Unchained - How Heated Sidebars During the SBF Trial Could Impact the Jury’s Decision - Ep. 556

Episode Date: October 13, 2023

The second week of Sam Bankman-Fried’s criminal trial is underway, bringing emotional testimony from SBF’s ex-girlfriend and former Alameda CEO Caroline Ellison, along with some surprising stories about alleged bribes to Chinese officials and discussion about reaching out to the Saudi Crown Prince for help. Ari Redbord, Global Head of Policy at TRM Labs, discusses why the question of who was actually in charge is so critical to the case, the defense’s strategy to discredit Caroline Ellison, and why sidebars in the courtroom can get so heated.  Listen to the episode on Apple Podcasts, Spotify, Overcast, Podcast Addict, Pocket Casts, Stitcher, Castbox, Google Podcasts, Amazon Music, or on your favorite podcast platform. Show highlights: Why Caroline Ellison is a critical witness on a "number of levels," according to Ari What a software developer at FTX revealed about whether SBF was directing trades Why a lawyer’s body language is something the jury looks out for  Why there have been so many sidebars in the trial and why they can sometimes get heated  The reason why the lawyers, particularly the defense team, have been so repetitive with their questions Considering the long prison sentence SBF is facing, why Ari "doesn't understand" SBF’s decision to push forward with the trial  Whether, after three days of testimonies, Ellison has come out as a credible witness for the jury Why the defense is facing an "uphill fight" and whether testimony from SBF would serve as a final Hail Mary for them Thank you to our sponsors! Crypto.com Hedera Popcorn Network Guest Ari Redbord, Global Head of Policy at TRM Labs. Previous appearances on Unchained:  Is TRM Labs Blocking Addresses From DeFi Protocols? Ari Redbord Says Yes The Legal and Regulatory Fallout From Terra’s Collapse: Who Will Pay? How Much Prison Time Is FTX’s Sam Bankman-Fried Facing? Links Previous coverage by Unchained on the trial of Sam Bankman-Fried: Sam Bankman-Fried Trial: Here's Everything That Happened So Far SBF Trial, Day 1: Possible Witnesses Include FTX Insiders, Big Names in Crypto, and SBF’s Family SBF Trial, Day 2: DOJ Says Sam Bankman-Fried ‘Lied’ While Defense Claims His Actions Were ‘Reasonable’ SBF Trial, Day 3: Why a True Believer in FTX Flipped Once He Learned One Fact SBF Trial, Day 4: SBF’s Lawyers Annoy Judge Kaplan, While Wang Reveals Alameda’s Special Privileges SBF Trial, Day 5: SBF's Defense Finally Found Its Legs, But Can It Counter Caroline Ellison? SBF Trial, Day 6: Caroline Ellison Recalls 'The Worst Week of My Life' SBF’s Lawyers Could Be Annoying the Judge. How Might That Impact the Trial? Did Sam Bankman-Fried Have Intent to Defraud FTX Investors? Here’s How Sam Bankman-Fried’s High-Stakes Trial Could Play Out SBF Trial: How Sam Bankman-Fried’s Lawyers Might Try and Win His Case The High-Stakes Trial of Sam Bankman-Fried Begins: What to Expect Go deeper into the trial:  In the SBF Case, Elite Corruption Is What’s Really on Trial Cooperating Witnesses in the SBF Trial May Get Little to No Prison Time Learn more about your ad choices. Visit megaphone.fm/adchoices

I sympathize with the defense here. This is an uphill fight to begin with. There are millions of pages of documents, but really, I mean, you have three really strong cooperators here who were in the inner circle, who knew what we're going on day to day and have been very, very credible. So I think the battle here was very, very difficult to begin with. And it remains that way still. Hi, everyone.

Welcome to Unchanged. You're no hype resource for all things crypto. I'm your host Laura Shin, author of The Cryptopians. I started covering crypto eight years ago and as a senior editor of Forbes was the first Mainstream meteor reporter to cover cryptocurrency full-time. This is the October 13th, 2023 episode of Unchained. Thinking of launching your own stablecoin, start with the open source stablecoin studio toolkit on Hedara. Start your journey at hadera.com slash unchained.

Shape tomorrow today. Vault Crafts by popcorn is your no-code DeFi Toolkit for, building automated, non-custodial yield strategies. Learn more on VaultCraft.io about how you can supercharge your crypto portfolio. With the crypto.com app, you can buy, trade, and spend crypto in one place. Download and get $25 with the code, Laura. Link in the description. Today's guest is Airy Redboard, Global Head of Policy at TRM Labs.

Welcome, Ari. Hey, Laura, thank you so much for having me. Great to be on the show. So, Ari and I were just discussing this before we started recording, and it's the fact that I have been spending all my days in the courtroom, and I've literally just run from there. And for the first time, probably ever in the history of the show, have not really written a script. So, Ari, I remember that you used to be a prosecutor. And unfortunately, I don't know the title because I did not have a chance to fill that in. So you are a former prosecutor, and I was curious for your takeaways on the SPF criminal trial. far. No, absolutely. And before we dig into this, I do want to comment on your day-to-day coverage, Laura, like as someone who is in D.C., not in New York every day, but is really trying to keep up with this trial, it's extraordinary to see what you've been doing. It is a masterclass on the sort of, you know, day-to-day reporting from a courtroom, which I think has been done

over the years and you are doing it extremely well. So it's really cool to talk to you. And honestly, you've been my source of news day-to-day as I've tried to follow this trial. So thank you for that. Okay, great. Well, thank you. I'm glad that it's working out because I am nearly killing myself to do it on certain days. I don't want to break it to you, but you're in week two of what is going to be like a week, many weeks long trial. I literally had that thought earlier today. I thought, wait, this is to go four more weeks. How am I going to keep going? However, the good news for me, in my opinion, is that the biggest witness so far just testified Caroline Ellison. And obviously, I'm sure probably most people at least in crypto would bet that SBF will testify. But until that moment, I think I can not have a day where I'm working from 930 a.m. until midnight.

So anyway, obviously, huge headline week. What are your takeaways about, well, we could start with this week in particular, but also, you know, the trial in general. Sure. Look, I think this week has been an extraordinary week in that the most important witness in the trial, unless the defendant in him, himself testifies, will have provided testimony. And Caroline is a critical witness on a number of levels. One, she is the government's cooperator, right, which comes with baggage, but it also comes with the fact that she was very, very close to the defendant and has intimate details about both the sort of financials that were happening, the financial issues that were happening in the company, but then also sort of the way the company was run, the way Bankman Freed operated. He had tremendous

trust in her. And I think a lot of that came out over the course of the last two days. So really, really extraordinary moment. And look, I mean, this is such an important witness that essentially both parties, the government and the defense, both raised this witness in their opening statements because the opening statements really sort of gave a roadmap of what the jury was to expect. And one of the things that the defense said is that you were going to hear from, you know, Caroline Ellison, who was the CEO of Almeda. And she was very much in control of that company, right? So the last two days, we saw a really a back and forth between how much control did she really have and what decisions were hers alone, but then what decisions

were really made in the background by the defendant. Yeah, and it's interesting, actually, because just this exact issue came up in the courtroom today, and by that I mean on Thursday. So basically, this afternoon, somebody named Christian Drapey was the witness right after Caroline. And he said that he was a software developer at Alameda. And there was like an interesting moment. And of course, I'm speaking just from memory, not from the transcript. So I might have to revise some of this later. But basically what happened was I think there was a moment when the prosecutor was asking kind of like who, like, you know, after Caroline Ellison and San Francisco were named co-CEOs, who did they report to?

And these kept getting objected to and sustained. And then finally there was like a little bit of a sidebar. And then if I remember correctly, the prosecutor was able to ask, oh, were there moments when you realize that like Sam was directing trades and he was able to talk about specific instances? Because even though he was a software developer, he said that he talked to traders every single day because they were sort of directing his work. So then he like gave instances where Sam was directing trades. He talked about Sam having access to internal systems, stuff like that. But it was just fascinating how initially the defense kept trying to block, like, who were they reporting to? It was like multiple questions and they just kept objecting.

Yeah, it's so critical. And I think something we've seen over the course of this trial is really a lot of these sidebars. And I think for folks who are not, I was an assistant U.S. attorney like the lawyers in the courtroom for the government for about 11 years. And those sidebars can get heated. But really what they're doing is saying, hey, you remember when we agreed to these ground rules in terms. of the kinds of questions that we're going to ask. And you're having that sort of back and forth up there. And that happened a lot in the last two days, particularly around Caroline's testimony. And one thing you're not allowed to do is continue to repeat question after question in a certain

area. And that was something, obviously, we were seeing the judge get upset about. But those sidebars are very, very important. I'd say for two reasons. One, because obviously you're basically fighting over legal issues, you know, at the bench. But there's something the jury sees as well. And the jury watches body language and the way that lawyers are behaving in the courtroom and interacting with each other in the court. Oftentimes, these types of conversations will happen outside of the jury's presence, but sidebars usually happen in front of the jury. And in my experience, I've gone back to talk to jurors after I've lost trials. And oftentimes they will talk about the body language of the lawyers and the way we're behaving in the courtroom. And I think it becomes important. Oh, that's interesting.

And wait, just to be clear, when you say they happen in front of the jury, does that mean they can hear the discussion or no it doesn't it's really so so but that's really when the jury's most interested and that's what you always hear when you talk to jurors that that's when they really want to know is what it's when they can't hear it right because normally you have and i don't know i have not been in court but normally you have a husher uh like a uh that's a noise machine essentially up at that bench that is making it impossible for jurors to hear but essentially they still see that you're arguing and when you're objecting it's you know it's not evidence but it's something that is in front of the jury they will be told not to actually take any of this into consideration, but we're all human beings and we take the way

we watch interaction into consideration to be sure. Okay, so quick question, because there have been so many sidebars. Is that a normal thing to happen, or is this like unusual? You know, it happens, it does happen a lot. Normally when a judge has made a ruling one way or another, and one side keeps still trying to get their questions in, and that's when the judge will say, all right, everybody, come to the bench. And it's almost like you're getting put in time out, you know, to some extent. But I will say it happens. It often happens frequently in a lengthy trial. I think what we've seen over the last few days is still pretty extraordinary. Oh, meaning that it indicates to you that it is kind of like more contentious between the two lawyers

than would be typical. The two or two legal teams. Exactly. Not just between the lawyers or even the government in the prosecution, but like not in the government and the defense. But look, there's a lot going on. There was a lot of pre-trial motions that the judge wants to make sure are kept to as the questions are asked. You want to make sure the questions are appropriate. So I would say that like this happens often, but it is happening particularly often in this case. Okay. Yeah, there was a really interesting sidebar yesterday, which was Wednesday, where basically the prosecutor sort of abruptly stopped her questioning of Caroline Ellison and then said, can we have a sidebar? And then when I read it later, she had objected to the fact that I guess Sam Pinkfried, she felt was sighing at some of the testimony or like scoffing or laughing.

And she said, you know, given the nature of Caroline and Sam's romantic relationship, which Caroline had talked about, you know, just feeling like he ignored her and she wanted more from the relationship and, you know, things like that, that it was affecting Caroline's testimony. and then the defense was going on about how, I guess, at some point, they had showed a photo of Sam where he was holding a deck of cards, but they didn't ask about it. It was, he was bringing, you know, pulling FDXT, I'm sure you know the type of photo. He was wearing a T-shirt, his hair was big, and I'm not sure why he was objecting to the fact that the photos showed a deck of cards, but I think the prosecutor said, I didn't ask any questions about that. So anyway, so yeah, it just feels like there's a lot of subtext.

I think you nailed it with that exact example, and that is a lot of what's going on. But what's interesting is, you know, if I'm a prosecutor, I'm immediately thinking, well, how do I get that into evidence, right? He is essentially his behavior in the courtroom. And there are ways you can do that. You can, because what you want to be able to do is ultimately argue it to the jury. Like the way he was in court, right, is the way he was with this person. you know, in in real life as this all happened. So I think that there's a lot of interesting stuff there.

Obviously, you can absolutely get it in if he testifies. You know, isn't it true you've been sitting here, you know, sighing and rolling your eyes at witnesses as they've testified? Yeah. That kind of thing. That's a way you get this in. But yeah. But so my point in all of this and where I can probably be most helpful here is there's so much going on,

you know, in that courtroom that you're not even thinking of. And one thing that's, I think one thing that's really, really important is everything the lawyers do on both sides is preparing for closing argument. Because closing argument is the opportunity where you can say, this is what you heard, right? This is what was said. But you can only argue those things. You can't argue things that didn't happen in the courtroom. So you need to make sure over the course of the next six weeks that anything that you want to ultimately argue to that jury of why your client is innocent or not guilty, rather, or what? why the defendant is guilty, has to come in.

So, you know, as an example, the lawyer for SBF's attorney, the defense attorney today was going through month by month. Did you meet with the prosecutors in December? Did you meet with them in January and February? And everyone thought this was really crazy. And it was objected to eventually when they got to 11 months or something. But what they want to be able to do ultimately at closing is say, look, this person met with the government every month for a year, at least, you know, all year. Okay. This person has a reason

to lie to you because they are trying to save their own skin. And not only did they meet with prosecutors, but during that time, they were, you know, working on your testimony, right? They want, she told you what they wanted her to say, right? Those are the types of things you're doing, but you have to have a basis to make those arguments. And even as crazy as it sounds, and I'm not sure it would have been my, the questions I would have asked, but that's what they are trying to do there. Okay, no wonder. So I'm going to ask you a little bit more about that, but first, we'll take a quick word from the sponsors who make this show possible. Looking to venture into the world of stablecoins, explore the open source stablecoin studio toolkit on Hedera, whether you're

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why are they doing this? So why are they doing it? Yeah. I mean, imagine if you're zoning out, right, how that jury is feeling. And I think that like whenever you're a lawyer on either side, especially in a relatively complex case, and, you know, the more and more I listen to the testimony here, the less and less complex I actually think it is. You know, it's there, And I think that's the role the government here to make this a very simple case. You know, hey, they took customer funds and they used them to pay off risky bets from Alameda in an unlimited type of way, right? I mean, at the end of the day, that's the argument that the government is going to make. And this was criminal and it was intentional.

You know, look, the defense is trying to do everything they can to be able to make the arguments I just sort of mentioned at closing. Hey, this person knew what she was doing. one thing that's been a real theme for the defense is that Bankman Freed was not around very often. And so obviously, Caroline Ellison was making decisions on her own when it came to Alameda. Well, you know, two things can be true. You know, Caroline could have been making some decisions on Alameda. Sam may have not been around, but he made the big decisions around how FDX customer funds were being used at the end of the day. But what they're doing here with all these repetitive questions is trying to set up the best closing they possibly can.

But you cannot do that and lose the jury, you know, along the way. And I think that that's the problem. The thing about the repetitive questions is that the information has already been presented. So it doesn't feel like it really has like another purpose. But related to that, I also just wanted to ask because I honestly was very confused. As far as I understand, these defense lawyers are extremely expensive. They're some of the best defense lawyers you can buy. And, you know, I'm not, hopefully they're not listening because I feel about saying this.

But they just have largely seemed so ineffectual and even unprepared. And I mean, the one day when they seemed a little bit more prepared was when they did the cross-examination of Gary Wong. But when they first started it, they just, they seemed to be floundering. It was, again, the repetitive question strategy. And then against Caroline Ellison today, like, Like, it really, I was just shocked when it ended because I thought that's all they're going to do because it just felt like nothing. There were a few things. I made a little video at lunch where I talked about some of the things that they managed to get on the record, like around, you know, their differences in like ambition or just, you know, I guess I can't even remember if my brain is so fried.

But the point is like, I could see that maybe they're just laying the groundwork, but since they didn't do much with what they asked, it just felt very, I don't know, I just couldn't see where they were going. Yeah, no, look, I don't know that I can speak too much to sort of the lawyers themselves. I can say this, that, you know, trials are hard. And, you know, I would say this case came to trial at unprecedented speed. I have never seen anything like it. Trials like this often take years to go to trial. And why do you think it went so quickly then?

No, I think it's a combination of, I think the court was pushing it, which is what a good court does, a good judge does, is make sure the parties are ready and they've got their stuff together. I think whenever a defendant is being held, so I think when he went to jail, that always makes things move more quickly. You know, a defendant wants to go to trial when they're sitting there in jail. When you're at your home, you know,

with under electronic monitoring and you have TV and computers and life, you don't care that much. So I think that was a huge piece of why it moved so quickly. But it's hard to be ready with multiple cooperators, millions of pages of documents. So I think that's a piece of it. That's not to sort of excuse anything. And the other pieces, look, I mean, I think different lawyers take a different approach.

You know, as a prosecutor, my strategy is always to get in and get out, to ask the questions, to try to make your points and then get out. I think the jury appreciates that. And also, I think ultimately you're making a better record when you do that. But, you know, we'll see. I think closing arguments to me are really a moment of truth where, you know, what are you ultimately able to argue at the end of the day? and I think we'll see where that goes.

One, just aside, and we've talked about this case, I want to say, actually, you know, an extradition. He was being held in the Bahamas and you and I talked about this case. And I think I said a couple things. One, I said that he will waive extradition, which he did. And I also said he would plead guilty, okay, which he didn't. And I have been wrong over and over about that point. To be honest with you, I don't understand, given the federal sentencing guidelines that he's looking at, essentially life in prison. I thought that he would plead guilty, accept responsibility, and try to cooperate in some way with the government to get a downward departure from those guidelines.

So it is possible, and this is just me now spitballing, that his lawyers advised that. And this is the defendant sort of pushing forward with a trial. I don't know the answer to that, but it's very, very possible. Okay. Yeah. I mean, maybe the poor defense is simply that thing about, I forget the saying, but like, since the facts aren't. on their side, they're sort of limited in what they can do. It's a hard case. And I think we're seeing very effective prosecutors who have a lot of evidence and frankly, great cooperators.

You know, it's interesting. I think if there's one takeaway from this week, I think the defense had really one job, and that is to discredit Caroline. A, make it feel like she could have committed this fraud alone, essentially, or at least in large part alone. and B, that she was totally non-credible because of her cooperation agreement, right? She was in the pocket of the government. She was going to testify like they wanted to.

But really what we saw was a very sympathetic witness who was very, very credible, who was clearly upset by the situation, who talked about the relief she felt when this was all over. That's a very sort of, I think, emotion a lot of people can relate to. And quite frankly, a relatively diminutive or like, you know, maybe weak person. who would not have been making this level of decisions alone. You know, you asked about that, you talked about her, not her confidence, her ambition. And what she said when she was asked, are you ambitious, is Sam wanted me to be more ambitious. And I thought that was incredibly, like, that kind of defined the relationship and exactly

what the prosecution is trying to, is trying to prove here. Yeah, yeah. Honestly, just from what you said, they didn't really get at her credibility too much. much, except there was one really interesting piece in the afternoon where they wanted to play clips from, well, actually, was the prosecution that wanted to play audio clips from the meeting that Caroline held on November 9th, the all-hands meeting for Alameda staff in which, you know, she revealed what had happened behind the scenes. And the defense, you know, went through a thing. This all was when the jury was out of the room. They went through, you know, some objections back

and forth and blah, blah, blah. Anyway, the judge allowed most of them, if not all of them. But then the defense said, well, we want to submit two of our own. And they only got one added. And it was one where Caroline was, somebody said to Caroline, oh, you know, I'm sorry for how you must feel right now. Thank you so much for, you know, we appreciate that you are doing this for us. And she said, oh, like, no, you know, honestly it was fun. And she was like laughing a little bit. But just the way she sounded, she just sounded so young and like, I'm leaning toward the word immature, but that's not it. It's because that sounds, it just gives a connotation. She sounded naive. She sounded naive and innocent and sort of like nervous and, yeah, just like using an inappropriate word there.

And maybe like letting out some nervous laughter or something. But the point is that that was the only clip that they ended up getting played. And then hilariously, after they played it, they didn't ask the witness who at that point was Christian Drapey. They didn't, the Alameda traitor, they didn't ask him anything about it. And I was like, okay. And so I thought maybe it's just to show she seemed lighthearted at one moment. Yeah, really, really interesting. But I think I, I think that naive sort of persona is very much what the prosecution is getting at here. And it's, it's unique to have a witness that, a cooperating witness that really doesn't feel like a cooperator. You know, It really feels like someone who was there.

You know, it's interesting. There was this testimony yesterday about the bribe to Chinese officials to unfreeze, you know, billions and assets. Yeah. Yeah. One billion dollars. One billion dollars. And it's interesting. So that would be a very highly litigated line of questioning by the government because you are not allowed to bring in external evidence to show propensity to commit crimes, right?

In other words, because he did this, bribe Chinese officials. he must have misused or misappropriated user funds. You're not allowed to do that. But what the government argued is that they were introducing that evidence to show Caroline's close relationship, that she was a trusted confid that he would have bring her into something this sensitive. So it's interesting. The government sort of gets that double whammy, right?

They get in some dirty Sam up with this story. And yet they also show how close they were. And I think that is the type of really impact. evidence, even just to show the closeness of the relationship, right? I mean, this is not a woman who was out. She was in the inner circle of the inner circle. And it just makes her so credible. Yeah. And then the hilarious thing that they showed afterward was her list where she talked about, I forget some like problematic things or whatever. And then she wrote, negative 150 million for the thing. Yeah. Yeah. And they asked her, why did you first?

She said that way, and she was like, you know, Saman said we shouldn't write down illegal things, and I didn't want to write. So she called it. But, you know, Laura, like that was so funny. That immediately jumped out to me, too, in the transcript. But how credible is that? It's so credible. Like, of course that's what happened, right?

You can't make it up. And I think that is sort of how her testimony generally came out. Yeah. Well, so at this point, I'm so curious. Like, well, so how well do you think the defense is do? doing what you said that they're two tasks or their main tax are. Do you feel like they're making headway or? I don't. And again, like I'm not in the courtroom every day like you are, but sort of what I've been reading, I certainly don't. But I, you know, look, I sympathize with the defense here,

right? This has been, this is an uphill fight to begin with. There are millions of pages of documents, but really, I mean, you have three really strong cooperators here who are in the inner circle, who knew what we're going on day to day and have been very, very credible. So I, I, I, I think, think the battle here was very, very difficult to begin with. And it's, it remains that, that way in the still, I'm so sorry to say this for you, early days of, of this trial. Yeah. Well, so at this point then, so I know you were in AUSA, but if you were going to say that the defense has, you know, one task from here on out, like what would you think their main strategy should be to try to turn things around? Yeah, look, their strategy,

from day one and really the only strategy they could have taken is this is Sam is an idiot he is unorganized he is he's disorganized he's sloppy he's careless this is just Sam being Sam this is not someone with criminal intent that's the only thing they could have done and really there's only one way to kind of establish that and I don't know if you just roll the dice and have him testify I mean look conventional wisdom is you never have your client testify I would probably be counseling him not to testify. But the reality is that, you know, sometimes you throw a Hail Mary and maybe, let's see how the next two weeks go, but that might be the Hail Mary that they need to throw to see if there's any way that he could charm or really sort of be a sympathetic figure for the jury.

I think it's unlikely, but we'll see ultimately that's up to him. You know, one thing for folks to know as we approach that moment, whether or not it happens, is there's going to be a lot of discussion in court. The judge himself will actually, at my mind. the defendant, explain to him what his constitutional rights are, that he has a right not to testify, and we'll go through all that, and you have to waive those rights. So a lot happens, and it'll be a really interesting moment. But maybe that's the hell Mary they need to throw at this point. Well, I mean, you know, I know that you obviously work in crypto and everything. So I was shocked that you think that they probably won't, that he probably won't testify because he has spoken

to five million different people. You really think, I bet 90% he probably is going to testify. And to be clear, Laura, it's not that I think he won't. It's that I think he shouldn't. Okay. Yeah, no, I again, like to your point, you know, his inclination immediately, which was a terrible idea. And we all knew it at the time was to go out and speak publicly. Everything he said and every one of those interviews will be used in cross-examination of him on the witness stand. Isn't it true, you said this? Isn't it true you said that? And a lot of what he said was, quite frankly, like, yes, this happened. I was in charge and I am very sorry. You know, and that's going to, that,

that will all come out on cross-examination. So no, I mean, look, there is no defense lawyer out there who ever wants their client to testify in a criminal trial. I mean, maybe there's, there's probably some exceptions we can think of, but it's really, really rare. And I think, I think he'll do himself harm. But on the flip side, like, I think to your point, yeah, he's probably likely to testify, given ego and, and quite frankly, maybe where the trial is at that point. right okay well erie thank you so much for giving us your thoughts on this really yeah just mind-blowing week um and yeah it's always a pleasure no thank you so much for having me and now now folks know like what are just random conversations are like thank you yes yes at least when we're talking

about caroline and sb yeah love it don't forget next up is the weekly news recap today presented by veteran crypto reporter and Columbia University Night Badget Fellow Michael Del Castillo. Stick around for this week in crypto after this short break. Join over 80 million people using crypto.com, one of the easiest places to buy, trade, and spend over 250 cryptocurrencies. Spend your crypto anywhere using the crypto.com visa card. Get up to 5% cash back instantly, plus 100% rebates for your Netflix and Spotify subscriptions, and zero annual fees. Download the crypto.com app now and get $25 with the code Laura.

Link in the description. Hello and welcome to this week's Crypto Roundup from FtX's chaotic bankruptcy and a $400 million heist to Voyager's legal woes and a $1.65 billion settlement. Plus, Binance joins forces with Israeli authorities to freeze Hamas accounts. I'm Michael Del Castillo, a Knight Badget Fellow at Columbia University, tuning in from York's Upper West Side, where you may hear the sounds of a saxophonist in the background today, celebrating the beginning of fall at a block party, five floors below. This is your weekly crypto recap. After declaring bankruptcy last year, the now-shuttered cryptocurrency exchange FTX was hit by a

heist that saw more than $400 million siphoned off its wallets. Citing potentially lax security measures at FTX, a Wired report Monday described staffers scrambling to secure over $1 billion in assets, moving some of them to cold storage wallet provided by Bitco, and in one case, the personal wallet of a consultant hired to help keep order in the aftermath of the collapse. In a classic glass quarterful scenario, an unnamed former FTX staffer described the, quote, very, very crazy night to wire. quote, we worked on it, we got it done, and we saved a massive amount of customers' money. But there was also between $7 billion and $9 billion that also went missing.

Adding to the turmoil, FTX co-founder Gary Wang testified the exchange fabricated the publicly advertised numbers in its ad hoc so-called insurance fund called the Secure Asset Fund for Users, or Sapphu. In court, a prosecutor asked Wang if the real number was, quote, higher or lower than the fake number. Wang said lower. In related news, after FTX competitor Binance last November reportedly topped up its own Seifu account with $1 billion, the exchange rebranded its Binance custody software to Sefu, C-E-F-F-U, a play on the Secure Asset Fund for Users acronym. In September, the SSC reportedly looked into the ReefFU. rebranding of what CoinDesk called the, quote, supposedly separate, quote, custodian to try to better understand exactly if and how separate it is. Back in FTX land, the exchange's defunct trading arm

alimator research is now also facing its own security dubs, a whistleblower who claims to be a former engineer at the company alleged on social media that the firm lost $190 million to inadequate security measures. The U.S. Commodity Futures Trading Commission. Commission and the Federal Trade Commission have filed lawsuits against Stephen Erlich, the former CEO of Collapsed Cryptolending Platform Voyager Digital. Five months after Bloomberg reported Voyager had about $1.8 billion in customer claims, the CFTC accused Erlich and Voyager of, quote, fraud and registration failures, end quote, with plans to seek restitution and permanent trading bans. Samuel Levine, the director of the FTC's Bureau of Consumer Protection,

said in a statement, quote, this action reminds companies and individuals don't play fast and loose with claims about FDIC insurance. The FTC has also reached a settlement with Voyager, imposing a $1.6 billion fee and permanently banning the company from handling consumer assets. The FTC's action centers on false claims that Voyager accounts were FDIC insured.

Ehrlich allegedly siphoned off millions to his own. wife, adding yet another layer to the complex case. In a week marked by the escalating conflict between Israel and Palestine, Israeli authorities joined forces with crypto exchange Binance to freeze cryptocurrency accounts linked to the militant group Hamas, according to a report by Israeli tech and startup news site, Kalkastek. Following recent attacks that resulted in over 1,000 Israeli casualties and another 1,000 Palestinian casualties in an Israeli retaliation, the accounts were used to raise funds for the group, according to the report. Quote, with the outbreak of the conflict, Hamas initiated a fundraising campaign on various social networks, end quote.

That's according to Israeli police speaking to the news site. Binance emphasized its commitment to, quote, combat finance terrorism, end quote, and noted that it had been working, quote, around the clock to support these efforts. In response to the war, crypto firms, including fireblocks and market across, launched crypto aid Israel to support affected citizens. However, the clampdown on Hamas crypto activities is part of a broader focus on how the group and others used digital assets. Crypto analytics firm TRM reported that Hamas had received nearly $800,000 in total through crypto, and Israeli police's La Javre 433 is collaborating with intelligence agencies to shut down such channels. Showing the

complexity of cracking down on crypto donations, Ukraine has reportedly raised a whopping $225 million in cryptocurrency from donors supporting its fight against Russia. Binance's Industry Recovery Initiative launched to aid crypto projects facing liquidity crises has deployed less than $30 million of what was once said to be a $1 billion fund, according to Bloomberg. While 18 companies reportedly participated only Aptos Labs, which emerged from the ruins of Facebook's effort to build a global currency, fully invested their pledged funds. Binance CEO Chang Peng

Zao had initially touted the fund as a transparent effort to support the industry. However, details about the 14 projects financed by the IRA remain undisclosed. Quote, we didn't identify many projects who would meet our criteria, end quote, according to Dana Howe Finance Labs Business Strategy Lead. The exchange has since moved 985, million dollars back to its corporate treasury, according to the report, signaling a shift in strategy. And Binance spokesperson told Bloomberg, quote, we will keep funds available as needed, but they will sit in our corporate wallets. As the UK tightens its grip on crypto marketing, Binance faces yet another setback. Its promotional partner, rather ostentatiously named Rebuilding Society,

has been blocked by UK regulators. The clampdown comes as new stringent, stringent, marketing rules take effect, compelling crypto exchanges to adapt swiftly. Binance, known for its aggressive marketing strategies, now finds itself navigating a regulatory maze. Meanwhile, OKX is also making adjustments to comply with the UK's evolving crypto marketing landscape. Both exchanges appear keen to ally their operations with the new regulations, to avoid penalties and, of course, maintain valuable market access. This week, the legal battle between coin base and the U.S. Securities and Exchange Commission intensified as the North American Securities Administrators Association, or NASA, filed an amicus brief supporting the SEC.

The NASA argued that digital assets should not be treated as, quote, somehow special, and quote, and that Coinbase should be subject to the same regulatory obligations as other market participants. Quote, the SEC case against Coinbase isn't extraordinary, the Association wrote, referencing to the Howie Test, a legal framework often used by the SEC to classify transactions as investment contracts. On social media, legal experts weighed in on the case. Former FDIC attorney turned Capitol Hill consultant Todd Phillips argued that the SEC strategy, quote, doesn't make sense. Jake Chivinsky, the chief policy officer of advocacy group

blockchain association, expressed confidence that Coinbase would win, writing that there are, quote, the far better arguments, end quote, supporting the cryptocurrency exchange presented in amicus briefs by various crypto organizations. Chivinsky emphasized that the SEC's current stance, quote, fails as a matter of text, history, precedent, and common sense, end quote. Something called BitVM, as in virtual machine, emerged as a high, topic in the Bitcoin community on Monday. Software developer Robin Linus of ZeroSink published a white paper on BitVM describing what he says is a way to make the current version of Bitcoin as programmable as Ethereum. Similar to how Ordinals was implemented last year to enable NFTs in the

Bitcoin blockchain, BitMV supposedly would not require any hard to implement controversial upgrades to Bitcoin's core database. Not since Uniswapeswap's 2000. 2020 white paper on automated market makers has a white paper caused this much stir. After initially offering a critical perspective on the white paper, Adam Back, the cryptographer and CEO of Montreal-based Bitcoin development firm Blockstream conceded he'd misunderstood the paper. He's not alone. Bob Butlerly, the CEO of Bitcoin NFT Marketplace bionic market, cautioned that, quote, BitVM is very, very complex to understand and understand.

implement." And quote, Mnib Ali, the co-creator of Bitcoin Layer 2 solution and potential BitVM competitor Stacks, took issue with calling the technology described in the paper as a virtual machine, writing on social media, this is very different from a full VM, like on Ethereum or Solano. Speaking of Bitcoin, network transactions on the cryptocurrency market currently valued at $561 billion have sharply declined to around 280,000. weekly, a level not seen since February following the peak around ordinals in September. The Polygon-based stablecoin, Real U.S.D, going underneath the ticker USDR, has lost its

peg to the U.S. dollar, plummeting to as low as 51 cents. Issued by Los Angeles-based tangible Dow, the stable coin that was backed by illiquid real estate holdings, but relied on another stable coin called Dai to achieve liquidity ran out of token supplies, forcing it to tap into $6.2 million. It says it had in a so-called insurance fund. The native tangible token, TNGBL, which was offered as a reward to users who locked up their assets to help back the stable coin, also saw a deep drop further destabilizing the treasury. The stable coin's price at one end rebounded to 68 cents, but then promptly fell back to 53 cents with a market capitalization of about $40.9 million. The collapse may have been triggered by a rush of redemptions, eroding $11.8 million

of dye that was collateral for the stable coin. Adding to the chaos, a user on Ocean Swap Swap $131,350 W-W USDR, that's wrapped USDR, for less than 0.0.0.000. Let me make sure I got all those zeros right. Yes, in U.S. D.C. paying a gas fee of 0.0012 BNB or about 25 cents. Poor, poor soul. In a twist that could only happen in the crypto world, American supermarket chain, Trader Joe's, is suing a decentralized exchange that goes by the name Trader Joe, singular. The grocery giant alleges that the crypto platform intentionally mimicked its name. The Dex's co-founder, Chengchay Lu, a Chinese citizen residing in Singapore, is named in the lawsuit. Lawyers for the Trader Joe's supermarket argue that the crypto platform created a narrative around a fictional Trader Joe closely associating it with the supermarket's brand.

The Dex's logo even features a character donning a red cap, the high-profile primary color of the grocery chain. So next time you're shopping for avocados or altcoins, make sure you know which Trader Joe's you're dealing with. And that's all. Thanks so much for joining us today. Stay tuned to Unchained for unparallel coverage of the Sam Bankman-Fried criminal trial. Laura is in the courtroom delivering firsthand observations and in-depth analysis of this pivotal case. With daily podcasts, videos, and written updates, Unchained is your go-to source for all developments that could redefine. the crypto landscape. Visit UnchainedCripto.com and never miss an update. Unchained is produced by Laura Shin with help from Kevin Fuchs, Matt Pilchard,

Juan Aronovich, Megan Gavish, Shawshank, and Margaret Curia. This weekly recap was written by Juan O'Oronovich and edited by myself, Michael Del Castillo. Thanks so much for listening and I'm looking forward to speaking to you next week. Have a good weekend. Unchained is now a part of the Coin Desk Podcast Network. For the latest in digital assets, check out markets daily seven days a week with new host, Noel Acheson. Follow the Coindesk podcast network for some of the best shows in crypto.