Tech Won't Save Us - Sam Bankman-Fried On Trial w/ Jacob Silverman

Episode Date: October 5, 2023

Paris Marx is joined by Jacob Silverman to discuss the start of the criminal trial against Sam Bankman-Fried, what we know about the case, and whether he’s likely to be found guilty. 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 jacobsilverman.com.Tech Won’t Save Us offers a critical perspective on tech, its worldview, and wider society with the goal of inspiring people to demand better tech and a better world. Follow the podcast (@techwontsaveus) and host Paris Marx (@parismarx) on Twitter, and support the show on Patreon.The podcast is produced by Eric Wickham and part of the Harbinger Media Network.Also mentioned in this episode:Jacob wrote about the trial on his newsletter.Molly White has also written a preview of what’s to come in the Bankman-Fried trial.Sam Bankman-Fried leaked Caroline Ellison’s diaries to the New York Times. Soon after, his bail was revoked and he was sent to prison for over witness tampering.Sam Bankman-Fried was interviewed by Matt Levine on Odd Lots and basically admitted yield farming was a Ponzi scheme.Caroline Ellison, Gary Wang, and Nishad Singh have all pleaded guilty and are expected to be collaborating with the government against Bankman-Fried.Bankman-Fried’s parents are also being sued over the millions they got from FTX.Support the show

he could go to jail for the rest of his life or the rest of his natural life. And jail is not a good place for people either, health-wise or whatever, and obviously very violent places. Like, this is for everything. Hello and welcome to Tech Won't Save Us. I'm your host, Paris Marks. And this week, my guest is returning friend of the show, Jacob Silverman. Jacob 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 on CBC Podcasts. By now, I'm sure you've heard of Sam Bankman-Fried, the disgraced founder of FTX, which collapsed about a year ago, is finally starting his trial this week. Or of course, by the time you hear this, it will have started. And so I thought that this

was a good opportunity to check in on what Sam Bankman-Fried has been up to, get a little refresher on the case of FTX and its collapse and everything that happened after, and also talk to Jacob, because he has been following this so closely, about what we might be likely to see in this trial, what the government is going to be arguing as it tries to prove that Sam Bankman-Fried is guilty of fraud and the various charges that he has been charged with, and how much of a chance he really has to stay out of prison at the end of the day. And that doesn't look too good, especially when we have the precedent now of someone like Elizabeth Holmes going to prison, not just

getting charged and found guilty, but she recently, quite recently actually, finally reported to prison and has begun her sentence. And now that we have these Silicon Valley founders being found guilty, being held to account for what they did, it looks like Sam Bankman-Fried could be joining this group and finding himself behind bars as well for what he did at FTX, which would be a big turn from the narrative that we had about him just a little over a year ago about being this young guy who was revolutionizing the tech industry and the finance industry and going to make everything better for so many people. Oh, how times change. So I was excited to dig into all this with Jacob to get this refresher. I just want to note one thing that we talked about in this conversation, because we did record it on Monday and the trial, you know, the jury selection started on Tuesday. Jacob mentions that he's not sure whether the government is actually going to have regular people who lost money in the FTX

collapse testifying during this trial. After we recorded, we found out because there were new documents released showing that the government does intend to bring some of those people into the trial to testify against Sam and I guess to give the jury an idea of what the impact of the collapse of his company and the actions that he took were, you know, on people who aren't just investors, but also just average people who kind of bought into the general crypto narrative. So that will be another aspect of this that we didn't know about at the time that we recorded. And that's why Jacob isn't sure that that's going to happen when I asked him about it in this interview. So as this trial continues over the next six weeks, it will be something to watch quite closely, you know, and I will see if it

warrants having kind of further episodes on in the future, depending on what comes out of it, you know, and ultimately whether Sam Bankman Freed is found guilty or not. So I hope you enjoy this episode with Jacob Silverman. If you do make sure to leave a five star review on Apple podcasts or Spotify. You can also share the show on social media or with any friends or colleagues who you think would learn from it. And if you do want to support the work that goes into making the show every week so we can keep having these critical conversations about technology and update you on things like this trial,

you can join John in Medford, Massachusetts, Bruno from Madison, Wisconsin, and Rain in Berlin by going to patreon.com slash techwontsaveus where you can become a supporter as well. Thanks so much and enjoy this week's conversation. Jacob, welcome back to Tech Won't Save Us. Glad to be here again. Thank you. Always great to chat. Obviously, people will probably be aware that our good buddy,

Sam Bankman-Fried, by the time you hear this, will be heading into his trial over the collapse of FTX. And just for people who might not remember all the story, because, you know, it happened a number of months ago now, or, you know, a bit longer than that, I guess. Can you give us a quick recap of the FTX collapse and what actually happened to kind of expose this company for what it was? Well, I'll try to give the quick version. I tend to riff sometimes. But in early November of 2022, a balance sheet was leaked to Coindesk, an industry publication, that basically showed that Alameda Research, Sam Bankman Freed's hedge fund and the kind of other pillar of his empire besides FTX, was built on shit coins. They had

very little real money. They had very little even of the quote unquote good crypto like Bitcoin and Ethereum. And they had a lot of FTT, FTX's own token, their own made up money, and some other shit coins or illiquid coins. Some of them were called Sam's coins like Solana and Serum, basically tokens that FTX or Alameda had a big hand in and often in subsidizing. So when that balance sheet was leaked, it created a lot of market turmoil. There was essentially a run on FTX. The other contributing factor was that CZ, the biggest figure in crypto, the CEO of Binance, said, I don't like what I see here. And he essentially said he was going to sell all his FTT, which he had a bunch of, which we could

talk about later. And that, of course, sparked more market panic panic and really within a week FTX was done. There was the run on the bank of regular people and also some very rich partners of FTX I think trying to get their money out and then the price of FTT which helped underwrite FTX also plummeted. The main problem though was that once there was the run on the bank, we learned that FTX didn't really have the money. Not only were they built on this sort of rickety empire of shit coins, but about $8 billion, possibly more, basically went out the side door to Alameda. And then from there, was gambled all over DeFi and crypto. Billions of dollars probably went to Sam and his colleagues into real estate in the Bahamas and elsewhere, and a lot of investments. So within a week, FTX had to stop withdrawals and close its doors. And then about

a month after that, after this weird media tour, Sam Bankman-Frie was arrested in the Bahamas and then sent to the US a few days later in an extradition agreement that he agreed to. And that's basically what happened. No, I think that was a great quick summation of everything that happened. So I appreciate that. And what was, I think, particularly notable in that moment was just how much the narrative shifted so quickly, right? Because FTX was supposed to be like the good crypto exchange. And Sam Bankman Freed was like, you know, he was getting all this really positive press coverage, despite, you know, how he presented himself in public and whatnot. And it was like overnight, it was like, okay, this kind of darling of the crypto industry, maybe there's Pon opinion of crypto. It just happened so rapidly. It was so dramatic. The week before, Sam had a multi-billion dollar fortune, at least on paper. The company, again on paper, was worth over $30

billion. And he was sort of the nice guy of crypto, the one leading the lobbying charge on Capitol Hill, which, of course, led to all kinds of political corruption. But he was the guy, the face of crypto in the English speaking world. CZ, who's Canadian, mostly lives overseas and kind of keeps away from North America. So for a lot of people, even people who may have doubted Sam, I don't think anyone predicted such a rapid fall and that this guy would become kind of corporate public enemy number one so rapidly. There was a lot of drama for people like us who like to watch this stuff. And he really went from someone who was powerful and mostly admired, in some cases, lauded as a great philanthropist, to a total fraudster in the public imagination of the sort of Elizabeth Holmes or Enron variety. Yeah. And I think that's really

important to note, right? And I think that this is a particularly kind of important case coming after the Elizabeth Holmes case where, you know, that was kind of seen as like, you know, the first kind of big tech founder to kind of fall from grace and be sent to prison. And now I think the question is, is this going to happen again with Sam Bankman Freed? And is this part of something bigger that's going to begin happening with these sorts of people? Yeah, I mean, I think for some of us, it's less about the specific prosecution of Sam Bankman Freed than this question of white collar crime and corporate accountability. You know, some people like to say that the crime wave is white collar.

Certainly, we know about things like wage theft and other crimes like tax evasion or even the kinds of bank fraud and money laundering that Sam Bankman Freed is charged with are pretty common, I would say, or at least happen way too often in the corporate world. And for someone like him, who is, of course, a big Democratic donor, exerted a lot of political influence, splashed a lot of money around in a deliberate plan to curry favor and influence, to now see him prosecuted is actually a little bit reassuring. I mean, we can be appropriately cynical about the American justice system, but you don't often see people, especially in such a quick reversal, who exert so much influence and were rich and powerful and then are suddenly facing life in prison potentially. Yeah, absolutely. And so, you know, you talk about the potential of life in prison. What are

the things that Sam Bankman Freed has been charged with as we head into this trial? There are seven charges. Just to quickly clarify for some people, because there's been some understandable confusion. I think now we're on the third indictment against Sam. So there were a couple of superseding indictments, as they're called. There were charges added and then removed. You had right-wingers flipping out, the charges were removed. But basically what's happening here is there are seven charges. The government is trying to get this to trial pretty quickly. And they're focusing right now on one, charges that were covered under the extradition agreement. So there are things that they're going to probably charge them on in a second trial that might happen next March.

And all this right now is centered around this question of, did $8 billion or more of FTX customer money, the money that regular people put in to gamble on crypto, which is supposed to stay in bank accounts so that it can be redeemed or withdrawn when people want it, was that money funneled to Alameda at Sam's direction and then used for all kinds of purposes and now is basically gone. And so from that, you get money laundering and various types of fraud, really classic financial crimes, which is another good

thing to keep in mind here. This story has not that much to do with crypto. Crypto is part of it, but you certainly don't need to know anything about it to understand or follow this case. Crypto perhaps helped facilitate some of this because there's an implication or an accusation, actually, that Gary Wang, who was one of Sam's executives and a star coder and a longtime friend of his, had coded a backdoor into the FTX system that allowed Alameda to just withdraw money or borrow as much money as it wanted. It had an unlimited line of credit. And this is something that allegedly most people in the company didn't know, but that Sam allegedly ordered. And Gary Wang has already pled guilty. It's worth noting that three of the top executives have pleaded guilty and are testifying against him.

A fourth, Ryan Salem, which is I believe how you pronounce it. I used to call it, say, Salome, but I think it's Salem. Ryan Salem has pled guilty. He's the fourth, Ryan Salem, which is, I believe how you pronounce it. I used to call it, say, Salome, but I think it's Salem. Ryan Salem has pled guilty. He's the fourth, but he's not testifying, at least so far. So that's the basic set of crimes there. And any one of those charges could land him in prison for 10 or 20 years. And they center basically on a few main things, was that he deceived investors, he lied to bankers, and he embezzled

money. And a lot of those fundamental facts are disputed by Sam, of course. But given what we know from these other guilty pleas, from the documents that have come out, from internal communications that are already in court filings, I mean, it seems real bad. It seems like he did this stuff. One last thing that's worth noting, too, is that, as a lot of folks are familiar with, most people who are familiar with, most people are charged with federal crimes end up in jail. They 90% plead guilty. These are federal criminal cases. I think 8% have the charges dismissed and something like 2% go to trial.

Of those 2%, about 1% walk away free or found not guilty. Or I think that also includes mistrials. So we're talking less than, it was last year last year was less than 300 people. I mean, we have a lot of people in prison in this country. And so the odds are really long. I know it's some people say, well, he has money and influence or did and he's a nice white guy and the political sort of valence of the case. But I don't know, it seems like they have him dead to rights. I cannot like happy hearing that, to be honest. No matter how much you would like some carceral reform, there is something satisfying, I think, especially if you're a journalist allowed to have an opinion.

And seeing this guy who ran roughshod over the industry and Congress and was sometimes very obnoxious about it, now having some comeuppance. I mean, one other thing perhaps related to what you were asking about earlier is that Damian Williams, the US attorney here in the Southern District of New York, has made a point of, because it's part of his mandate too, of going after white collar crime, financial crime. He's prosecuted a few Wall Street people, which the crypto people probably aren't paying attention to. But, you know, and other crypto Ponzi schemers. Sam is definitely the biggest one. But so far, I've been mostly heartened by what he's done because I mean, he's not directly prosecuting the case. It's an assistant U.S. attorney. But his office seems to

care about what his job is, which is to prosecute the felons of Manhattan who tend to be white-collar criminals. And he even pulled this one out of the Bahamas. Yeah, and it's gone quickly. I mean, he's given a few stern speeches at the podium. He said that this case isn't over. And that's one thing we could talk about. I mean, I think there's a lot more to come, whether about Sam or all these other people connected to him. And a lot of that will be civil litigation, but there certainly could be more criminal charges, more people arrested. Gotcha. Yeah. When I look at this list of charges that he's up against, it basically kind of revolves around wire fraud and conspiracy to commit wire fraud, and then some conspiracies on money laundering and securities fraud as well.

So like your kind of traditional financial crimes. And I feel like we talk a lot about, fraud, and then some conspiracies on money laundering and securities fraud as well. So like, you know, kind of traditional financial crimes. And I feel like we talk a lot about or used to talk a lot about how crypto was like trying to transform the financial system and all this stuff. But ultimately, what you know, I think journalists like yourself were doing was really to kind of make us understand how this was part of a much broader trend among companies to continually try to do these sorts of things and just find new ways to kind of get around it. And so it was not really surprising to see crypto companies doing something that we've seen time and again in the financial industry or whatever. Yeah, I would say, I mean, broadly, a lot of the modern economy can seem like financial engineering. I mean, just a quick aside, like look at someone

like Vivek Ramaswamy, actually, who I have to say, I worked for his company very briefly, but everything I'll say is sort of public knowledge and not NDA. But years ago, I worked for his biotech company, Roivant, which very much, I would say, is sort of a product of financial engineering. He comes from the private equity world. A lot of people who are very rich, arguably didn't make anything, or just move various types of money around. And I think we see that a lot in crypto. I mean, obviously, Sam invented his own money. They just created FTT. And what we certainly learned from the last couple of years of crypto is that they need the mainstream financial system. Everyone wants to get back to fiat. That's still how the world runs. And that a lot

of these companies are willing to break the law or do whatever it takes to maintain banking relationships or to bank under assumed names as FTX did. And that, you know, for all the emphasis on quote building and to be a builder in crypto, there's very little that's being built to go back to this financial engineering idea. It's, you know, three card Monty or choose your metaphor. It's just shuffling around a lot of real and fake money. And in the process, almost as a matter of course, breaking these laws around money laundering and wire fraud and things like that. Yeah, I think put really well. And just to be clear, Vivek is one of these folks who is running for the Republican presidential nomination, right? Yeah, he's one of the Republican nominees is sort of in the insurgent. You know, I pay a little more

attention to him because I worked for Roy Vamp briefly as a ghostwriter. But he's sort of the most emergent would be Trump heir figure in the latest round. And, you know, a far right firebrand who is, I think, also reflects the certain kind of extremism that or radicalization that's happening in the corporate world that we've talked about, that we see in Silicon Valley, you know, the David Sachs, Elon Musk kind of right wingers. So, you know, after, you know, FTX collapsed, and, you know, in the process of kind of Sam Bankman free being arrested, there was this whole kind of media campaign that he was on in trying to tell his side of the story and kind of make it look like he was not at fault here. And then when he was

extradited back to the United States, he was quite active on social media for a while. He was giving interviews. He even had a sub stack. Does that give us any indication of kind of how he is trying to present his narrative for what happened here? Yeah. So Sam has always been very active in the media. He's not shy. He talks to people and he's always communicated a lot with journalists, both in public interviews and appearances. And he texts people. I mean, he DM me a little bit and it started on his end, which surprised me. Like I don't normally hear from billionaire CEOs directly like that. This is common in crypto in some ways. I don't normally hear from billionaire CEOs directly like that. This is common in crypto in some ways that they don't necessarily do PR how other industries

do. But Sam took it to a farther extent, I'd say. He was up at all hours and would just be messaging people all the time. And while he was on his rise, that kind of thing worked. People found him charming. The availability, I think, was very appealing to the media. On his way down, of course, yeah, he's been just as active trying to play the media. It was very unusual and weird, I think, for people to see this kind of apology tour that he went on from basically the second week of November to a month later when he was arrested in the Bahamas. That day, I think it was our and colleague, Molly White, maybe, who asked him on Twitter spaces, do you worry about arrest or being apprehended if you go to the U.S.? Because he was supposed to go testify on Capitol Hill.

There was a New York Times event he had done via video, though. And he said he sort of gave a typical Sam answer of how he hadn't thought about it that much and he needed to look into that. And he was arrested, I believe, that night, certainly less than 12 hours later in the Bahamas. So it was all a strange kind of way of doing things, but it made some sense for who he was. I think it certainly backfired. I think one set of lawyers dropped him. I know he had a lot of conflicts with lawyers.

This summer, I was in court for some pretrial hearings. He had gotten in trouble because he had shown some of Caroline Ellison, the co-CEO of Alameda and a former girlfriend of Sam, who's going to testify at trial. He showed some of her basically diary-like writings that he had access to, to a New York Times reporter, David Yaffe Bellany, And those were published in the Times. And it actually, I think, in a lot of people's eyes, creates some sympathy for Caroline Ellison. It was just stuff about her being kind of overwhelmed and feeling like she let Sam down, various emotional feelings about their broken relationship. Nothing that I would call scandalous,

certainly intimate. But given that it emerged that Sam was the source for this stuff, I think it actually backfired and was part of Sam's general kind of blowback from his media campaign and attempts to play the media. And the actual sort of material result of that was that the prosecution in his case said, this is witness intimidation through the media. The judge, Judge that the prosecution in his case said, this is witness intimidation through the media. The judge, Judge Kaplan, in the case agreed. And there was a somewhat dramatic hearing over the summer in which ultimately at the end, the judge simply said, I'm a remanding bail or a remanding bond. And Sam was forced to take off his tie,

his shoelaces, empty his pockets, and was taken to the MDC jail here in Brooklyn, which is a pretty grim place, like a lot of American jails and prisons. The media was a big part of his rise, and it's been a big part of his sort of fall and attempts to defend himself. In court, his lawyers have basically said, Your Honor, he was just using his First Amendment rights to try to defend himself in the media and respond to all this bad press. He kind of said, it's not my fault that my client might be reckless, but it's legal. It may not be a good strategy, but it's a legal strategy. And the judge ultimately disagreed.

He said talking to reporters is a lawful use of his First Amendment rights. But if it's in the service of a crime, i.e. witness intimidation, then it's not. It's kind of like Trump having these phone calls and messages with other people that when he was indicted in Georgia and people say, well, it's just free speech to tweet X, Y, Z or something like that. But the prosecutors say, no, that's in service of a crime, you know, of this RICO conspiracy. Same kind of thing. If you use free speech in service of a crime, you know, of this RICO conspiracy. Same kind of thing. If you use free speech in service of a crime, then you can go to jail. So eventually he had this gag order put on him or partial gag order. He couldn't use signal. He stopped the substack and the tweeting, but he couldn't help himself. He still was inviting journalists over to his home. He had something like 400 phone calls

with Michael Lewis. Of course, there's a book coming out this week from Michael Lewis. And he had about 100 phone calls with that New York Times reporter, David Yaffe-Bellini, who's a good reporter and doing his job. You know, if Sam's going to pick up the phone, reporters should be calling him. Absolutely. And, you know, as you say, Sam McAfee is in prison now as, you know, this trial kind of kicks off. Can you tell us a bit more about what that has been like? Because I know that he and his lawyers have been arguing that, you know, he should be outside of prison or he should be having more internet access and things like that. But the judge keeps pushing back on these requests, as I understand. Yeah, there's been a lot of procedural stuff, not necessarily out of the ordinary. I talked to one former prosecutor who said the procedural

stuff is kind of all they have because there, frankly, does seem to be a lot of evidence against Sam and three star witnesses. Well, first, they didn't really like some of the restrictions earlier. But then by putting him in jail last month, he has limited internet access. I don't know the exact situation today as we speak, but he definitely can meet with his lawyers at the courthouse or at their offices, I believe, under supervision. There's a laptop that is loaded with documents. But the basic complaint is really just the extent of access he has to an internet-connected laptop or to these documents. There's supposedly millions of documents produced as part of Discovery. I think the real sort of lesson or kind of takeaway is that Sam is very involved in his own defense.

And both in his media tour before, but now going to trial, he seems to think, perhaps genuinely, that there's something in these documents or that he can somehow talk his way out of this. It really did seem like he thought he could talk his way out of it before he was arrested. And that now that he's going to trial, somehow the exculpatory information is in these records of trades and communications that do exist. He says a lot of the communications don't exist because they were auto-deleted, but he says that wasn't my order. You know, you can see how the contradictions kind of pile up and the government says that Sam did order, you know, use of auto-deletion on Signal and things like that. They're going to bring that up at trial. So it's some murky sense that if Sam only had access to all the trading data and

everything like that, he kind of just show how this was a confluence of errors and no one's fault, really. I don't know how he'll do that. He also seems to intend to claim that he had bad legal advice. The government has seemingly, or I believe the judges ruled that they don't want to hear that in opening statements, but it may be presented at trial. I'm not a lawyer, so I can't necessarily explain that distinction. But even that is not a very good defense, I think, because he may have gotten bad legal advice, but he's an adult male CEO who knew what he was doing. And supposedly some of these sort of commands or decisions came directly from Sam. Furthermore, one of his lawyers was his dad. And his dad also encouraged him to hire a guy named

Daniel Freeberg, who was kind of the in-house fixer, the Michael Clayton type, and supposedly the dispenser of potentially illegal advice. I mean, the basic lines then are, oh, there's something in the data and bad legal advice. Maybe he'll have another defensive trial, but that's what we can probably expect from him. Yeah, it really sounds like grasping at straws. And I want to come back to his father in a little bit. You know, before we dig more into kind of what is likely going to be the argument made in this case, I just want to kind of check on some, I don't know, more logistical points, I guess. This trial begins on October 3rd or will

have begun on October 3rd by the time that this episode goes live. Do we have an idea of how long the trial itself is going to take? It could be as long as six weeks. Right now, I have a schedule here that shows it going through at least November 9th. You know, things can happen. He might reach a plea deal. I don't think so, because he seems pretty intent on fighting this stuff. And he seems to genuinely believe to the extent that he can in his own innocence. We don't really know yet when some of these people will testify, but the big days will, number one with a bullet will be when Caroline Ellison testifies, but also Gary Wang and Nishat Singh, former friends and executives, are key witnesses. And there are a few days, just the way the system works here, where the trial won't meet. Right now, there's nothing scheduled. October 23rd

through 25th, there are a few of those kinds of days. You know, it'll be a little plodding, a little boring at times. But to us who are interested in this stuff, it'll be very dramatic sometimes too. And there can be a lot of journalists like me there. There aren't cameras or recording of any sort allowed in the courtroom. So this will all be told pretty much via writing, via the courtroom sketches, which were charming. But the one from the one, the last hearings showed him next to this U.S. marshal who in real life was enormous. And Sam is not exactly a built guy, but it kind of showed Sam as this hulking guy next to an equally big marshal. But that's, you know, that's the fun of courtroom sketch artists. And it's going to be mostly nine to

five, I think, with some variation. I don't expect any stops. You know, one thing is that the judge kept saying, well, you're complaining about your internet access and access to documents, and now you're going to jail. Like, do you want to request more time, basically a continuation of the trial or delay? And this happened back and forth a number of times between Sam's lawyers and the judge. And they said, Sam's lawyers said no every time. I mean, he was given an opportunity. They are seeming to take seriously some of his complaints about internet access and trying to accommodate him. He seems eager to go forward. My sort of pet theory is that we know that he is funding his legal defense with 10 million plus dollars that he just gave to his parents. So maybe there's some concern that that will be clawed back in the bankruptcy process. I think that's a legitimate possibility. Maybe he just wants to get this over with. But for whatever reason, we have any idea, you know, if this trial is going to take six weeks, how long it would ultimately take to kind of get a verdict and kind of what his sentence would be if he's found guilty, you know, those sorts of details. It is a jury trial,

12 jurors here in New York. It has to be a unanimous verdict. So there's a possibility that, you know, one of his best hopes really is for a mistrial, which means that they just can't come to a unanimous agreement or unanimous guilty agreement. And basically the way you get there is by muddying the waters, one, through the media, even though, I mean, the sort of ideal juror doesn't have much foreknowledge of this case. And the other way is just kind of confuse people in court or try to make certain arguments about his own innocence to at least convince one or two people. But, you know, I've explained what the odds are. They're not great. And there are, of course, things about the case, you know, kind of a hotshot young overnight billionaire that might not rub jurors the right way. You know, Sam is not necessarily that sympathetic. Some people might find him so, but the jurors will deliberate at the end of the trial. That could be a, you know, I would say at minimum, it would be a day. It could be weeks, but that would be unusual. I mean, usually I think these kinds of things, it's a week or so. Sometimes you

might hear them going back to the judge for clarification on things, stuff like that. But if he's found guilty, each charge carries, you charge carries a dozen plus years in prison. Between all this, he could go to jail for the rest of his life or the rest of his natural life. And jail is not a good place for people either, health-wise or whatever, and obviously very violent places. This is for everything. And it's possible a judge could take a relatively more lenient approach and say, oh, 20 or 30 years. I don't have the exact sentencing guidelines next to me, but this is a long time. You're talking potentially dozens of years in prison. You know, if he gets paroled, he will be a middle-aged or old man, even. This is it. It felt to me, I went to a few

pretrial hearings. The one where he was remanded into custody, you could just see it on his face. He was pale. He was sort of surprised and struck. And that's when it really felt real. I think for a lot of people, I don't know if it felt real then for Sam, but that was a very dramatic moment where he realized like he might never be free again. Yeah. Um, and, and like, I remember in the Elizabeth Holmes case, like she was found guilty, but then it still took a while, I believe, for the judge to actually decide on the length and sentencing. Then when he actually has to report to prison, he'll almost certainly appeal while he's probably incarcerated. The Elizabeth Holmes trial also took some years, I think, to get going. This is pretty quick turnaround from he was

arrested something like 10 months ago. But, you know, if Sam is eventually found guilty and sent to some, you know, medium security prison somewhere in the country, yeah, you're right. He may not actually report to prison for another six months or something like that. Yeah. But, you know, I guess one big difference between him and Elizabeth Holmes is that Elizabeth Holmes was out during her trial, whereas he is in prison. Yeah, already. One of the things that I was reading as I was preparing for this interview was about kind of the government's approach to this case. And I was reading that they, it was kind of explained that they had what was called, quote, a thin to win approach where they weren't trying to go

really heavy on like details and stuff like they were kind of trying to give the jury, you know, the details that they would need to find this guy guilty and not kind of overburdening them with like the minutia and like the kind of technical details of crypto and all this kind of stuff. Do you have any insights into the case that the government is likely going to present as it tries to, you know, seek this guilty verdict against Sam? Yeah, I think that's an interesting phrase, thin to win. I mean, I think that's probably pretty smart, to be honest. Again, I'm not a lawyer, but if I were sort of presenting a case against Sam, I would try to do what I frankly try to do my journalism, which is to simplify and translate for a lay

audience and to tell people the facts, which are crypto is not that important. You don't really need to understand how it works to understand this case or this company. And you don't want to get bogged down in technical details. I mean, I think that's something that Sam will want. And that's why he's going through the data and writes these long, wonkish sub-stack posts and stuff. Because if he is the only one that really understands what happened, then how could a jury understand it? But the main question, again, really revolves around some of the banking relationships, which there's documentation that they lied. And Silvergate Bank in San Diego,

I believe, rejected them as a client. And then they formed this shell company called North Dimension, which was a fake electronics retailer complete with a website, and then banked under that name at Silvergate. I mean, Silvergate may have known or sort of looked the other way, but that's what happened. Like, these are kind of simple things that people can understand. If they ask Gary Wang on the stand, did Sam order you to create a backdoor so that Alameda could borrow unlimited money? That's something that jurors should be able to understand. And Gary Wang is going to say yes, unless he wants to perjure himself. So I think you're right. And

that's probably a wise approach, just in that while there's this sort of technological gloss and celebrity and Sam is this public figure and any other number of things, complicating factors you can kind of point to or use to kind of filigree or fill out the story is about these fundamental ideas of theft and embezzlement and breaking these longstanding laws around wire fraud and other things like that. You may also hear from Sam's side, hey, crypto is new and innovative and complicated. Existing laws can't quite apply. Sam was working overseas, things like that. That's the kind of thing you hear from the industry a lot because they want their own new regulatory

regime written for them. Of course, that was something that Sam was spearheading. But what we've seen and what I think is obvious in this case is that existing laws around finance, money, banking, fraud, conspiracy, those cover this industry pretty well. charge Crypto Ponzi schemers and fraudsters under the same laws that you charge the one banker that's ever charged every decade here in the U.S. or that you charge some hedge funder as Damien Williams is prosecuting a hedge funder or two right now. Do you think that, you know, we obviously talked about the media campaign that Sam has been on and how Sam used to give kind of a lot of interviews even before the FTX collapse. You know, there's a notable interview, you know, with Bloomberg where he kind of basically describes what the business was doing as being a Ponzi scheme without really specifically saying the word. Do you think that

kind of the interviews that he has given or like the sub stack posts that he's written could actually help the government in kind of incriminating him? I do. I don't necessarily know what the legal arguments might be around that, but he had a tendency to say too much. I was actually talking to some folks the other day and they remind me there are basically three main incidents. The famous Bloomberg interview on odd lots where he talked about yield farming on DeFi, which basically is this whole black box metaphor. It doesn't matter. But Matt Levine said that sounds like a Ponzi scheme. And he said, yes. There was a magazine interview where he said

that some exchanges were secretly insolvent. Well, that certainly sounds like him. There was something else that he said in Congress, I think, about concern that some tokens weren't fully backed by real money, which is, of course, the big fear about Tether, who was Alameda's number one business partner. So it can often seem as if Sam was called a Freudian slip or whatever else, but sort of confessing almost in public, whether that might just be used to paint a picture of kind of recklessness or he knew, I'm not sure, or used perhaps more sort of towards the fundamental charges. But there's certainly a lot of things that he has said and written that could be turned back against him and brought up in court. Well,

you said this, were you thinking about your own company? That kind of thing. I don't expect him to necessarily take the stand, but that stuff could certainly be brought up in court. Yeah, no, I think that makes perfect sense. And, you know, if he does take the stand, that would be a big day or a few days. That would be a big one too, yeah. Yeah. You've talked a number of times about how Carolyn Ellison, who was the co-CEO of Alameda Research, which, you know, was kind of the trading firm that was attached to, or kind of sister companies with FTX, which was the kind of crypto exchange, as well as Gary Wang and Nishad Singh, who I believe were executives at FTX, have all pleaded guilty

and from as far as we can tell are working with the government and are going to be helpful to the government's case. Do we know what they can kind of bring to the government's arguments to try to ensure that Sam is found guilty? I think the basic thing they seem to know about was that Alameda was losing a lot of money and that eventually that line of credit that they already had with FTX was made unlimited, specifically through this backdoor that was coded by Gary Wang, which he's admitted to, but also in conversations with them. So there's a line

from Caroline that's been in some documents. Someone asked her who ordered the line of credit or something like that. And she says, Sam, I guess. That can seem a little waffly. But, you know, in court, they're basically going to, we expect them to say, we started to know, or at least summer of 2022, or even before that Alameda was insolvent, that we were losing a lot, or that FTX was insolvent, and that we were filing all this money through Alameda. But there are also things like huge loans that were made, and loans, perhaps in quotes. I mean, some of these had no collateral or even no documentation that were made to Sam and other executives. We're talking over a billion dollars in Sam's case, hundreds of millions of dollars

for some executives, hundreds of millions of dollars worth of real estate that was purchased. Again, this is money that came from FTX, went to Alameda. And because it was all kind of mixed also in a few bank accounts, that is also illegal co-mingling. And because it was all kind of mixed also in a few bank accounts, that is also a legal co-mingling of funds. But it all kind of just was being transferred to Alameda or accessed by Alameda. And then that was their big pot of money to spend on politicians, celebrities, real estate, investments, and themselves. So that kind of thing implicates all of them or sort of involved all of them. I mean, they were all reaching into the register and they were all spending. And I think the basic

argument and basic confession, as it might be, will be, oh yeah, we knew and Sam was in charge and ordered some of this stuff. And that may be enough. Yeah. And I guess what's distinct is that those three people have pled guilty and they're basically saying that Sam is guilty along with them. Yeah. I think they may, some of them may go to jail. Maybe all three of them might just be a few years, I would expect, for their cooperation because they weren't number one on the masthead, so to speak.

But they've said it, that they are cooperating. That means producing evidence. That means turning evidence. That means turning over phones and things like that. Even already, yes, Sam may have used disappearing messages on Signal, but stuff tends to stick around. People take screenshots, things like that. There are plenty of emails and other forms of communication that I think put together could paint a pretty damning portrait. I mean, just even ask before you even talk about any theft of funds, why was a hedge fund investing hundreds of millions of dollars,

billions of dollars in startups? For example, like that company Anthropic, one of these big new AI darlings that just got billions of dollars from Amazon in almost a kind of friendly takeover of sorts. That company, one of their key early investors was Alameda, gave them $500 million. And that's as Cottom at the Financial Times was telling me, like, VC investments are supposed to be long-term. Hedge funds generally deal in short-term investments. Like, none of this stuff made sense.

Like, why were you buying real estate with your hedge fund? Why were you giving money to Sam's parents who gave money to Stanford? Just those kinds of transactions don't make sense. And ultimately, you have to account for them. And the way you honestly account for them in this case was we were spending like there was no tomorrow. I mean, there is a quote from Sam floating around that he felt like they had infinite money. And honestly, I've heard that from people at other crypto companies during the peak of the bubble. Like there was this sense of irrationality. I mean, that it's not exculpatory or anything. There's still crimes committed, but like people thought they had

unlimited money. In some cases they did because they were lying and printing their own tokens and things like that. Those things have to be accounted for. And I think the only way you really account for stuff like the billions of dollars that was funneled through Alameda is that we committed crimes. Yeah. You know, we'll definitely see all that laid out over the next six weeks. One other person, you know, beyond those three that I saw kind of written about was Sam Tribucco, who was the other co-CEO of Alameda. As far as I know, he's off the radar and we don't know where he is. Is there any indication that he could be assisting the government or not really? It's possible. There's just no real public evidence. Off the

radar is the right term because a few months before the whole thing collapsed, Sam left the company around the time that Brett Harrison, the CEO of FTX US, who has so far escaped any legal consequences, left the company. And Caroline was put in charge of Alameda by herself. Sam, well, at the time, he made it seem like he bought a boat called Soak My Deck or Soak My Decks, I think. I don't know. It's something juvenile, I imagine. I guess it sounds like a sex act, whatever. Anyway, but now we know that that boat was bought by Alameda, something like it was, I think, $42 or $52 million. And he said he was going to go enjoy his boat. He posted once, I think, after FTX went down saying he wished everyone well in November

2022. And he literally hasn't been heard from since, as far as I know. He is exactly the kind of person that the government would be interested in and that could possibly face criminal liability. So I would expect that the long arm of the law has somehow reached out to him, even if he's sailing around the Caribbean. But there are people like that that I do wonder, even just as a spectator, what's going on with them. Daniel Friedberg, again, that lawyer fixer guy, who I think is very key to the story, has supposedly been talking

with the government, but we don't really know what his status is. I would still wonder about Brett Harrison, even though he had a lot of conflict with Sam and was somewhat insulated being the CEO of FTX US. And there are other executives, people who are involved with their venture investments. And Ryan Salem has pleaded guilty. He's really important on the political operation, but he has not agreed to testify or cooperate. So, you know, there's a lot more that could happen. I expect some of the political corruption will be worked out next year through the legal system, through charges, and some people pleading guilty. I mean, Nishad Singh has already pleaded guilty to being a straw donor in a scheme partly orchestrated by Sam's mother. So there are all these characters floating around, former executives,

business partners, too, who I think could still face legal liability. And there is sort of a, I don't know, a game I play sometimes of trying to list all the people who are still floating around out there wondering, you know, what are they up to? Who have they talked to? A fun game. But I think you see that a lot with crypto, just these random people that are like hard to kind of pin down. Yeah, sometimes geographically. Yeah, absolutely. You've mentioned Sam's parents a few times, Joseph Bankman and Barbara Freed.

You know, there's been some reporting recently, and they were recently sued, I believe, by FTX, you know, what's remaining of the company, because of all the money that they received. Can you talk to us a bit about kind of who they are and what it's alleged that happened? happened. Yeah. So everyone knew that Sam's parents were both one, very close with him, but also, and very influential on his life and development as many parents are. But I mean, really like on his like political philosophy and what he chose to do for his work and things like that. But they've been involved with the company. The last few weeks, those really opened this up. So there's a great piece in Bloomberg by Max Chafkin, and I'm sorry, I'm blanking on his co-writer's name. And there was a very instructive piece, but I would say not good in The New Yorker by Sheila Kolkata about the parents. And then there was this lawsuit by the new leadership of FTX who

was charged with cleaning up the company, getting the money back, suing people who should probably be sued. And reading these indictments, or not, sorry, that civil complaint, that civil lawsuit was also very instructive. I encourage people, if you really want to nerd out, you know, read court documents, read indictments or civil complaints. You'll learn a lot. Some of the best reporting is done by law firms, I have to say, because they have access to messages and internal documents and things like that. Not to mention resources. Yeah, they have more money than you and me and more people to work on this stuff and private detectives and all that good stuff. So what we really know now is that, and this has

come to the fore more through these stories in the last few weeks, is that the parents were deeply involved in the company. The dad, especially, everyone knew that Joseph Bankman took a salary from the company. There's a document or an email in the civil complaint that says he was getting $200,000 a year. He complained to Sam in email and cc'd the mom that he wasn't getting a million dollars. I mean, just cringeworthy and like, oh my goodness kind of stuff. It was such a wild story when I read that. Yeah. And so Joe was ostensibly advising on philanthropy, which is important to Sam and the company,

a lot of pandemic preparedness kind of stuff and some other political ventures. But he was involved in a lot. He was the main consigliere to his son, I think, besides in-house people like Dan Freeberg or some of Sam's close friends who are now testifying against him. Sam turned to him a lot. He came to meetings. He was on campus, so to speak, at FTX. We know that Sam's parents signed the deed to a $16 million beachfront apartment that FTX bought. They claim that they thought that FTX was the beneficial owner, but it's a little ridiculous. Sam's parents are highly lauded legal scholars at Stanford. They are experts in some of this stuff, in corporate malfeasance, in tax law, in the case of the father. So to think that they signed a deed to a $16 million residence and

didn't really know what they were doing is ridiculous. And they spent part of their time there and they build FTX for landscaping and things like that. And they called it our house. So, and another key thing is that they got $10 million, just basically a lump sum. It was called a loan. There was no documentation, really, no collateral, no really understand until recently. Like we knew that they're important. We knew that they could face some legal exposure even, especially on the political corruption front. But now it's a lot more than that, especially because Sam is ostensibly using bad legal advice as part of his defense. Well, that includes your dad who was coming to all these meetings with you, who's going to Capitol Hill with you. That's a little awkward and strange. And then worth noting is that Mind the Gap was this progressive organization that Barbara Freed helped run. Sam and various FTX affiliated people

donated money to it. There is an email in which Barbara Freed seems to just tell them to do a straw donation through Nishat Singh to Mind the Gap, and the donation did happen. So that looks like a crime. And so I would think that they would face some kind of legal pressure in the next year. I don't know if that means charging them. I mean, they're a little on the elderly side, that may not. But at the same time, like, these are crimes. They seemingly, if not legally facilitated, they encouraged the recklessness of their son. I mean, the drama surrounding them is rather extraordinary. And there are these quotes from the mom about how Sam could never tell a lie and stuff like that, which is a little absurd and sad.

I mean, they seem like very devoted parents who are talking about saving their son. But frankly, they seem to help get their son into this mess. And if they were there cheering from the silence the whole time, I don't see how they can avoid some liability or credible accusation that they knew. It seems via some comments, actually, from Anthony Scaramucci, of all people who became a business partner of Sam's, that Joseph Bankman might have known before a lot of people did that the company was insolvent. And as I may have said earlier, Joseph Bankman helped bring in Daniel Freebird, who crushed an important lawsuit against the company in 2019 that essentially accused them of fraud and market manipulation. So you have all these areas in which the parents were really there participating, sending emails, being recognized by people at the company as influential people

there, giving advice to Sam, making decisions, taking money. And I think that's important. It speaks, of course, to like the corruption of the milieu he came from. It speaks to the fact that just because you rise through good institutions and the meritocracy doesn't mean you're a good person. It also, I think, shows that even if you're an effective altruist or you sleep on a beanbag chair, as Sam does, that you're not above greed. And when a billion dollars falls in your lap, you might want it. Yeah. As I point out to people, sure, Sam drove a Toyota Corolla and slept on a beanbag chair in his office, but he had a $30 million apartment where he lived with his buddies. Sometimes he flew private. They paid to have Amazon packages delivered in Florida and then

shipped by plane to the Bahamas. I mean, there was luxury here. There was extravagant spending. It just took different forms than some people might enjoy, though I think a lot of people would spring for a luxury apartment. So it's not like the picture of Sam as some ascetic, nerdy math whiz who only cared about kind of profit in the service of this effective altruist ideal is totally wrong. We could debate how much he believed in effective altruism or those particular ideas. And, you know, I think we both think that they're very flawed, but in the short term, like day to day basis, he and his parents were enjoying the money. Yeah, I think you put that really well. And I think that that's important to understand. You know, I saw you tweet recently

that people need to keep in mind that, you know, Sam Bankman Freed is not some child. Like he's an adult man who did these things and knows what he was doing. And, you know, we shouldn't treat him as though he didn't. And that was a huge problem on his rise, that he was this cherubic wunderkind or whatever people often called him like a boy or said he looked like a boy or kid. Even now you hear that. I mean, Michael Lewis is sort of the elephant in the room in this conversation because his book is coming out this week. I'll hopefully have read it by the time this

episode comes out. But, you know, there's a 60 Minutes interview, an excerpt and stuff. Kind of seems like he's fallen for Sam's story. It's not reassuring at all. And he seems to also take that sort of wayward child view of Sam. It's just really important not to, especially because Sam is a rich white man from a very educated milieu, deeply connected. I mean, you can't just say he didn't know better or kind of got out over his skis. I mean, yes, some of this stuff happened when he was in his mid-20s. But again, a well-educated adult overseeing a huge operation, being advised sometimes by 50-year-old lawyers.

So I don't know, just this whole kind of narrative of Sam, which still exists and you still see it kind of cropping up as some babe in the woods, really bothers me. And I think it's very unfair to the victims who are mostly just everyday people who, for whatever reason, decided to gamble on FTX and now their money is stuck or just gone. Yeah, and that's always important to understand. Do we have any indication as to whether there will be victims involved in the trial and kind of the government's case against Sam? I'm not sure.

I doubt you would see any everyday people. It might be interesting, you know, certainly from a reporter's perspective to hear from an average Joe who lost some money. I mean, we did that for my podcast, but it's good to talk to those kinds of folks. I don't know what the legal salience would be of bringing sort of an everyday customer

or even some of these people who have cropped up in the media who lost a couple of million dollars or something like that. I mean, maybe some of the people who kind of occupy these roles of celebrity spokesman slash investor slash advisor, like a Kevin O'Leary type, would be interviewed perhaps by investigators. But, you know, I think they'll mostly keep that sort of narrow approach, as you

talked about earlier. And I mean, they've got three insiders who are ready to confess and implicate him. And that seems pretty big to me. Yeah. And so, you know, to kind of close off this conversation, obviously, there will be a lot to watch in the weeks to come. Where do you think that this is all going? And are there particular things that you'll be watching for over the next few weeks to determine, you know, what is ultimately going to happen here? I think just the testimony of those three, Nishat Singh, Gary Wang, Caroline Ellison, especially Caroline, will be big. You know, we're kind of looking for anything unexpected, which is, I know, a little silly to say, but because there is almost an expected approach here. So a surprise witness, maybe some documents that come up or communications

that are particularly damning that we didn't know about before. It's very possible. You know, a huge surprise would be if he suddenly reached a plea deal or something like that. And then going forward, I'm wondering about the trial next year, which could very well happen. I mean, it's scheduled. We don't know which charges, but the judge put it on the calendar for March next year. And then the civil litigation. I have said sort of joked darkly that I think Sam will be in civil litigation for the rest of his life. I mean, there's certainly enough out there. A lot of this stuff has combined into one sort of blob of civil litigation. It's called a multi-district litigation that's happening with all these civil cases against FTX. But I think there are going to be some big ones,

like besides the celebrities, like I think law firms or VCs, I mean, some VCs have already been sued, the banks, like it's going to spread widely in this search for accountability. It doesn't mean anyone is actually going to, Sequoia is not going to step forward and say, I'm sorry, here's some money for the victims. But these people are going to be called to account in some way. And I think that will be interesting to watch. Like, is this going to create sort of some ruptures in Silicon Valley and kind of elite law and stuff like that? Because some of the people who are blamed for this whole mess are the elite law firms and VC firms that helped prop up Sam. Yeah, it's going to be fascinating to watch. I think, you know, like the Elizabeth Holmes trial,

this is another one that people are going to want to be paying attention to because it's going to reveal a lot about FTX and Sam Bankman Freed. But I think it's also going to reveal a lot about crypto and the tech industry more generally. And Stanford. He went to MIT, but you know, his parents are Stanford people like you can easily see this in the Holmes vein as a trial of certain slices of the American elite of meritocracy of sort of the Zuckerberg type that we prop up as the young white male tech genius. And I think we should, and especially in the commentary and analysis around this trial, like those are the kinds of issues we should be thinking about besides financial crime and crypto and stuff like that. Awesome. Well, I'll be looking forward to watching what's

happening and keeping up with your tweets and reporting and whatever you'll be doing to kind of cover this. I'm really excited to see that. So thanks so much as always for coming on the show, Jacob. Always great to chat. Glad to do it. Thank you. Jacob Silverman is a journalist, the co-author of Easy Money and the host of The Naked Emperor. Jacob. Always great to chat.com slash tech won't save us and become a supporter. Thanks for listening. Thank you.