Tangle - Sam Bankman-Fried found guilty.

Episode Date: November 6, 2023

Sam Bankman-Fried's conviction. On Thursday, the FTX founder was convicted of stealing billions of dollars from customers of his crypto exchange, marking one of the largest financial fraud convictions in U.S. history. After a short deliberation, a New York federal jury convicted Bankman-Fried on all seven counts he faced. He was also found guilty of money laundering and defrauding investors and lenders to FTX's sister company, a hedge fund called Alameda Research."SBF," as Bankman-Fried is commonly known, will face sentencing March 28, 2024 and could serve decades of prison time.You can read today's podcast ⁠⁠here⁠⁠, our “Under the Radar” story here, and today’s “Have a nice day” story here. You can also check out our latest YouTube video, an interview with Rep. Dean Phillips and his bid for the Democratic Presidential nomination here, and a sizzle reel of our first ever Tangle Live event from August 2023, here.Today’s clickables: Quick hits (1:40), Today’s story (3:33), Right’s take (7:29), Left’s take (11:10), Isaac’s take (14:47), Listener question (18:56), Under the Radar (22:17), Numbers (23:21), Have a nice day (24:23)You can subscribe to Tangle by clicking here or drop something in our tip jar by clicking here. Take the poll. What do you think of Sam Bankman-Fried's conviction? Let us know!Our podcast is written by Isaac Saul and edited by Jon Lall. Music for the podcast was produced by Diet 75. Our newsletter is edited by Bailey Saul, Sean Brady, Ari Weitzman, and produced in conjunction with Tangle’s social media manager Magdalena Bokowa, who also created our logo.--- Send in a voice message: https://podcasters.spotify.com/pod/show/tanglenews/message Hosted on Acast. See acast.com/privacy for more information.

Based on Charles Yu's award-winning book, Interior Chinatown follows the story of Willis Wu, a background character trapped in a police procedural who dreams about a world beyond Chinatown. When he inadvertently becomes a witness to a crime, Willis begins to unravel a criminal web, his family's buried history, and what it feels like to be in the spotlight. Interior Chinatown is streaming November 19th, only on Disney+. The flu remains a serious disease. Last season, over 102,000 influenza cases have been reported across Canada, which is Chinatown is streaming November 19th, only on Disney+. yourself from the flu. It's the first cell-based flu vaccine authorized in Canada for ages six months and older, and it may be available for free in your province. Side effects and allergic reactions can occur, and 100% protection is not guaranteed. Learn more at flucellvax.ca.

From executive producer Isaac Saul, this is Tangle. Good morning, good afternoon, and good evening, and welcome to the Tangle podcast, the place we get views from across the political spectrum, some independent thinking, and a little bit of my take. I'm your host, Isaac Saul, and on today's episode, we get views from across the political spectrum, some independent thinking, and a little bit of my take. I'm your host, Isaac Saul, and on today's episode, we're going to be talking about Sam Bankman Freed, also known as SBF, who was convicted this past week, found guilty of fraud, all sorts of other stuff too, stealing billions of dollars. We're going to talk about exactly what the crypto wunderkind did, what we know about the trial, and what to take away from it.

Before we jump in though, a quick reminder. On Friday, I published a piece called Israel Has No Good Options, breaking down all the different ways Israel could respond to Hamas's attack and why none of them are good. All the downside to each option, to me, seemed to outweigh the upside. We shared that piece in our Friday newsletter. It was a subscriber's only piece, so it's behind a paywall, but yeah, you should totally subscribe to read it because I think it's a good piece. We're proud of it, and I'd be interested to hear what you think. You can find it by going to readtangle.com. All right, with that out of the way, we're going to start things off with our quick hits. First up, new polls from the New York Times and Siena College show that President Biden is trailing former President Trump in five out of the six battleground states. Number two, former President Donald Trump will

testify in his $250 million civil fraud trial today. The Trump Organization is accused of making false statements of financial conditions to win favorable loan terms and insurance policies. Number three, United States Secretary of State Antony Blinken visited the West Bank on Sunday as Israel's forces encircled Gaza City. Meanwhile, Lebanon's militant group Hezbollah has warned that if Israel continues to attack Gaza, it will lead to a broader regional conflict. Number four, Iowa Governor Kim Reynolds, the Republican, will reportedly endorse Florida Governor Ron DeSantis for president today. Number five, employers added 150,000 jobs in October, fewer than economists

expected. Unemployment rose to 3.9 percent, the highest rate in 21 months. A jury found former cryptocurrency mogul Sam Bankman Freed guilty on all seven counts against him. Prosecutors allege the 31-year-old founder of the FTX exchange used the company as basically a personal piggy bank. The 31-year-old was accused of mismanaging customer funds, stored his crypto exchange FTX to enrich himself and his family. We're talking about potentially $10 billion in losses. Over the month-long trial, prosecutors argued Bankman-Fried stole billions of dollars from customers to back his crypto-focused hedge fund, Alameda Research. FTX declared bankruptcy a year

ago with customers racing to withdraw funds. On Thursday, the FTX founder was convicted of stealing billions of dollars from customers of his crypto exchange, marking one of the largest financial fraud convictions in U.S. history. After a short deliberation, a New York federal jury convicted Bankman-Fried on all seven counts he faced. Bankman-Fried was also found guilty of money laundering and defrauding lenders of FTX's sister company, a hedge fund called Alameda Research. SBF, as Bankman-Fried is commonly known, will face sentencing March 28, 2024, and could serve decades of prison time. A quick reminder, we explained the FTX collapse in November of 2022. FTX was a crypto exchange, a place where people could trade digital

or cryptocurrencies for other assets like conventional money. In 2022, the exchange was valued at $32 billion and was being promoted by celebrities like Larry David, Tom Brady, and Steph Curry. In November of 2022, the crypto website Coindesk published an article detailing the seemingly close ties between FTX and Alameda Research. Alameda's balance sheet consisted largely of tokens created by FTX. That realization caused a massive sell-off in those tokens over customer fears that something was amiss, effectively creating the crypto version of a bank run. The collapse of FTX has drawn a great deal of interest, not just because FTX was one of the largest crypto exchanges in the world, but because Bankman Freed was also a major political donor who had been lobbying to guide

potential regulation of the industry. He gave $40 million to Democrats and has said he gave an equal amount to Republicans in 2020 as quote-unquote dark money donations. During the trial, prosecutors brought forward evidence and testimony from some of Bank Benfreid's closest friends and colleagues that he was siphoning money from FTX to pay debts of the hedge fund Alameda Research. He was also using the money to send hundreds of millions of dollars in political donations, make high-risk investments, and buy real estate. SBF's ex-girlfriend, Caroline Ellison, who was the chief executive officer at Alameda, testified that SBF directly instructed her to alter balance sheets in a way that kept hedge fund lenders off their scent. Ellison, FTX co-founder Gary Wang, and engineering chief Nishad Singh all pleaded

guilty to felony charges and testified against Bankman-Fried to reduce or avoid their own prison sentences. SBF's lawyers framed him as an entrepreneur and nerd who made some mistakes but did not commit any crimes. With the prosecution landing blows during trial, SBF made the high-risk decision to take the stand and testify, telling jurors he had good intentions and was navigating an emerging industry. He insisted he never defrauded customers, but also conceded that he regretted not having better risk management at FTX. However, under cross-examination, SBF gave evasive answers to prosecutors who painted him as a liar and showed the jury how his public statements didn't align

with the available evidence. SPF also admitted that he learned in 2020 that FTX customer funds were being held by Alameda, but did not take any steps to protect those funds. Sam Bankman-Fried thought that he was above the law. Today's verdict proves he was wrong, U.S. Attorney General Merrick Garland said in a statement. This case should send a clear message to anyone who tries to hide their crimes behind a shiny new thing they claim no one else is smart enough to understand. The Justice Department will hold you accountable. Bankman-Fried's lawyers indicated they plan to appeal. We are very disappointed with the result, SBF's lawyer Mark Cohen said in a statement. Mr. Bankman-Fried maintains his innocence and will continue to

vigorously fight the charges against him. Today, we're going to examine some reactions to the news from the right and the left, and then my take. First up, we'll start with what the right is saying. The right is happy about the guilty verdict and frames SBF as a con artist like Elizabeth Holmes. Some say the outcome should not be used to give more regulatory powers to the federal government. Others criticize SBF for using his ill-gotten gains to boost Democratic politicians and influence elections. In town hall, Laura Hollis wrote, We are breeding generations of little tyrants like SBF. Bankman Freed is the latest entrepreneurial wunderkind who thought he was above the law.

Elizabeth Holmes, disgraced founder of Silicon Valley blood-testing startup Theranos, was convicted last week of defrauding investors to hundreds of millions of dollars and sentenced to 11 years in prison, Hollis said. One of the most striking things about the FTX, Theranos, and WeWork case studies is not just the hubris of the founders, but the utter lack of inquiry by those who should have been asking hard questions. With few notable exceptions, the media's relationship with these young founders was worshipful adoration. The second thing one notices when studying these stories is that the fraudsters all use the same shtick. They figured out that the surest way to

have the press and everyone else falling all over you is to announce that you're going to change the world, Hollis wrote. Behind the lofty sentiments is an ugly reality. It's not that these self-appointed world changers don't believe their own hype. They are so convinced of their own importance that they see themselves as exempt from society's rules. The Wall Street Journal editorial board argued that the SEC can police crypto fraud without new regulatory powers even after SBF's guilty verdict. SEC chairman Gary Gensler has spun Mr. Bankman-Fried's fraud as a cautionary tale of the crypto wild west. The SEC chief claims cryptocurrencies are securities, ergo exchanges and token developers must submit to agency regulation. But a federal

judge this year disagreed, and Congress hasn't given the SEC authority to regulate crypto, the board said. Mr. Gensler has authority to regulate crypto, the board said. Mr. Gensler has tried to regulate anyway, even before the FTX collapse, but regulators and prosecutors don't need new powers to charge fraud under existing U.S. laws. And while Mr. Gensler charged crypto companies for marketing unregistered securities and operating unregistered trading platforms, that didn't stop Mr. Bankman-Fried's crimes, the board said. One question for Congress to investigate is whether Mr. Gensler's preoccupation with expanding his regulatory and enforcement power caused the agency to overlook the FTX fraud in plain sight. In PJ Media, Victoria Taft called SBF a Democrat bagman who helped destroy the cryptocurrency business. The man touted as

Warren Buffett incarnate was anything but. The jury decided he was running a racket. His mother, a bundler who ran an organization to supply money to Democrats, encouraged her son to give money to leftists, which made him the second largest Democrat donor during the 2020 cycle. It was just other people's money he was giving away. His brother, another executive at the Bahamas-based crypto exchange, also gave company money to political friends, Taft said. CBS reported that SBF donated $6 million to the House Majority Pack, the main outside group supporting House Democrats. Then he gave $250,000 to the Democratic Congressional Campaign Committee

and $66,500 to the Democratic Senatorial Campaign Committee. The bulk of his political donations, $27 million, bankrolled the Protect Our Future PAC, a group advocating for pandemic preparedness. It was pandemic preparedness the same way Zuckbucks were for pandemic preparedness. All right, that is it for what the right is saying, which brings us to what the left is saying. The left is also glad SBF was found guilty but worries that the crypto industry still has a fraud problem. Some call for greater regulation of the industry to proactively address malicious behavior. Others say the saga should be a cautionary tale to any crypto firm that might try to take advantage of their customers.

In Bloomberg, Noah Feldman wrote that SBF's fall isn't just a morality tale, it's a warning to regulators. Bankman-Fried's conviction should not be used to argue that crypto is now a safe space for investment, whether by ordinary folks or sophisticated players. The fact that one person has been found guilty does not have much, if any, impact for other potential bad actors. Each will still make their own individual calculus about the costs and benefits of trying out potentially fraudulent strategies, Feldman said. The simple takeaway from the FTX collapse is that unregulated industries like crypto are incredibly risky. Congress and the federal agencies could speed up the process by declaring an emerging sector to be subject to existing regulatory regimes until more situation-specific

regulation can be produced. That could have happened in crypto, it just didn't. Maybe it's time to learn the lesson that we're better off with imperfect rules that arrive quickly and can be altered later, rather than unregulated conduct that can only be adjudicated after bad actors have hurt people. The New York Daily News editorial board said prosecutors established conclusively that FTX was a criminal enterprise. Bankman-Fried's paper empire relied on the oldest trick in the con man book. Not only can you afford to invest in this newfangled technology, can you really afford not to, the board said? Perhaps the fundamental question at the end of this saga is how Bankman Freed managed to pull the wool over the eyes of so many supposed adults in the room. Retail customers are one thing, but he was embraced by elected officials, financial

titans, and prominent journalists, often without question, even as the business that catapulted him to multi-billion dollar status was rife with fraud going back to at least 2021. Let this be a lesson to policymakers that glitz and hype don't equal substance, and to regulators that moving slow on fast-paced technological developments can harm a lot of people in little time. Let this be a shot across the bow to the remaining actors in the crypto space and other would-be scam artists in tech and elsewhere. You can keep it up for a while, but you can't keep it up forever. Eventually, the rug gets pulled. Based on Charles Yu's award-winning book, Interior Chinatown follows the story of Willis Wu, a background character trapped in a

police procedural who dreams about a world beyond Chinatown. When he inadvertently becomes a witness to a crime, Willis begins to unravel a criminal web, his family's buried history, and what it feels like to be in the spotlight. Interior Chinatown is streaming November 19th, only on Disney+. the first cell-based flu vaccine authorized in Canada for ages six months and older, and it may be available for free in your province. Side effects and allergic reactions can occur, and 100% protection is not guaranteed. Learn more at flucellvax.ca. In Bloomberg, Lionel Laurent argued that SBF won't be the last crypto mogul behind bars. I don't believe for a second that this will be the last crypto fraud.

We've closed one chapter of COVID-era laser-eyed true believers, yet market prices are stirring once more as traditional finance firms see an opening to offer Bitcoin and other products with the potential blessing of regulators, Lorenz said. There are other parts to the story of FTX that explain the incentives beyond the individual. The crypto subculture, for example, and its overlap with the aggressive quantitative trading culture where Bankman Freed cut his teeth. What would Bankman Freed have been without the long line of venture capitalists throwing more than $27 billion into crypto during 2021's pandemic-fueled euphoria, clearly without serious due diligence? Were the institutional investors parking their funds at a trading venue in the Bahamas? Were the institutional investors parking their funds at

a trading venue in the Bahamas? Were the accounting firm based in the metaverse appointed to audit FTX? It's easy to talk about missed red flags, but there was willful blindness here. All right, that is it for what the left and the right are saying, which brings us to my take. All right, I'll be honest, this entire thing is surreal. I don't know SBF, and I never got a chance to interview him, but I have been following the crypto space closely since 2015, and I even made some money buying and trading crypto in the early days of Ethereum. Sam Bank-Benfreid was the crypto nerd in the last few years. It is hard to overstate how central he felt to the future of the space and how essential he seemed to crypto being accepted by mainstream society. He was the weird crypto genius who was sitting in

meetings with high-ranking politicians and celebrities, building the bridge between the complicated, sometimes criminal offshoot world of crypto and mainstream regulators and investors. Now he's going to jail, probably for a long time, and by all accounts, his sentence is well-deserved. Bloomberg's Matt Levine has been essential covering this beat. A lot of his sentence is well-deserved. Bloomberg's Matt Levine has been essential covering this beat. A lot of his writing is behind a paywall, but his early October piece titled SBF's Defense Will Be Tough encapsulated just how bad this looked for Bankman-Fried. Here's how Levine laid out the central charges in a way that just cuts through the complicating factors, quote, Customers deposited billions of dollars at his crypto exchange FTX to buy crypto.

Bankman Freed's trading firm, Alameda Research, secretly took that money to gamble on crypto tokens and make weird illiquid venture investments. Also, a lot of the money seems to have been siphoned off to make political donations, buy celebrity endorsements, pay for Bahamas real estate for Bankman Freed and his family, etc. When customers started asking for their money back last November, it wasn't there. This is bad. The basic combination of the customer's money is gone and you live in a $30 million penthouse is really killer. That's the most basic outline of financial fraud. The customers don't have the money anymore and you do, end quote. Roughly speaking, Bankman-Fried's defense was that he made some mistakes, he didn't properly account for risk, and a massive and unexpected crash in the crypto

markets led to a run on the exchange which pushed FTX to lose all its customers' money in the same way banks sometimes lose people's money without stealing it. The problem with that defense is that it just doesn't comport with reality. Exchanges like FTX need to keep collateral and manage their positions so they can always pay out the winners and losers of bets. The money investors were putting in would have been there if SPF didn't spend it all making a bunch of other very risky investments, donating millions to political campaigns, buying an expensive house, propping up Alameda, and inventing other crypto tokens for people to buy and sell. SPF's defense was further undercut by the fact that pretty much every single high

ranking person at FTX and Alameda Research who was close to SPF said he was warned about what he was doing, ignored the warnings, and sometimes directly instructed people to try to obscure what they were doing from investors and the public. Frankly, I'm not surprised it only took the jury a few hours to find him guilty on all counts. This whole thing is bad for everyone involved. It is ugly for the democratic politicians who took money from a fraudster that just got caught in a Bernie Madoff-esque Ponzi scheme. It is ugly for the thousands of legitimate players in the crypto space who are trying to build real wealth and real use cases for this technology but are getting undermined by criminals like SBF.

It is ugly for the celebrities who took a nice paycheck on a product they didn't understand and then pushed their fans and followers into a scheme that cost them untold amounts of money. Most of all, though, it is ugly for SBF. The prosecution used his own words against him with ease, showing that he was still willing to lie while testifying. His career is ruined, and there's a chance he could go to prison for the rest of his life. I have no idea how long of a sentence he is realistically looking at, but all the charges stacked up on top of each other

could put him in prison for more than a hundred years. Given the damage he did and how many people lost their money on him, it's going to be hard for any judge to muster much sympathy. All right, that is it for my take, which brings us to your questions answered. This one's from Mike in Chicago, Illinois. Mike said, I can't help but think that the whole primary process this cycle is just a waste of time. I know you make an effort to include a broad set Mike in Chicago, Illinois. Mike said, I can't help but think that the whole primary process this cycle is just a waste of time. I know you make an effort to include a broad set of perspectives and you've written about all the politicians and wannabe politicians involved, but it just feels like you're in the second half of a blowout game and the end result is a foregone conclusion.

I guess I'm asking, is there any value in following the primary process when we already know what the end result is? All right, this is a good question, Mike. So to extend the sports analogy briefly, it's only the people who stick around to the end of blowout games who get to appreciate the most incredible comebacks. And while I definitely don't expect anyone other than Donald Trump to win the Republican primary, there is still a chance, however slim, that another candidate does. As a political commentator, it's interesting to me to watch the dynamics play out and see what that path might look like. This is true for Democrats, too, even though there's hardly any primary to speak of. So, the value in following the primary

depends on what you're watching for and trying to learn about. If, like most people, you are interested only in who is going to get the Republican nomination, then no. Following the primaries closely won't be that interesting. Tracking the polls, watching the debates, and reading the coverage isn't going to give you a more sophisticated understanding of Trump's almost definitely going to win than a quick glance at the situation would tell you. If you're trying to learn more about what Republican voters are thinking, and I think you probably should be Republican or not because that's half our country, then there's a lot to learn by following the presidential primary. What kind of qualities will Republican voters prioritize? Which behaviors will they excuse? What issues will matter most to

them? Which issues do they say matter but probably don't? How do voters differ from state to state, and how do their opinions change over time? Even if the race for the nomination isn't dramatic, Which issues do they say matter but probably don't? How do voters differ from state to state? And how do their opinions change over time? Even if the race for the nomination isn't dramatic, I'd say that all of those questions are important and offer very interesting answers. And finally, two important points. First, no matter what happens, it is basically a guarantee that both Trump and Biden will not be in the 2028 presidential race. That means the

Republican primaries and hypothetical Democratic alternatives give us a great opportunity to learn more about the people who will be shaping national politics for the next four years, and potentially give us a sneak peek into the 2028 election. The future of the Republican Party probably won't heavily feature Mike Pence, Chris Christie, Doug Burgum, and Asa Hutchinson, but it will probably include big roles for Vivek Ramaswamy, Nikki Haley, Tim Scott, and Ron DeSantis. And this primary gives you the best possible way to get to know them, how they think, and what issues are important to them. Second, despite the fact that Trump looks to have the nomination sealed and Democrats aren't running a real primary challenge to Biden, there are obvious situations where you either have to drop out or are forced out Trump's legal troubles and Biden's health. In that case, it'll be good to know who the options are on both

sides. As a quick reminder, the next Republican primary debate will be this Wednesday at 8 p.m. Eastern, and we'll be breaking down what we learned about those candidates in Tangle the next day. Even if it's the second half of a blog game, there's still a lot to learn about next year's starting players. All right, that is it for your questions answered, which brings us to our Under the Radar section. U.S. soldiers and Marines have been left with devastating post-war injuries from their own weapons, according to a new investigation from the New York Times. Research has shown that blast exposure from firing heavy weapons can cause traumatic brain injuries, similar to the kinds NFL players get from repetitive contact. In 2016 and 2017, the U.S. strategy was to put fewer soldiers on the ground and instead have them fire continuous rounds of artillery against the Islamic State in Iraq and Syria.

But now those same soldiers are being plagued by nightmares, panic attacks, depression, and even hallucinations. Rather than getting treatment, men are being forced out of the military and cut off from health care after facing misconduct charges. But the military has struggled to understand what was wrong. The New York Times has the story, and there's a link to it in today's episode description. That link is behind a paywall. All right, next up is our numbers section. The number of times Sam Bankman-Fried said he could not recall an incident while being questioned on the stand during trial was 140. Bankman-Fried's estimated net worth at FTX's peak in 2022 was $26.5 billion. That was according to Forbes. Bankman-Fried's

estimated net worth as of November 6, 2023 is $4 million, according to Forbes. The amount that Bankman-Fried gave in support of Joe Biden's 2020 presidential bid was $5.2 million. The amount that Bankman-Fried is alleged to have given his parents in the form of home, cash, and other goods is $26 million. The percent increase in the price of Bitcoin in the past month was 24%. The percent decrease in the price of Bitcoin after Bankman-Fried%. The percent decrease in the price of Bitcoin after Bankman-Fried was found guilty, according to Markets Insider data, was 2%. The global cryptocurrency market cap as of November 6, 2023, was $1.38 trillion. All right, last but not least is our have a nice day section.

All right, last but not least is our have a nice day section. More than 300 high school graduates signed up for a unique student exchange program this summer. Unlike the well-known foreign exchange model that allows teens the chance to study abroad, this program gives students the opportunity to soak in a brand new culture without ever leaving the country. It's called the American Exchange Project, or AEP for short, and it was co-founded by 29-year-old David McCullough III, the grandson of the late Pulitzer Prize-winning historian David McCullough. We fund kids to spend a week in the summer after senior year in an American town that is politically and socioeconomically and culturally very diverse

from the one that they're growing up in, McCullough said, and the kids who participate say it's a little weird at first, but ultimately worth it. You have to do things that, even if it's talking to a new person, might make you uncomfortable, said Californian Evan Quach, who traveled to Dodge City, Kansas. But you have to, or else you're not going to make new friends. You're not going to be able to experience life. CBS News has the story, and there's a link to it in today's episode description. All right, everybody, that is it for today's podcast. As always, if you want to support our work, please go to readtangled.com and consider becoming a member.

We'll be right back here at same time tomorrow. Hope everybody had a great weekend. We'll see you then. Peace. Our podcast is written by me, Isaac Saul, and edited by John Long. Our script is edited by Ari Weitzman, Bailey Saul, and Sean Brady. The logo for our podcast was designed by Magdalena Bukova, who's also our social media manager. Music for the podcast was produced by Diet75. For more on Tangle, please go to readtangle.com and check out our website. We'll see you next time. Chinatown. When he inadvertently becomes a witness to a crime, Willis begins to unravel a criminal web, his family's buried history, and what it feels like to be in the spotlight. Interior Chinatown is streaming November 19th, only on Disney+. The flu remains a serious disease. Last season, over 102,000 influenza cases have been reported across Canada, which is nearly

double the historic average of 52,000 cases. What can you do this flu season? Talk to your pharmacist or doctor about getting a flu shot. Consider FluCellVax Quad and help protect yourself from the flu. It's the first cell-based flu vaccine authorized in Canada for ages six months and older, and it may be available for free in your province. Side effects and allergic reactions can occur, and 100% protection is not guaranteed. Learn more at FluCellVax.ca.