably have my assistant figure out which law enforcement agency to call immediately. Misplacing $900 million is a five-alarm fire even for Citibank; misplacing several billion is kicking over a lantern in Chicago in 1871.

Midway through Sam Bankman-Fried’s cross examination, as prosecutor Danielle Sassoon went through a brutal line of questioning like a hot buzzsaw through a butter cow, I found myself reflecting on how smart the average person is. Maybe they don’t know calculus. Maybe they’ll never read Ulysses. Maybe they can’t code. But they definitely know how to identify bullshit when they see it. 

So if you, like Bankman-Fried, have moved into the Clintonian territory of “it depends on how you define ‘trading’’” you done fucked up, son. Make whatever “sophisticated” argument you like; even the stupid will see through it. 

It is honestly kind of incredible to watch a man torpedo his own credibility on direct testimony. We’re not even at the cross yet, and the judge has already instructed him to answer the question he’s being asked by his own lawyer. 

The jury is watching all of this intently. 

Sam Bankman-Fried is so fucked.

I have come to court every day since opening arguments thinking, Surely things cannot get worse for this man. Surely we have reached the bottom. Unfortunately, there is no bottom — in the prosecution’s telling, FTX and Alameda Research, his exchange and trading company, were matryoshka dolls of crime. Today, the defense started its case, which should theoretically present Bankman-Fried in a better light. But if what I saw of him on the stand is any indication, he may be more damning for himself than any of the prosecution’s witnesses.

Sure, Sam Bankman-Fried’s trial has revealed that FTX was basically a seething mass of scams. But it has also revealed how Bankman-Fried blew up the lives of the people who are closest to him.

Of course everyone who had money trapped on the FTX exchange when it collapsed — as the result of Bankman-Fried’s trading firm Alameda Research purloining its customers’ funds — had their lives altered. Even if they are made whole by the bankruptcy proceedings, that’s still money that they should have had access to at any time they wanted it. That may mean houses that weren’t purchased, medical procedures that were left undone, and life savings lost.

Sam Bankman-Fried will testify at his criminal fraud trial on Thursday as he faces charges of fraud, conspiracy, and money laundering related to his failed cryptocurrency exchange FTX.

During a conference call on Wednesday, attorney Mark Cohen confirmed Bankman-Fried will take the stand. The move isn’t much of a surprise, considering the time Bankman-Fried spent speaking on his own behalf between the collapse of FTX last year and his eventual arrest last December.

It is one thing to type the world YOLO, jokingly, on Beyoncé’s internet. It is another thing entirely to hear it explained in a court of law. The trial of Sam Bankman-Fried has been, in its vocabulary, tragically millennial. (Disclosure: I am also a millennial.)

Christian Drappi, a former Alameda software engineer, was put in the position of explaining YOLO — “you only live once” — as well as the phrase “a YOLO thing” to anyone who might be unfamiliar. He was testifying about a recording of an Alameda all-hands meeting in which Caroline Ellison, then the CEO of Alameda, confessed to taking FTX customer funds. In the recording, Drappi said “I’m sure this wasn’t, like, a YOLO thing” in response to the confession.

Of Sam Bankman-Fried’s alleged co-conspirators, Nishad Singh gave the most emotionally compelling testimony. And on cross-examination, he also proved to be the most unreliable. 

Yesterday, Singh condemned Bankman-Fried for continuing to make venture investments despite knowing the money came from customer funds, even calling the actions taken at FTX “evil.” Today, the defense pointed out that Singh took out a loan from FTX in order to buy a $3.7 million house on Orcas Island in Washington after Singh says he found out about the misuse of customer funds. 

In September 2022, when he found out that Alameda had been using FTX customer funds, Nishad Singh said he asked to speak with the founder of Alameda and the CEO of FTX. They were both, of course, Sam Bankman-Fried. Singh and Bankman-Fried met on the balcony of the penthouse they shared in the Bahamas, which was spacious enough to include a pool, around 8PM or 9PM local time. As Bankman-Fried sprawled in a white chaise lounge, Singh paced anxiously. 

“I’m not sure what there is to worry about,” Bankman-Fried told Singh, according to Singh’s court testimony today.

In the break after Caroline Ellison stepped down from the stand, Barbara Fried engaged defense lawyer Christian Everdell in an animated conversation. Fried, the defendant’s mother, was gesticulating and clearly had a strong opinion about something. Everdell walked off, and Mark Cohen talked to her for a bit after that.

Fried seemed frustrated, and I couldn’t blame her. The defense absolutely biffed the cross-examination of Ellison and, to make matters worse was unable to keep a recording of an all-hands meeting where Ellison confessed to taking customer funds from being played for the jury. Is this really the best the defense can do?

Sam Bankman-Fried wasn’t just a crypto wunderkind, he was an ambassador for improving the world through effective altruism. And if you were wondering how he squared those values with all the lying he allegedly did during his time at FTX, wonder no more: the answer is utilitarianism. 

Lying and stealing were permitted, as “the only moral rule that mattered would be maximal utility,” Caroline Ellison testified on her second day at Bankman-Fried’s fraud trial. I glanced over at his parents, Joseph Bankman and Barbara Fried, to see what they made of this; both appeared to be busy scribbling into legal pads. In any case, the approach apparently worked for much of Bankman-Fried’s life — right up to demanding doctored balance sheets for the company Ellison supposedly ran.