The Journal. - The Trial of Crypto’s Golden Boy: Opening Arguments

Episode Date: October 5, 2023

With a jury selected, lawyers from the prosecution and defense make their opening statements. Rachel Humphreys and WSJ’s Caitlin Ostroff get their first clues into some of the strategies that will unfold throughout the trial.  Further Reading: - What’s Happening Today at the Sam Bankman-Fried Trial  Further Listening: - The Trial of Crypto’s Golden Boy  Learn more about your ad choices. Visit megaphone.fm/adchoices

Okay, so day two is done in this trial, and it was a pretty big day. For one, we have a... A jury. We have a jury, finally. Which we thought might take a while, but we have a jury. And we also got opening arguments for this case. Like, what stuck out to you? We have opening arguments, which effectively means that both sides in this case have Like what stuck out to you? We've opening arguments, which effectively means that both sides in this case have like shown their hand. They've shown

their card. So we now have an indication of how they're going to argue this case. As the judge described, we have now seen the movie trailer for this case, and we're going to get a sense of how things are going to unfold. From the Journal, this is the trial of crypto's golden boy. I'm Caitlin Ostroff. And I'm Rachel Humphries. Coming up, opening arguments. Introducing TD Insurance for Business, with customized coverage options for your business. Because at TD Insurance, we understand that your business is unique,

so your business insurance should be too. Contact a licensed TD Insurance advisor to learn more. Day two of Sam Bankman-Fried's trial, and Caitlin, we were lucky enough to be in the courtroom today. I say lucky because not all reporters get that access. It's a very imposing room, large wood paneled room on the 26th floor of the courthouse, which gave us an amazing view of New York. Not that that's what we were interested in today. But before we get to opening arguments, let's quickly talk about the jury. Who do we end up with today? Yeah, so we have our 12 jurors and our six alternates, and it's a mix of people. So in total, we have seven men, 11 women, and they kind of come from all walks of life. You have two trained conductors, a woman who is 10 weeks pregnant, a high school librarian, a special education teacher. And so you really just have this big cross-section of people.

And very shortly after that jury was selected, they were thrown straight into the trial and the order of the day, which was opening arguments. Describe what happened. The judge got the jury ready to hear the opening arguments. The judge's explanation to the jury about what opening arguments were was that this was a trailer for a movie and they should view it as such. So when you're sitting at the movies and you're trying to figure out, is this actually going to be a great movie? Or is this actually a flop that's dressed up to look like an amazing film?

That's the same level of skepticism that you should bring to these opening arguments. You need to see whether the finished product matches what you're being pitched on right now. And this was the government's chance to pitch that narrative to the jury. And, you know, in this moment, what they want to do is they want to put out a simple narrative that they're going to prove through this trial. And that simple narrative was that Sam Bankman-Fried knowingly defrauded customers and took billions of dollars and lied. Yes. What did you make of that? Yeah, they painted this picture of Bankman Freed living this high life a year ago.

You know, he was talking with Tom Frady and Bill Clinton. He was flying on a private jet to all sorts of places. And they kind of built it up as, you know, he was like living in stardom. But that was all a lie. Like it was all built on lies. on lies. And so they were trying to paint the picture that in reality, he was stealing money from customers of his crypto exchange FTX. And according to the prosecutors, how did Bankman-Fried allegedly steal the money? They broke it down. Can you explain how they described it to us? Yeah, so they started with FTX. And then they told the jury that not only did Bankman Freed have FTX, his crypto exchange, he had another company, Alameda Research, which was a trading firm where people buy and sell cryptocurrencies.

And they actually alluded to the code that we talked about in our previous pretrial episodes, you know, where they were saying that there was two different ways that Bankman Freed was able to take customer assets. And so one of those was via the code. The government alleged that the code gave them special privilege to go and take customers' Bitcoin, whatever other cryptocurrencies, and move it to Alameda, which then they could use for whatever they wanted. And they pointed to a second way as well, where they said that, you know, when people went on FTX, they were directed to send US dollars, other kind of government currencies, to a bank account that was actually controlled by Alameda. And so they kind of alleged that those are the two main ways

that Alameda got customer money. And what they alleged is that that customer money that went to Alameda was used to furnish this incredibly lavish lifestyle that Bankman Freed lived and afforded him to buy condos in the Bahamas. And they talked about that opulent lifestyle. Bahamas, and they talked about that opulent lifestyle. And at one point, the prosecutor, looking at the jury, pointed to Sam Bankman-Fried, who was sat in his chair, and said, this man stole billions of dollars from thousands of people. And Bankman-Fried didn't, he didn't react. No, he really didn't, which probably he was prepared for, but kind of surprised me to have someone pointing at you and not react like that. But yeah, he kind of just kept his head down.

He was taking notes on his computer throughout and didn't react. Okay, so that was the opening argument from the prosecution. After the break, we're going to talk about how Sam Bankman-Fried's lawyers reacted and how they defended their client. Introducing Tim's new Infuser Energy Beverages, made with natural caffeine. They come in two refreshing flavors, blackberry yuzu and mango starfruit. Try them today, only at Tim's. At participating

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And then, finally, add Bacardi rum. Shake it together. And there you have it the perfect summer mix Bacardi do what moves you live passionately drink responsibly copyright 2024 Bacardi it's trade dress and the bat device are trademarks of Bacardi and Company Limited rum 40 alcohol by volume so after we got the prosecution's opening statement we got the defenses and where prosecutors wanted to paint a picture of bankman freed's intent the defense wanted to do the opposite right yeah and the lawyer who stood up to speak was Mark Cohen, who is part of Bankman-Fried's

defense team. And he's worked on some pretty high profile cases. He's pretty softly spoken. And I noticed that he began by being very deferential to the jury. And I also noticed he always called Bankman-Fried by his first name, Sam, I think to kind of maybe humanize him a little bit. And he described him as a math nerd who growing up, he didn't party, he didn't drink. And he painted this picture of him as this kid, this young guy who was in charge of a company that he said probably grew too quickly and things kind of got out of hand effectively. And he said that Sam Bankman Freed didn't defraud anyone and that he didn't intend to. And he said that he acted in good faith in trying to run the companies he founded, FTX and Alameda. Yeah, it was a very different

narrative that he painted. Bankman Freed's lawyers said that, you know, while crypto was rising, Bankman Freed began to worry about it crashing. And so Bankman Freed's lawyers said that, you know, while crypto was rising, Bankman Freed began to worry about it crashing. And so Bankman Freed told Caroline Ellison, who ran the trading firm that he founded, Alameda, to start protecting the company against a potential downside. And Bankman Freed's lawyer said that, you know, Ellison didn't do that. And then in 2022, we did get that crypto crash. Yeah. And they talked about how during that downturn, that crash, that Bankman Freed made the right decisions at the time. They talked a lot about retrospective decisions and that his actions during the collapse showed that

actually he was responsible. He wasn't who the government are making him out to be. And they cited a couple of examples. They said he didn't act like a CEO that would steal. For example, they argued that he was transparent with customers. When the government had said that FTX customers who deposited cash did so in an Alameda account, the defense argued that customers knew that. And they actually showed us a slide which showed the details that the customers would use to pay in the money. And the account was an Alameda account. So they argued that people knew about that. And they also talked about, you know,

when FTX collapsed in November last year, Bankman Free didn't run away. You know, he worked, they said, to get customers their money back. And that showed a very different image from the one that the government had painted. Yeah, I have to say, though, I found Cohen's argument to be a little bit more complicated. And in a lot of the financial crypto jargon that I find annoying in my day to day writing about it. And I actually made a list of, you know, terms he said that I wrote down. And I want to I want to quiz you, Rachel. What is margin alone? I have no idea. When I heard that, I was just looking at the margin in my notebook. And that's the only thing I could think of. Rachel, what's a market maker?

A market maker. A market maker sounds cool. Like it sounds like someone who's influencing, but I don't think that's what it is, like in their particular industry. Not quite. You're a little bit cold there. Last one. What is fiat? Right. So again, all I can think of is the car, the fiat car, but it did come up a lot of times in relation to accounts. So it's a type of account, but I have no idea. I'm going to give you that one. That is government issued currency, like the dollar or the euro. But we'll come back to these questions in the future and we'll be- Oh, you're going to test me again? Yes, absolutely. Okay, great, great. Yeah, very confusing for everyone in the courtroom, especially the jury. I certainly thought for the opening statement, the opening story,

it was quite a lot of detail at a high level for people to get their head around. Yeah. And the defense gave some explanation, limited explanation of these terms, but it's a lot to take all at once. What was your thought of what today actually tells us about what this trial is going to be like? I think simply that the government is calling Bankman Frefred a liar who stole money from his customers. And his defense team is saying that he never meant to steal. He never intended to steal. And he was a hard worker who created this incredible, successful business that grew too fast. And we've got a situation where the prosecution is establishing,

I would say, a simpler version of events, a more black and white version of events. And the defense is giving something a bit more nuanced. I may be suggesting to the jury, it's a bit more complicated than that. That's all for today, Thursday, October 5th. The trial of Crypto's Golden Boy is from The Journal, which is a co-production of Spotify and The Wall Street Journal. Thanks for listening. Check back here for trial updates.