Unchained - SBF Trial: How Sam Bankman-Fried’s Lawyers Might Try and Win His Case - Ep. 551

Episode Date: October 3, 2023

The high-stakes trial of Sam Bankman-Fried is set to begin on October 3, and the FTX founder and former CEO will have to answer for his role in the cryptocurrency exchange’s downfall, which led to billions in losses. Both the prosecution and defense are currently preparing for what is set to be a significant milestone for the crypto industry. Kayvan Sadeghi, partner at Jenner & Block and Sam Enzer, partner at Cahill Gordon & Reindel, discuss the differences between a civil and criminal trial, what the jury selection process might look like, and what arguments the prosecution and defense might use to support their cases.  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: The difference between a civil and criminal trial and why it's difficult for the defense to prepare while Sam Bankman-Fried is in jail Whether SBF was offered a plea deal and if so, why he didn't take it What the process of vetting jurors looks like and what both sides are looking for What a pre-opening jury charge is and why Judge Lewis A. Kaplan might choose to use it The importance of intent when it comes to SBF’s charges The pros and cons of the defense using the argument that the FTX founder was receiving poor legal advice What charges SBF is facing and whether the defense or prosecution has the upper hand How the opening statements of both the prosecution and the defense might play out Whether SBF will be put on the stand and why that could be a "dangerous" move, according to Sam How the defense could respond to testimony from key witnesses like Caroline Ellison or Gary Wang How Judge Kaplan being a "tough sentencer" could impact SBF’s jail sentence, according to Sam Thank you to our sponsors! Crypto.com LayerZero Popcorn Network Guests: Kayvan Sadeghi, partner and co-chair of Fintech & Crypto Assets at Jenner & Block Previous appearance on Unchained: Why the SEC vs. Ripple Order Is Now About 2 Things: Coinbase and Congress Samson Enzer, partner at Cahill Gordon & Reindel. Links Previous coverage from Unchained on Sam Bankman-Fried and FTX: Here’s How Sam Bankman-Fried’s High-Stakes Trial Could Play Out Why FTX Might Try to Claw Back Funds From Retail Customers How Much Prison Time Is FTX’s Sam Bankman-Fried Facing?  Why the Legal Process for FTX and Sam Bankman-Fried Could Take Years The Chopping Block: SBF Wants to Win in the Court of Public Opinion. Will He? Jesse Powell and Kevin Zhou on How FTX and Alameda Lost $10 Billion Sam Bankman-Fried on How to Prevent the Next Terra and 3AC Details of the trial: Unchained: FTX: The Exchange That Brought Down the Industry CoinDesk:  Here's the Sam Bankman-Fried Trial Schedule The SBF Trial: How Did We Get Here? Here’s How FTX Founder Sam Bankman-Fried’s Trial May Play Out Forbes: Sam Bankman-Fried Could Face 'Very Long Sentence,' Judge Says Before Denying Release SBF’s defense team: Unchained: Sam-Bankman-Fried Files New Request for Temporary Release Before Trial CoinDesk:  U.S. Department of Justice Opposes Sam Bankman-Fried's Latest Move for 'Temporary Release' Key witnesses: Unchained: SBF’s Expert Witnesses Barred From Testifying at Trial Reuters: Who is Caroline Ellison, a key witness set to testify against Sam Bankman-Fried? NYT: Prosecutors Detail Evidence Against Sam Bankman-Fried - The New York Times CoinDesk:  All of Sam Bankman-Fried's Proposed Expert Witnesses Should Be Barred From Testifying: DOJ Judge Blocks Sam Bankman-Fried's Proposed Witnesses From Testifying Business Insider: Sam Bankman-Fried is being sent to jail after a judge revoked his bail over alleged witness tampering Jury selection: CoinDesk: Sam Bankman-Fried Can Ask DOJ Witnesses About Drug Use Cointelegraph: Sam Bankman-Fried’s political donations can be surfaced in trial, rules judge Learn more about your ad choices. Visit megaphone.fm/adchoices

It's very dangerous to call the defendant. However, you may be in a situation where the government puts their case on and you are going to lose. There is no way you're winning. Your only shot is a Hail Mary, okay, let's put them on. The other side of the coin is it's very powerful when a defendant testifies. It makes it much harder for the jury to convict. They're not dealing with characterizations of a person anymore. They're dealing with that person.

They have heard the person speak intimately in a courtroom. And even in cases I've had where a defendant testified, even when the jury ends up convicting, it often takes them longer to get there because it's a harder decision when a human being testifies to them. Starting on Tuesday, October 3rd, the day this episode airs, the world will be watching the criminal trial of the United States versus Sam Binkman-Fried. In this episode, my guests Kvon Sadegh and Samson-Enzer unpack what it is we're likely to see in the trial, starting with what kinds of potential jurors it is that both,

the prosecution and the defense will want to deselect from the jury poll this week. Why it's even gotten to the point of a criminal trial given that three co-conspirators have already pleaded guilty. What the core of the trial centers around? And why it is, they think, the fact that it involves crypto won't matter. Plus, they explore the effectiveness of one potential defense from Bankman-Fried's side, the so-called advice of counsel defense that says that FDX's own lawyers approved of the company's actions. And finally, they raise the question that everyone will be looking for. Will Sam testify?

Hi, everyone. Welcome to Unchained, your 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 Main Tree Meteorporter to cover cryptocurrency full-time. This is the October 3rd, 2023 episode of Unchained. Buy, trade, and spend crypto on the Crypto.com app. New users can enjoy zero credit card fees on crypto purchases in the first seven days.

Download the crypto.com app and get $25 with the code Laura. Link in the description. VaultCraft 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. The game has changed. The Google Cloud Oracle built for layer zero is now securing every layer zero. message by default. Their custom end-to-end solution sets itself up to bring its world-class security to Web3 and establish itself as the HTTPS within Layer Zero messaging.

Visit Layer Zero.network to learn more. Today's topic is the trial for Sam Vingfenfried. Here to discuss are Kvon Sadegh, partner and co-chair of FinTech and crypto assets at Jenner and Block, and Samson Enzer, partner at Cahill, Gordon, and Rindell. Welcome Kvon and Sam. Great to be back with you, Laura. Likewise. Thanks for having us on. So, on the day this episode airs is the first day of the criminal trial for the United States against Sam Bankman-Fried, the former CEO of FTX. Before we dive into the details of this trial, why don't we just have you each briefly describe how your background is relevant to this case? Kvon, would you like to start?

Sure. So I've been a litigator in New York for the last little over 20 years now, I guess, and in the blockchain space since late 2016. have been following all sorts of litigation enforcement actions in the space, including things related to the FDX situation, of course. I also know when things go criminal to open people like my friend Sam here, who have more direct experience. I'll turn it over to him to discuss his background. Sure. Thank you, Kavon. I used to be a federal prosecutor in the Southern District of New York in the Securities and Commodities Fraud Unit, which is the unit that is prosecuting Sam Bankman-Fried. When I was there, I did their first crypto securities fraud

cases. So what you're seeing in this case is sort of an evolution of some of the cases that I worked on. The prosecutors in this case are folks that used to be my colleagues. I know them well, both from when I was a prosecutor and now as a defense lawyer at Cahill. I tried a case in front of Judge Kaplan, who is the judge in the case. I know him well, and I've had a case in front of him as a defense lawyer. And the defense lawyers are folks that I'm friends with from both sides. I worked with them with Chris Everdale when we were prosecutors together. And now on the defense side, he and I have worked together on this side as well. All right. So to begin our discussion, why don't we first explain how this trial is different from, say, the SEC's case against Ripple, which took years

to even get a judgment that is now being appealed. So how is this trial against SBF, you know, even able to start less than a year after FDX collapsed? Sure. I can jump in for what a lot of people in the industry have been looking at are things like the SEC enforcement action against Ripple, Coinbase, other things like that, which are civil proceedings. And those tend to be preceded by years of investigation, followed by once a case starts, you know, months, if not years of discovery where parties are exchanging all sorts of documents, taking depositions, there's multiple rounds of briefing. And we end up with something like a decision on summary judgment, as we saw in Ripple before you ever get to a trial that was tried. That is a very different process than the criminal

process, which involves a lot less discovery up front. You end up exchanging a lot less information before trial, and it's a much more accelerated time frame. I think for talking about exactly how those mechanics work, maybe we can kick to Sam to discuss a little bit about the criminal process. Yeah, for sure. I think in a criminal case is very common to get from indictment to trial within roughly a year, even in a complicated case. This case is unusual in that the prosecutors investigated the crime very, very quickly. You know, it was November of 2022 that I think the market and the public started to see signs that FTX was cracking. It was not long after that that there was an indictment. So they were speedy in the investigation. Judge Kaplan is a no-nonsense judge who does not like to move

a trial date. So he's somebody who pushes a case to trial if that's where it's headed. And so that's why we are here. And you'll, in the criminal context, as Kavana mentioned, you know, in a civil case, you will get to question under oath that is depose the other side's witnesses. So there are no surprises at a trial, not so in a criminal trial. The defense does not have the opportunity to, if the witnesses for the government don't want to be interviewed by them, they won't be. They don't have the right to question them if those witnesses don't want to be questioned. They may not even know who the witnesses are. They may learn that for the first time very shortly before the trial.

If you've seen the movie, My Cousin Vinnie, it's actually. pretty good summary of how the criminal process goes. You're there and you're hearing the testimony for the first time. You have to really be live on your feet to be able to deal with it. And that's something that I think surprises a lot of people who aren't familiar with the system because I think the natural instinct is, you know, civil cases are about money. Criminal cases are about your freedom. And you would think as the defendant, when your freedom's on the line, you'd have more rights to information that you would have more ability to, you know, mount your defense and have everything that you would need to do so. But in fact, it sort of works the opposite way that you have

less information going into the trial. You have less rights to understand what the prosecutors are going to do than you would to understand what the SEC is going to do when they're bringing a case just for money damages. I think another thing to think about, and this has played out in some of the briefing ahead of trial. In the Ripple case, the defendants, the company and the executives who were named in the suit, are not in jail. So they can run their business. They can live their lives. They can meet with their lawyers in a conference room to prepare. Sam Bankman-Fried has been repeated. asking the judge to release him on bail because he is literally in jail right now awaiting trial. He was out on bail originally. He did things that caused the judge to detain him. And now he's sitting

in a jail. What that means is his lawyers do not have 24-7 access to him. He may not have full access to computers or things to do the stuff he needs to do to prepare. I can tell you on the defense side, I've had clients in jail when I've had to defend them. It is extremely difficult to confer with the client and prepare for court when you have limited, limited access to them because they're in jail. Yeah, one other thing that I wanted to ask is why this even went to trial at all, considering that three of SBF's own callings will be testifying against him and have already pleaded guilty. So I don't really know. I'm not a lawyer, but in my head, it's like when you have that kind of testimony against you, you know, from witnesses that were directly there,

Does that mean that a plea deal wasn't even on the table, or do you think Sam declined such an offer? Or, you know, what happened there? I am sure that if he had wanted to plead guilty, I doubt very much that the government would have been interested in letting him cooperate because he is, so to speak, the king. When the government lets somebody cooperate, that is, plead guilty and testify against others to get a reduction or leniency at sentencing, typically the government wants to get somebody in the middle or the bottom. and cooperate them up against somebody higher up in the food chain of a crime. I don't think there's anybody above SBF. We could have a discussion about whether he maybe knows things about others who would be peers of his in the industry, but I doubt the government was interested in his cooperation.

Would they have let him plead guilty just to have some reduction in sentence exposure for the certainty of a conviction? They probably would have, but I expect they would have wanted a very stiff plea. And I think SBF, as some defendants do, they take the position. I didn't do anything wrong. I didn't act with intent to defraud. And when intent is the key issue, what was in somebody's between somebody's ears when they were doing something. It's very often that that gets tried.

White-collar criminal cases get tried a lot. And I think people, it is important. In a white-collar criminal case, when you're talking about fraud, very often, 97% of the facts are not going to be in dispute. In other words, the facts of did people deposit money? or funds or digital assets on FDX, not in dispute. What did the terms of you say, not in dispute? A lot of the activity is not in dispute. The question is, what was Sam thinking when he did certain things?

Was he acting with the intent to deceive people and take their money? Or were other people doing that? And he was just blissfully unaware. And so what you're saying is, like it really could be either that the government didn't offer the plea deal because they wanted to use the other witnesses to get him or that Sam wanted to take that gamble since, you know, it would be harder to prove what his intent was. So you're saying it really could be either. It could be either, but I would expect knowing the, I think if Sam wanted to plead and was willing to take a stiff terms, he probably could have.

I think that he drives the buck. The government decides whether you get charged. It's really up to the defendant to decide whether they go to trial. I don't expect they were going to be, as you say, it's a stiff plea. would have been available, if anything. I mean, there was going to be no light sentence on the back of a plea here. So I think Sam was looking at any plea would have probably been a long time behind bars. And so at that point, maybe you decide to take your chances in his shoes. Right. Because of the sheer amount of money and the number of charges. Yeah.

Okay. So the main task at the start of the trial will be to choose the jurors. What do you think each side will be looking for when it comes to prospective jurors? So we've got a, you know, a little bit of a hint from the voir dire questions that each side has put forward. You know, I think that's the name for the process for vetting the jurors. Exactly. Maybe it makes sense to start with sort of how that process will unfold. So the trial will start with the selection of jurors. And it's very different in a civil case, as we're dealing with here, or then in the criminal case. So civil case, the lawyers get to ask questions directly. the jurors, particularly in state court, and it's a very freewheeling process. In a federal criminal

case like this, the questions are handled by the judge, and both the prosecution and the defense have submitted proposed questions to the court that will help guide what the court asks of the jurors. And a lot of it is pretty typical stuff that both sides somewhat agree on. You want to know if people have any connection to any of the parties in the case, any of the lawyers in the case, if they have certain direct background and exposure to FDX or things like that. I think where some of the differences lie is whether people have broader exposure to crypto, you know, the crypto industry generally, if they have views on any of that, or even the financial markets is one of the areas that parties may be touching. And then once we move past

that, the defense was trying to, you're asking the judge to get into areas that I don't expect he will, but looking for any exposure to her experience with people with ADHD, any things along those lines that you can tell are sort of teeing up some of their defenses. So I think the defense will be looking for people who will be more sympathetic to some of those additional factors where, as I imagine, the prosecution will be looking for people who are probably generally skeptical of crypto overall and avoiding any of those sort of sideshows. I would put it in three buckets. I think the government and the defense will think about the types of jurors into three

buckets. One bucket are people who are sort of the quintessential citizen, common sense oriented. they work a job, they can convict. Those are the people the government likes. So somebody who holds a job, somebody who is a boss, somebody who's a mid-level manager, so they are committed to society. They have to make decisions. They sometimes have to make decisions on incomplete information. That's the type of person the government would want. Then you've got people who are extremely technical who want proof in mathematical certainty. Those are folks that the defense would like and that the government might not like. And then in the third category is another group that the defense would like. And those who are, those are folks who are more emotional and not necessarily going to be driven by the sort of inferences the government will put before them. So, for example, the government likes to strike social workers, very afraid of having a social worker on there who might sympathize with a young defendant and say, you know, maybe, maybe a mistake was made here. I'm not sure beyond a reasonable doubt that this person should go

to jail. No, wait, just to go back to people who are either familiar with crypto or financial services. It wasn't clear to me. So it seemed like you were saying that, you know, the government would seek people who were skeptical of crypto. But if you're, if you just are knowledgeable, then is that, it seems like that would be better than for the prosecution rather than for the defense. Am I right in thinking that or? It's hard to read the Tileys of exactly how that one will cut. You know, one of the defenses that that we can see Sam Bankerfrey would like to put forward and that the prosecution is opposing is an idea of sort of blame the regulators, blame the uncertainty in the industry, all of those sort of things to suggest that this was, you know, Wild West, it wasn't

clear what the rules of the road were, and therefore, you know, that should absolve him of some responsibility. And, you know, I think that's something the prosecution understandably doesn't want to get into, and the judge has indicated, you know, there's going to be a pretty tight leash on anything like that, I think. But people who are very steeped in the crypto industry may have more of those views, they may be, you know, they may think that the uncertainty and the government's approach is partially to blame for what's happened, things like that. And so anybody who's, you know, so close that they may have some of those views may not be an ideal juror for the prosecution. But somebody who's lost money or knows people who lost money in some of these scams may be,

you know, maybe more likely to be a good juror for the prosecution. So it's hard to see exactly how those things will cut. I think it's important to note also. We call it jurors. We call it jury selection, but it's actually a misnomer. The right name for it should be jury deselection. You don't pick your jurors. You get a pool of people and you have a certain number of strikes. And so really what you're doing is picking the worst apples and deselecting them and you're stuck with what you're left with. And so it's really, I think when trial lawyers do jury selection in a criminal case, they think about who are the people I have to get rid of? Who can I just who can I not have on the jury? Government does not want the social worker on the jury. The government

does not want, they don't like lawyers on the jury because they fear that a lawyer might just take over, creates unpredictability. Another sort of advantage for the defense is that the government has to get 12 jurors unanimous to prevail. If the jury is not unanimous, that's a hung jury and it's a mistrial, which basically is a victory for the defense. And if the jury unanimously wants to acquit, that's a victory for the defense. So it's the jury, the jury, the government needs to be able to get a group of people who can agree. Maybe somebody leads them and the rest of the people can go along with it, but they have to be able to reach consensus.

That's important as well. Well, yeah, this is definitely a pretty complicated chess game. It sounds like so one other thing that will happen or might happen after the jury deselection is that Judge Kaplan, Judge Lewis Kaplan, who is the judge in this case, might give a pre-opening jury charge, explain what that is and why it is that. he might give this or why he might not? Sure. So it is common practice before the commencement of the body of the trial, which is the opening statements of the lawyers, the presentation of evidence, and then closing

arguments. Before the sort of body of the trial, the judge will typically give preliminary instructions to help the jury understand what they're going to hear. So the judge will say, you know, you're going to hear opening statements. These are the lawyers attempt to give a preview of what to expect, what the lawyers say is not evidence, and some rules of the road, some general rules of the road. And that's common. What Judge Kaplan does that's unique, he doesn't do it in every case, but he has done it in some criminal cases where it's complicated, is he will hone in on what he thinks is a key issue in the case. And flag for the jury, one of the key issues in this case is going to be a dispute about X. Here are the key rules you need to know about the law on how to

decide X. Why is that important? It focuses the jury. It gives you a sense of what the judge thinks is the real battleground. A federal judge who's neutral, you know, has no stake in the case telling you this is the key issue, can elevate the importance of that issue and make other issues less important. So it can have an advantage for one side of the other. And so it will be interesting to see if the judge does that here. And if so, what does he focus on? And if you were the judge like what would you say are the crucial issues or what would you focus on? I'd love to hear Kavanaugh's thought on that. I have a couple of thoughts. Yeah, well, I mean, I think you nailed it right at the outset there saying with the intent issue is just,

it's really front and center here. There are a lot of the facts here that are, you know, not going to be in dispute. I think that, you know, cutting through all the complexity of this industry and getting down to just, you know, what was the intent here? You know, that's really one of the core questions. Yeah. So I think that's, that's really going to be front and center. And it's going to be a question of whether the judge teased that up or other things. But Sam, I don't know if you think there are their sort of core focuses. I agree. I think a subset of that is the question of the role of counsel. So one thing that is unique here, it is very common in a white collar criminal trial that the defense will try to argue, hey, I had lawyers, lawyers were present, this whole thing

was lawyered. I had a compliance department. In other words, how could you say I acted with criminal intent when there were adults in the room who didn't object to this. And there are various species of this argument. The most robust version is a true advice of counsel defense. That is, I got a lawyer. I provided the lawyer with all of the pertinent facts to a legal question. I asked for advice. I was given advice that said this was okay. That kind of defense, if offered can be very powerful, but it comes with downsides, including that you have to, waive your attorney-client privilege and provide all the, open the kimono on all the communications with the lawyer. So, for example, if the client lied to the lawyer, didn't give the complete picture

to the lawyer, or if the lawyer gave caveats in their advice as lawyers so often do, that may not be something that a defendant wants to put under a microscope. And so generally, although defendants will often threaten to assert an advice of counsel defense, in the end, they'll usually do some watered down version where they don't say fully advice of counsel, but they say, hey, I didn't have intent because lawyers were present. That shouldn't waive my privilege. I can have my cake and eat it too. That doesn't waive my privilege, but it does give you some reason to say that the government hasn't met its burden of proving intent. And I think it'll be interesting to see, you know, is the defense going to do a full-throated advice of counsel defense or not? They've suggested they are, but are they going to do it or not?

And if so, how should the jury think about that issue? Does advice of counsel defense negate all the charges? What kind of advice did he get? How should the jury think about this? And wait, so when you say that you think they might really go for that defense, does that mean that then all their communications will be revealed during the trial, you know, as what you called opening the kimono? Not necessarily that they would come out in a trial, but before trial, you know,

the government would get to get disclosed. of whatever, and not necessarily, we have to separate out the advice that Sam would have gotten when he was running FTX versus the lawyer, the advice he's getting in his defense. So I do not think an assertion of advice of counsel as to when he was CEO would waive privilege as to his trial defense work, but it could waive privilege as to the advice he got from the general counsel or external counsel to FTAX. when he was running FTCS. I'm not privy to what the government did or did not receive in discovery.

But, you know, if he truly is asserting advice of counsel, the government would be entitled to get what would otherwise be privileged communications with lawyers he talked to, etc. Okay. So then earlier you mentioned that in order to be convicted of any of the charges, it has to be a unanimous decision by the jurors. That seems like a really high bar to meet. And yet I keep hearing these statistics that prosecutors, you know, generally win most of their cases. So I don't know how to square those two facts.

You know, how likely do you think it is that there really will be unanimous decisions on these different charges? I think the statistics are, you know, you have to be viewed in the light of how many cases also plea out, right? So the cases where it's less certain that you're going to be able to convict, I think, are much more likely to end up in a plea. And so the cases that end up going to trial are ones where the prosecution feels pretty strong, you know, in their case and that they have the evidence necessary to convict. And I think that shapes the statistics quite a bit. And I think they probably have a view here that they've got a very good chance on a lot of these charges. And we can kind of walk through some of the different charges here and whether there's their distinctions between them. But yeah, I think they wouldn't have they wouldn't have moved this quickly and they wouldn't have taken quite as aggressive a posture. They would have been more likely to plea, et cetera, if they thought they had real risk on. on these charges. I think they probably feel pretty, pretty strong that they've got a good case. Yeah. So why don't we walk through the charges and then, you know, you could say kind of which ones you think are more likely, you know, to get that unanimous vote. And then I think also some of them would require that intent be proved and some of them may, may not. So can you just, yeah,

sort of walk us through the different charges and how likely you think there'll be a conviction on any of them. So the charges, I think there are seven counts. There's charges of wire fraud and conspiracy to commit wire fraud with respect to customers of FTCS, you know, defrauding customers out of their funds. There are charges of wire fraud and conspiracy to commit wire fraud as to lenders on Alameda, that is lenders of Alameda, the sort of affiliate, the trading affiliate of FTCS, the exchange. There are charges of conspiracy to commit securities fraud on investors of FTCS, conspiracy to commit commodities fraud on customers of FTCS, and money laundering conspiracy charge,

conspiracy to commit money laundering as to funds that were misappropriated from FTCS customers. Now, in terms of where do I think the government's case is the strongest, I would say that that is with respect to the fraud charges on customers. It's very simple. It's very straightforward. The government's argument, their allegation is customers were told that their funds would be segregated, would not be used for proprietary investment. And in reality, and that is what induced them to deposit their funds and trust FTX with them. And in reality, FTX knew, according to the government, that those funds would actually be turned over to Alameda, an affiliate, to trade. Money was law.

misappropriated in other ways as well. In other words, they are stealing customer money and using it for purposes. They weren't authorized to do it. And then there were lies about that. That's a very straightforward theory. And in particular, I think the toughest part for the defense is not, you know, if you want to look at the whole time frame, there's room to have a debate. It gets harder to have that debate when you get to the very, very end of the alleged scheme. that is roughly around November of 2022, as FTCS starts to get, as San Bankman-Fried starts to get more and more data that the exchange is going to go under, that they're insolvent. But he's telling customers, don't worry, everything is fine. We are totally fine to induce people to not pull out their money or even deposit money. These are where the government's case is the strongest.

Yeah, that one tweet that got deleted. I don't remember the exact wording of it, but it's very famous. There are screenshots of it all over the internet. Yeah, and I agree. The other charges are a little bit more complicated. The charge against lenders, you have to get into whether the valuations that he was providing to people were overstating the value of assets, things like that. And there are going to be questions about whether the valuation on a token related to FTCT token, was that correct or not.

Those are getting to much more complicated questions for a jury than the relatively simple story of you told customers that this is what you were going to do with their assets and then you did something else with their assets, which I think is just more intuitive for everyone to understand. And which of the charges require that intent be proved? Every one of them. Oh. Every one of them requires some type of intent. Oh, got it.

Okay. Interesting. All right. So we've talked about how there's going to be the jury deselection. I actually love that phrase. And then, you know, Judge Kaplan may give. the pre-jury charge and or pre-opening jury charge. And then at that point, we'll see opening statements. So what are you going to be looking for when it comes to the government's opening

statement? I think from the government side, I think they're going to want to cut through a lot of the, and sort of avoid a lot of the surrounding issues around the industry and other things and probably want to focus much more on telling what is a conventional story. This has to be reduced to narratives that people are familiar with and understand. And there's a lot of complexity around crypto and people will be, you know, a little bit is on the jury maybe a little gun shy of trying to understand all of that. And so I think from the prosecution side, you need to cut through that and say, this is a story as old as time, essentially, you know, fraud is fraud. And this looks like any fraud in any industry, you don't have to understand crypto to understand that when you take

people's assets and you tell that you're going to do one thing and you do something else, that's fraud. So I think that's the sort of narrative we're going to see from the prosecution. But I'm interested in in Sam's take as well. No, I think Kavon hit it. And I, I think SD&Y prosecutors in particular, there is a common structure to their openings that we should all see if they follow and I expect they will. Part one is what they call the grab. This is where they give something that grabs the jury's attention. Part two, they walk at a high level through what they expect the evidence to show. They don't tell you how they're going to prove it at that part, but they just sort of tell you this is what you're going to see.

And the point of it is to contextualize the case for the jury, to precondition them, to see the evidence as it comes. comes in the way the government wants them to see it and to demystify some of the technicalities. A lot of the technicalities, how does crypto work? What's a blockchain? It's all just background. At the end of the day, this is a case about lying. At least that's what the government's going to say. And then part three of the government opening is typically where they say, all right, this is how we're going to prove it.

And that is a roadmap to what type of evidence. We're going to have cooperating witnesses. And then they like to do what is called what trial lawyers call taking. the sting out. In other words, that is, they know that the defense is going to do certain things, including attack the credibility of the cooperating witnesses. They're rats, their snitches, they're lying to save themselves. And so they're going to try to take the sting out of that by saying, look, these cooperators admitted their crimes. They pled guilty to them. The judge will decide their sentence, not us, and they're corroborated. There's other evidence that confirms what they say.

Listen to them carefully. And then at the end, the SDNY process, prosecutors will almost always say, we're going to ask you to do three things. One, listen closely to the evidence. Two, follow Judge Kaplan's instructions on the law. And three, use your common sense. If you do those three things, then there's only one conclusion that the defendant is guilty. You can tell he's given that opening once or twice himself. Yeah, it's so funny, actually, listening to you. I was like, oh, it's so similar to, like, writing an article. Yep. The other thing I should mention, the STMI prosecutors are taught. You point at the defendant.

You will see the prosecutor during the opening statement, point at the defendant. It is a dramatic thing to point at somebody and say they're guilty. It's a moment that you're going to feel electricity in the courtroom, static. And it's intended for that. It is intended to show the jury, this is somebody who should be condemned. We condemn this person. You should feel comfortable condemning them and convicting them. Wow.

I'm getting so excited to be in the courtroom. All right. So in a moment, we're going to talk about the defenses. opening, but first a quick word from the sponsors who make the show possible. Amazon presents Jamal versus the Shih Tzu. Descending from the gray wolf, Shih Tzu's live by their own untamed primal code of not giving a single Shih Tzu.

But Jamal shopped on Amazon and bought dog treats, chew toys, and 32 ounces of carpet cleaner. Hey, Jamal, you've been promoted to pack leader. Save the everyday. with deals from Amazon. The game has changed. The Google Cloud Oracle built for Layer Zero is now securing every Layer Zero message by default.

Their custom end-to-end solution sets itself up to bring its world-class security to Web3 and establish itself as the HTTPS within Layer Zero messaging. Visit Layer Zero.network to learn more. Popcorn just made Defi way easier with VaultCraft through no-code DeFi Toolkit for building, deploying, and monetizing automated yield strategies in a few clicks. Forget spending months of R&D and capital when you can instantly launch your crypto fund with VaultCraft on any EVM chain. From wallets and institutional service providers to

non-DefiDGens, anyone can use VaultCraft to supercharge their crypto portfolios with custom-tailored cross-chain yield strategies. Go to VaultCraft.io and start building. Join over 80 million people using crypto.com, one of the easiest places to buy, trade, and spend over 250 cryptocurrencies. With the crypto.com visa card, you can spend your crypto anywhere and get rewarded at every step. Up to 5% cashback instantly, plus 100% rebates for your Netflix and Spotify subscriptions, and zero annual fees. New users enjoy zero credit card fees on crypto purchases in their first seven days. Download the crypto.com app and get $25 with the code Laura. Link in the description. Back to my conversation with Kavon and Sam. So we just went over the prosecution's opening. What will you be looking for in the

defense's opening statements? Sure. So I think the defense side has given some hints of what they were hoping to do and there have already been some rulings from the court precluding them from doing certain things in the opening that they wanted to do. And so maybe we're starting there. It was what they're not going to be allowed to do is try to sort of put the industry on trial in a sense, try to argue, blame the regulators sort of theories is something they've precluded from introducing it at that stage. And I think they had wanted to, they have a theory that I think there was a speeding ticket analogy. They're saying, if you're just saying you're going the same speed as all the other traffic, if everybody else is doing it, then how could you be doing something wrong? And their argument here is

there are no rules of the road. The regulators haven't set rules. So it's as if you're on a road with no posted speed limit, if you just go the same speed as everyone else, you're following traffic, then how could you be guilty? And they wanted to make that sort of analogy. And the judges are precluded that, at least at the opening stage. So they're not going to be able to do that. I don't think they're going to have much leeway to get into some of the other extraneous facts that they'd want to around the industry more broadly. So I think they're going to try to focus on Sam and humanize him. And they really are going to need to show that to the extent they can, that he is somebody you should have sympathy for, that this is all very complex and that you can't show.

there were other people who were working for him and handling a lot of these things, and he was flying at a level above a lot of the details and try to divorce him from some of the worst facts. But that's a tall order. Yeah, I think Kavana's totally right. The thing for the defense is they need to keep their options open. The government knows what their case is going to look like, what they've got to prove. The defense, which is at a disadvantage in many respects, the one advantage they do have is the element of surprise. And so there are certain things that we can expect they will definitely do, which is, one, remind the jury there's a burden of proof here. The government has that burden. It is only their

burden and it's proof beyond reasonable doubt. Two, remind them the dynamic in a courtroom, a prosecutor who the jury will inherently trust has just stood up and said, pointed at the defendant and said he's guilty. And they've just heard all this terrible stuff. And so they may already be 90% of the way to condemning the person. So they have to get the jury to like walk that back. Hold on. We haven't heard any evidence. You know, there's two sides to every story. Keep an open mind. Now, whether they go further than that and start to actually get into arguments, that will be something very interesting to see. Are they going to actually debate some of the merits and tell us where the battlegrounds are? Number one. Number two, are they going to nitpick the government's proof and say it's

not enough? There's a whole. Or go further and start to make assertions that could not possibly be proven through a government witness. If so, that could be an indicator that they intend to call Sam Bankman-Freet as a witness. And I think one of the key things in this trial is going to be, is he going to take the stand? Is he going to testify? Now, one thing that's unusual about this case is he has given a lot of statements before he was charged about what the conduct was. He did interviews. So unlike many cases, whether or not he takes the stand, he will in some sense, it is possible his, quote, testimony will be heard in a way if the government chooses to play or elicit parts of the accounts he's given before Trump. And so the defense may have no choice

but to grapple with that and start to get in. What is Sam's narrative? If you were the defense, would you want to put Sam on the stand or would you rather not? Yeah, this is always a very difficult decision and it's also particularly hard because I don't know him. I think one thing to know about a criminal trial is the way it's structured, the government goes first. They put their case on. Then the defense goes. And it is at that point the defendant has to decide whether to testify. And I think there's a reason for that, which is to say you would want.

to see how the government's case plays out. When the defendant testifies the entire trial changes, whether we like it or, you know, the judge will instruct the jury that under the Fifth Amendment of the Constitution of the United States, the defendant has no burden and does not have to testify against themselves or incriminate themselves. It's always the government's burden to prove their case beyond a reasonable doubt. But regardless, the defendant takes the stand. The jury is not, it's just human nature. They're not going to think about, did the government prove it anymore? They're going to think about do I believe this guy? If they believe him, he's acquitted or if some believe him, there's a hung jury.

And if they don't believe him, and it could be something immaterial, too. Could be something they think he lied about something that's totally unrelated to the case, going to jail. So it's very dangerous to call the defendant. However, you may be in a situation where the government puts their case on and you are going to lose. There is no way you're winning. Your only shot is a Hail Mary. Okay, let's put him on. The other side of the coin is it's very powerful when a defendant tests.

It makes it much harder for the jury to convict. They're not dealing with characterizations of a person anymore. They're dealing with that person. They have heard the person speak intimately in a courtroom. And even in cases I've had where a defendant testified, even when the jury ends up convicting, it often takes them longer to get there because it's a harder decision when a human being testifies to them. It just feels like given Sam's behavior up until this point that he himself, would want to testify. For sure. You're absolutely right. And one thing to note, it is his decision and his alone. There are some decisions that the trial lawyer for a defendant controls.

And there are some decisions there to the defendants, whether or not to plead guilty, whether or not to testify. That is his decision alone. His lawyers can say, this is a crazy idea. If he wants to do it, he gets to do it. Yeah. One thing I wanted to say to Kvon's earlier point about how he's going to, or the defense generally will try to play up this image. Like, you know, he was young, you know, he didn't really

know what was going on. Other people were working for him. I actually feel like up until the collapse of FTX was revealed that he played up this image about like being young and, you know, wearing the shorts and the T-shirts and the crazy hair and all that. And so even just in this past year, like after everything was revealed, I noticed random comments online. Mostly it's like people that they're non-crypto people as far as I can tell, who say things like, oh, he was just a kid. And it's like, he's 31 years old. Like most American men have children by the age of 31. Like, you know, but they still say these things. So anyway, maybe it'll be effective. We'll see. And so just before we continue on to, you know, the testimony, which I do want to get to in this opening,

what do you think the defense's strongest case will be? Is it just to play up that image? Or is there, like, anything that you think will directly counter, you know, these? Like, especially when you were saying the customer fraud is probably the most likely win for the prosecution. Do you think that there's any strong case the defense can make against that charge or any of them in particular? I think the way Sam put it earlier, this Sam put it earlier. The innocent Sam. Right, right. No comment there.

But I think the way this Sam put it earlier, the defense really wants to keep their options open. And with some of those questions, how the evidence unfolds on the prosecution side will determine a lot how they won't approach that. And so I would expect that they may not get too far into the weeds on some of that on opening, just because it is pretty unclear exactly how that will unfold and that there are some difficulties on how that comes together. So I think they may touch on some things, but I wouldn't expect them to get too far into the weeds of the merits of those issues.

And then one other thing I wanted to ask just about that line of argument that SPF was acting on the advice of their legal counsel. I was just wondering, like, generally when defendants try that ploy, is that something that juries tend to either be sympathetic to or skeptical of? I think it all depends on the facts of that defense and whether it had the nature of the situation. I think that it is hard when you're talking about lying. I mean, the government will cast this as you can't murder people, all right? I don't care if your lawyer says you can kill somebody. That's not okay.

And it is doubtful that a lawyer told anybody they can murder somebody. But even if there was a question about it, you know, there are just some situations where I'm sorry, getting advice from a lawyer doesn't excuse anything. And the government will try to cast this in that manner. They'll say, this is about lying. You know, the lawyers were not asked to opine on whether lying is okay. They were asked to opine on little tidbits of a mosaic of detail. that fed into a scheme.

But they never had the big picture of that scheme. And they never would have blessed making a false statement to intentionally to induce somebody to give their funds. The defense will say, no, no, no, no. This is way more complicated. This is a bunch of components. First of all, Sam isn't even necessarily the customer-facing person. He's the executive, the CEO running this thing.

There are all these people under him, including the three people who may have committed. a crime and are now trying to blame him. You know, this is the defense narrative. The cooperators did it, not me. You know, they kept me in the dark on the details. I thought that our terms of service, Sam's frame of mind was, I always knew we may want to do prop trading with Alameda. And my understanding was the lawyers had vetted whatever we had to tell customers and had

approved terms of use and had done what we needed to do to disclose that. So being told now that this is a fraud, that's crazy. I mean, I talked to multiple lawyers. And they said this was okay. Okay. Interesting. All right. So now let's go to the testimony. Obviously, we know certain core witnesses that the government will call, such as Caroline Ellison, the former CEO of Alameda, Gary Wang and Ashad Singh, who were both on the tech side at FTX. Which other ones are you sort of wondering, you know, whether or not they'll be called or, you know, whose testimony are you kind of interested in on the prosecution side? I think those are some of the most interesting ones. I think to me what will be interesting is how the prosecution and the defense, too, when it gets to them if they really try to mount a substantive defense,

but how the prosecution will get out their narrative arc. Because often on the prosecution side, you put up an FBI agent who did the investigation, and you use that as the vehicle to do a lot of the narrative arc of the evidence, and that's an easy way to put out a lot of the narrative. With these cooperating witnesses, how much you lean on them to tell substantial parts of the story and how much you use them just as where you need them as a supporting cast will be, will be interesting. I haven't spoken to them. I don't know how compelling they'll be. There's obviously a risk with each of these witnesses. So it'll be interesting to see how much of role they have. I do think it's interesting that prosecution asked for the trial to continue through Friday. Friday was originally not going to be a scheduled trial day. and they have to continue to have a fuller week on week one so that they could get more, including for out-of-town witnesses.

So I would imagine we're going to see some interesting witness early on in the trial based on that. But exactly how they try to piece that together and use these witnesses versus the FBI agents will be interesting to see. I think all of that is correct. And two other things that I think will be interesting is are, one, do they have internal communications and what kind? These days, a lot of folks at crypto exchanges, other folks in the fintech and crypto space, they use ephemeral messaging, signal or other things that disappear that don't stick around. What kind of internal communications will there be to corroborate the government's theory? Intent very often comes down to the proof is usually in the putting of the communications. that tells you what somebody was thinking at that time and can really give you a window into

whether they knew what they were doing was wrong or whether they actually thought it was okay. And if they have those types of documents, what's the vehicle? Is it going to be the cooperating witnesses? Is it going to be other witnesses that they use? Will they use both? The other thing is how the government, whether or not the government is going to use lawyers. There are in-house lawyers who worked at FTX. Are they going to call them or not?

You know, do they want to call them affirmatively to get ahead of the advice of counsel defense? Or do they want to sort of not go there and let force the defense if they want to go there to put a defense case on? This is a very unusual circumstance in certain ways with the legal side too, because, you know, through the bankruptcy process, we've seen some real back and forth, you know, some somewhat salacious affidavits being put in, you know, sort of fighting between the former in-house lawyer. which is an unusual circumstance. So it's always a bit of a touchy subject to try to get lawyers on the stand and navigate those issues. This adds a whole different dimension of volatility. And what do you think it means that the government said that it's probably going to have

about four to five weeks of testimony and the defense is saying that they probably would take only about a week and a half? Is it simply because it just sort of feels like so many of the people involved have already pleaded guilty and are kind of on the... the government's side now? Is it simply a matter of that? Or is that typical? I think that's not surprising from my perspective. I mean, one, as Sam hit early and often here, the government has the burden, right? So they really have to prove a case and they're going to have to explain what was going on with FTX and Alameda and all of that. And that is a difficult thing to explain to people.

And so to unpack all that and explain how they investigated and came to the conclusion of how money was being used and as you get into the, you know, additional layers of fraud with respect to lenders and investors. And as you move through through all those pieces, there's, there's a lot to unpack there. And I think it's going to take them a while to explain how they got what the evidence they have, what it means, you know, place it all in context. So that takes a lot more doing. I don't think on the defense side, there's nearly as much to do. I think the big question is one, does Sam get on the stand? And then there will be questions about the defense experts as well. I think we saw motions to preclude evidence from both the prosecution and the defense early on. And Sam's

lawyers had proposed several experts. The judge didn't grant them the right to put those experts on automatically, but left open the possibility that those experts could be used for rebuttal. So we'll see exactly what they need to do with those experts and that those are sort of the big wild cards, I think, on the defense side. But as a general matter, the prosecution takes most of the time because they have the burden. I agree with all of that. I will just add that the government tends to overestimate the length of the case because judges generally and Judge Kaplan in particular, if they underestimate and the trial takes longer, he will be very upset with them and will make sure they feel his wrath every single day in various ways. Because you know,

you've got to get juror 12 people, actually more than 12, right? Because you have 12 jurors and you have alternates. We have to sit through the trial in case one of the main jurors get sick or something happens or they get struck or whatever. So that's a lot of people to tie up eight hours a day for weeks on end from their lives. It's a huge, huge burden, a huge social cost, not to mention the burden on the court and the prosecutors and the defense lawyers, right? And all the witnesses. So the government tends to overestimate. And then you may see if things are going as better than expected, it'll end up being shorter. And the defense, it doesn't take that long to put a defense case on because they don't have the burden so they can just go in and hit like a laser the things they want to

argue in closing. It wouldn't surprise me if the trial ends up being a little bit shorter than that forecast. Yeah. And a lot of the defense cases on cross-examination of the prosecution's witnesses, which is part of, you know, during the prosecution's case before they arrest. So that that's a sort of wildcard on how long the prosecution's case will take. They don't know how long, you know, some of that will take as well. I will add that I think it's a mistake for the government if they make this too long. There's a saying that I was taught as a prosecutor in that office, thin to win. Keep it simple. If prosecutors, especially in STNY, want to the extent they have any downsides, they would never admit it, but to the extent they have a downside, there's a saying, don't make a federal case out of it. They tend to overtry a case. Sometimes it would benefit from editing it down to just the one, two, or three killer points and then stopping.

the jury then remembers their points and they get right to closings while the evidence is fresh in the jury's mind. A four-week trial of government proof plus a defense case of a week. The jury at the end, they'll remember some of it, but a lot of it, they're not going to remember. And then it puts much more pressure on the closing. So I think Thin to Win, it would be smart for them to go with Thin to Win. That actually raises an interesting question with some of the evidence that have been discussing some of the preliminary papers back and forth for free trial as well, because some of the charges, prosecution had added additional charges after their original indictment. Then they ended up deciding not to try those at this time. So they're 13 total. They're only seven that are going forward now.

And some of those additional charges, they've now been arguing whether there's evidence related to those charges that can still get in on this trial because it goes to intent or other things like that, even on the charges that are being filed. So things about the, you know, they have a charge related to bribery of a Chinese official. They're issues around the campaign donations, issues like that. And the prosecution has argued that that sort of evidence can come in now because it's indicative of intent and other things with respect to the charges they are trying. But that gets into the question of like, how much do you try to throw at this jury? How much do you expand the field of view beyond the narrower charges you're bringing to rope in all these additional facts? And is that going to make a better story for the prosecution or is that actually going to end up muddying the water or making it harder for. the jury to focus on the things they really need to be focused on. Yeah, yeah, that makes sense.

Again, reminds you of journalism in that editing it down and making, you know, your key points is really important because you're right. The jury, they're going to have a lot of information to take in. And the more that they take in, the more it leaves room for there to be disagreement, I think, when they go to do their deliberations. Let's pretend that you are working for the defense. And I think particularly in this case, and I know I keep honing in on this, but I do think it's something that to my mind is a very difficult hurdle to overcome, which is that, you know, there's going to be testimony from three colleagues who were all direct witnesses. They were the ones who kind of were in the room, so to speak, who will be testifying against Sam. So if you

were the defense, how would you go about trying to counter their testimony? I think what Sam, this Sam again said earlier, you know, is a large part of it. I mean, they've admitted that they committed crimes. Now they're trying to pin it on somebody else. And so, you know, the question will be how convincingly they can put Sam in the room. They can put Sam in the conversation with them and how much that link is drawn because they'll be able to testify probably pretty good detail about what was happening. You know, and like whether what was being done with assets and things like that. The question will be how easy is it to draw the link to this was being done at Sam's direction or with his knowledge or things like that? And that's really, I think, where you've got

to focus on dealing with them because they all, you know, obviously will have motivations to cooperate to, you know, reduce their own punishment, to blame Sam just to absolve themselves internally, all those sort of things. So you're going to want to play up those considerations and get the jury to question how much it is that they're just sort of blaming him after the fact for things that they really were in charge of directing. I agree. And I think the other thing that I think the defense will try to do, one danger for the government in overtrying a case

or having too many witnesses, it's just human nature. People don't remember things perfectly. They're going to be inconsistencies between their memories. And one thing that I think the defense will try to do, they may not even lay an attack on it during the body of the trial. They may lay traps to lock witnesses firmly into details and not even tell that witness or give a clue at that time why they're getting them to commit so firmly to a detail.

And then in closing, say, look, he told you he was sure he would bet his life on X fact. And this other person told you that X fact is false. Now, is that proof beyond a reasonable doubt? That person was convinced, but they're wrong. They have to be wrong because the government's other witness says otherwise. So are you sure beyond a reasonable doubt about the proof? And the proof, by the way, members of the jury, you think they would have called third? three, if they didn't need all three, they needed every one of these witnesses. They believed in

their mind that they don't have the proof without them and they contradict each other on key points. Yeah, if they can tease out contradictions, that obviously would be key. And I think this is where it can be difficult for the prosecution, the government also because Sam obviously knows all the details of what's going on. So he'll be able to spot where that's going to be possible in a way that the prosecution may not see coming. They will only know the story they've been told. And to the extent there are places to seize out inconsistencies, Sam may be able to help find those. Those witnesses probably live day in and day out with Sam. And so they can also be a vehicle for introducing evidence to give the defense the option of not calling Sam to get certain facts they want in the record

for closing that they think would be helpful. So for example, it would not surprise me if a lot of the conduct or a lot of the stuff that happened at FTCS happened in a drug-fueled haze. We could have a discussion about which way that cuts. Is that a fact that favors the government or is it a fact that favors the defense? But to the extent that Sam was, you know, high on cocaine and Adderall the whole time, it might be a mitigating fact. It might be something that impaired his judgment in a way that negates intent. And it may be something that could be elicited from cooperators rather than having to call him.

And by the same token, to the extent they were all high, that may impair their memory and put a question mark on the validity of their testimony. Yeah, although, yeah, just to make clear, I don't think cocaine was one of the favorite drugs in the FTX. Adderal. It was amphetamines like Adderall. More like I would call it, I guess, abuse of prescription drugs. But not that I think there's like that much difference. When you have something impairing your, you know, faculties, then I guess it's. all boils down to the same thing. So in a way, what you were saying is the best defense here is an

offense against the witnesses just to attack them. However, you know, whatever it is that you find, that's a vulnerability. For sure, and also use them as a Trojan horse to get out points that you think they'll give you. The defense wants in the record that you think that they would admit. The prosecution doesn't have to get you to like their witnesses. Like you, the jury can dislike each of those witnesses who was part of this crowd and who was living with Sam and decide it doesn't like any of them, but they were all in it together. So it's not a situation where the prosecution actually has to get you to think these are good people or to decide you like them in any way. All right. So when it comes downward at the end of all these different charges, which ones

are the ones that you believe SPF will most likely be convicted of? And which ones do you think he's least likely to be convicted of? One thing that we didn't talk about earlier, and I'd actually be interested in Sam's take on this is from the prosecution's view, you've got these sort of direct fraud claims and then you've got the conspiracy claims each time. And so how do you, how do you think about the likelihood of one versus the other and where you play those off each other? I mean, here you've got the co-conspirators are your cooperating witnesses. So all the charges are to some degree going to hang on on some of that testimony. But interested in your, you're thinking on the difference between the conspiracy charge and the direct claim. Sure. I think the government uses the conspiracy charges as a

tactic because it can lower their burden of proof on certain things like it doesn't have to be the defendant that does something in the Southern District of New York to get venue in the Southern District of New York to convict on conspiracy or a variety of proof may be admissible to prove a conspiracy as opposed to a substantive charge that the conspirators agreed to commit. And by the way, for those who don't know, conspiracy fancy term for an agreement, by two or more people to commit a crime. The commission of the crime is the substantive crime. Conspiracy to commit a crime is an agreement to commit that crime.

You can be guilty of conspiracy even if you don't actually complete the underlying crime. So if Kvon and I agree to commit a fraud, we agree to do it, we talk about it and we commit an overt act. Let's say I give him some money so that we can get the fraud going, but we actually never end up doing it. we're guilty of conspiracy, even if we didn't actually complete the fraud. If we actually follow through, then we're guilty of conspiracy and the substantive charge. The thing on conspiracy, what gives the government a big advantage there is, look, the, you know, implicitly, the cooperators are going to say, I'm guilty of a crime. What am I guilty of? I conspire.

I agreed with others. If the jury believes that, then you're like 90% of the way there to convicting Sam because who did he, who did they agree with? They agreed with Sam, right? Whether Sam did the crime or not, he agreed. And so I think that's the sort of the power of a conspiracy charge. What I agree with Kvon that, you know, some of the more technical charges like securities fraud, commodities fraud, I think the government charges those for policy reasons, right? The securities and commodities fraud unit is the unit that brought this case. They work with the SEC and the CFTC a lot. If they bring a securities fraud charge, that makes it easier for them to get a stay of the SEC's parallel case,

or if the CFTC is involved to get a commodities fraud charge, makes it easier for them to get a stay of the parallel CFTC case. So there are tactical reasons and policy reasons why they do it, but it's harder to prove and it involves a bunch of legal jargon that gets you away from the simple story of customer gave me money. I lied to him to get the money and I misappropriated the money. touching on the securities and commodities piece of this, I think it's probably important for the audience to understand. This has nothing to do with the sort of our token securities or commodities type discussion that we see in all of the ripple and Coinbase and all of that. The prosecution is stayed clear of all of that. They just wire fraud is the way you avoid that.

Fraud is fraud. You don't need to get into whether it's securities fraud or commodities fraud. The securities fraud claim they brought here is a different claim. It has nothing to do with whether tokens or securities or any of that. it is fraud on investors in FDX. And so that is a much more conventional securities fraud theory. It has nothing to do with getting into crypto. My is fraud too. It's like it's about the swaps customers. They're not trying to go after everything more broadly. So, you know, I think that the government's avoided a lot of those complexities. Yeah, I think the securities fraud ones are very similar to what

Elizabeth Holmes of Theranos was convicted of because she is serving time really for having these fraudulent claims to her very wealthy investors. and not for really what she did to everyday people who are customers of Theranos. But anyway, assuming that he's convicted of at least, you know, whatever number of charges, what would you expect to see in terms of sentencing, especially kind of taking into account what you know of Judge Kaplan and obviously the magnitude of what happened here? I think Judge Kaplan is a brilliant judge. And I think he is a judge that either side would like to have before sentencing.

because he understands the law and he will do what the law requires. And if the government is wrong about something, he will hold them to task. He's done that before in cases like United States v. Stein, which was the KPMG case for many years ago and some other examples. But when it comes to sentencing, once somebody is convicted, Judge Kaplan is a very, very tough sentencer, very, very harsh, draconian. He is what you would call colloquially a hanging judge. And I think that the defense has done a lot of things that will aggravate Judge Kaplan, that will come back to bite them at sentencing if Sam Bankman Fried is convicted. So, for example, San Bangman Fried was bailed. And then he engaged in conduct that the judge determined was essentially witness tamper, right? Like releasing a cooperating witness's journal and doing things to try to basically deter witnesses from testifying for the government. That offends Judge Kaplan. It made him decide to put Sam Bankman read in jail, which gives you a sense of where the judge, that means the judge in his mind

thinks this guy is probably guilty. He's not going to put him in unless he's sort of gotten comfortable that the evidence is very strong and repeatedly asking to be put out on bail, even after the judge has made that decision, coming back to it over and over again. These are things that really could come back to hurt the defense if they get to a sentence. So if you were to put a number on how many years Sam might see in prison, what would that number be? or about like? I don't know the guidelines here. One thing we should talk about is in the federal system, there's a regime that judges use to sentence. So there's a statute, Title 18, United States Code Section 3553A, and it sits out the factors that Congress has directed federal judges to considerate sentencing.

And it's common sense things, the history and characteristics of the defendant, the nature and circumstances of the crime, whether or not the sentence should be imposed to deter others from committing a crime like this, whether there's a danger to the community that posed by the defendant thing, the common sense stuff. But one other factor that they have to consider is what's called the U.S. sentencing guidelines. There's a commission. It does a study and evaluates data and has come up with a rubric of a way of calculating based on the characteristics of the crime and a defendant's criminal history, a sentencing range. And judges do not have to sentence within the guidelines, but the guidelines are designed to create some measure of uniformity among judges across the country. It's supposed to be a starting point

so that, you know, similar defendants who do similar crimes are treated roughly similarly. The judge can give a sentence within the guidelines. They can go above it. They can go below it. And one very important factor in the sentencing, it's sort of a load star that your starting point, your anchor, is what are the guidelines here? They haven't been calculated. And I think that's going to be very, very important. Judge Kaplan has no fear about. giving, you know, he's got the stomach to give a guideline sentence. The guidelines here could be astronomical, given the amount of funds involved. If the jury finds that all customers were defrauded, you're talking about billions of dollars, the guidelines could be life in prison. That's what I was

going to focus on. I obviously agree with everything Sam said. As far as how long with Judge Kaplan, I mean, we're talking, I think dollar values at this size, we're probably talking in decades, not years. The question is how long he ends up actually serving maybe a separate question, and things like that, because there are ways that can end up reduced at various points. But if he's convicted of what he's being charged of, given the dollars at stake, the number of people at stake, all those things, we're looking at a very, very long potential sense. Yeah, I actually walked through this with Martin Scroley on the show last December. He came on twice. It was interesting.

Yeah, he, I think what we came up with, it was something. He walked through actually all the points. But interestingly, based on the dollar amounts, I think, the highest number when you're looking at dollar amounts is something like $15 million, which obviously that's just a smid enough of what's, you know, at stake actually in this case. So based on dollar amount alone, it does lead you to believe it would be a harsher sentence. But he actually had the opinion that Judge Kaplan was a slightly more lenient judge in the SD&Y system, actually, because he has been in that particular court a number of times.

I guess that was how he concluded that. Like, I think he'd studied all the judges and something. So, you know, I recognize he is not a lawyer. He's just somebody who's intimately familiar with the Southern District of New York court. And one other thing that I wanted to say was I feel like where we ended up based on the points, it was something in the ballpark of like 36 years. But then he was saying that since it's just a guideline, like it might end up being more like 24 or whatever.

Just who knows? And I don't even know if I'm remembering this correctly. but what's surprising to me is that you both are saying it will be on this harsher end. And then there was this coin desk article by Nick Day, who he's an amazing reporter. But he had an estimate in there of 10 to 20. And I was like, oh, that's not at all what I feel like I've been hearing from other lawyers. But who knows, maybe whoever he interviewed was saying something different. If the defense gets 10 years for Sam Bank been freed, that would be a huge victory for them.

I think the last case I can think of it's sort of analogous is the Madoff case. And, you know, Bernard Madoff would be the government's analogy here for Sambank-Bin-Fried, although different stage of his life. But he was sentenced, I think, to 150 years. I was actually in the courtroom when Madoff was sentenced. I was a law clerk at that time, a law clerk in that courthouse. And I knew Judge Chin who sentenced him and he invited me to come. And I watched it.

I was in the room and heard Madoff speak and heard the victim speak. And I think going into it, I remember thinking. thinking probably made off his sentence to 20 or 30 years, maybe 40, which for him would have effectively been a life sentence. But Judge Chin wanted to send a message. And he sent a very clear message, 150 years, the absolute maximum allowed by statute. You know, the difference here is Sam Bankman Fried is young. And so that does raise questions about, all right, on the one hand, you need to send a message to society and perhaps to deter conduct in this space, deter criminal conduct in this space. But on the other hand, you know, in terms of this human, could he be redeemed?

You know, do we really need to keep him in until he's in a coffin? Or is it possible that in decades, he will be a person who can be redeemed and add value to society? And I think that's a hard question, especially when you're talking about sentencing a young person. I also think that, you know, there's some other key distinctions. I mean, with the made-off situation. I mean, that was a Ponzi scheme that ran for decades. I mean, that was a, you know, that was a very different situation in some ways. And this was, you know, I mean, they, you know, FTCS obviously grew very large very quickly, but it was a bunch of kids and a bull run who, you know, expanded very, very fast in a untested area. And while that's not necessarily going to impact the trial itself, the way that

the defense would like it to, I think it's sentencing. Some of those things do start to play a bigger factor in how you assess whether or not you put a kid away for life. So I think that, yeah, I do think those factors will weigh in. That said, as between Martin Schrelli and Samenzor, if you're looking for guidance on what's like to happen in the Southern District, I would go with Samans or not Martin Schrolet. Thank you, Kva. Yeah, I would agree with that. One last thing I wanted to point out in terms of the Madoff comparison was that Madoff had $20 billion in cash losses and $65 billion in paper losses. So, yes, of course, eight or $10 billion lost in FTCS,

it's a staggering amount of money, but the Madoff Ponzi was, you know, bigger. And then last quick question, given that Caroline, Nishad, and Gary all pleaded guilty, what would you expect the sort of comparison to be in terms of their sentencing? Like, you know, one third of what Sam Bankan-Frieds would be or one-half, or I don't know if you can even make that kind of estimate.

That's a difficult one. we're given the variability on what his is. I mean, I think if Sam gets a very long sentence, I think that there's will be much lower by comparison. But it's hard to put numbers on it. I don't know, Sam, if you have a, you have a sense on where those end up. Yeah, I think Judge Kaplan understands this systemically. He has to give a sentence that rewards cooperation in order for the government to be able to go to the next set of potential cooperators and tell them, look, if you cooperate, you will get a lenient sentence, help us, and then we get to do justice. Judge Kaplan knows that as an institutional player, cooperators are a very

important part of the government's arsenal. They have to be able to give a reward. Now, in terms of what do the numbers look like? I don't know enough about the particulars of each of their cases, but the way to think about it is, you know, they're not all the same. So, for example, the first one at the table gets the best benefit because they broke the logjam. They are the ones who help the government, not just make the case, but perhaps we're influential in giving the government the leverage to recruit the other cooperators, right? The other two may have been influenced by the fact that they thought or knew somebody else was already talking. And so that's an important distinction. I would bet the first at the table could get away with a sentence of no jail time,

would not surprise me. It's harder for the other two. And just to clarify, would the first one be the lawyer that went to authorities first and appears to have gotten some kind of immunity? Or are you talking about Caroline? I'm talking about Caroline. I think immunity means no sentence or non-prosecution agreement means no sentence. Cooperation agreement is different. A cooperation agreement is, I plead guilty. I agree to testify and help the government. In exchange at sentencing the government will write a letter to the judge pursuant to Section 5K of the U.S. sentencing. guidelines, advising the judge that I cooperated and asking the judge to be lenient in light of the factors bearing on my cooperation. And interestingly, in the Southern District, which is different

than many other districts of the country, the government does not recommend a specific sentence for cooperators. So they leave it entirely to the judge's discretion. In other districts, you may have a deal where a cooperator up front says, all right, I would have gotten 10 years. I get five years if I testify. That's not how the Southern District does. Got it. Okay. Well, this was just an amazing exploration of how this trial might unfold. And I just so appreciate both your insights. Where can people learn more about each of you and your work? Sure. You can find me on the Jenner.com website on LinkedIn, various other social media, and usually popping up here and their events and the like. But certainly start with Jenner.com. Yep. For me, I recommend you,

You come to the Cahill website, cahill.com. I'm on there. My biography is there. I also have a thing on LinkedIn, and you can see what I'm doing on the defense side now that I'm no longer working for the government, helping people stay out of trouble and get out of trouble. All right.

Well, it's been a pleasure having you both on Unchained. Thank you. Thank you, Laura. Always a pleasure. Thanks so much for joining us today. To learn more about Kvon, Sam, and the trial of Sam Thingman Fried. Check out the show notes for this episode. Unchained is produced by me, Laura Shin,

without from Kevin Fuchs, Matt Pilcher, Wandermanovich, Megan Gavis, Ginny Hogan, Shoshak, and Margaret Correa. Thanks for listening. 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 Atchison. Follow the CoinDesk Podcast Network for some of the best shows in crypto.