Unchained - Why Martin Shkreli Thinks SBF's New Judge Could Still Be Lenient - Ep. 438

Episode Date: December 30, 2022

Martin Shkreli, entrepreneur, investor and convicted white-collar criminal, talks about the new judge assigned to the case against Sam Bankman-Fried, whether Sam’s going to plead guilty or not, and the potential involvement of his family in the lawsuit. Show highlights: whether Sam Bankman-Fried truly did not have money to post bail why the government did not restrict Sam's usage of the internet and social media why Martin thinks the new judge assigned to the case, Judge Lewis Kaplan, is good for SBF how many years Judge Kaplan could sentence SBF to, given his unusual work experience whether there's still a chance that Sam could paint this case as a business failure how defense attorneys will likely try to exploit the romantic relationship between Ellison and SBF in their favor why it is unlikely that SBF will plead guilty on the January 3rd arraignment date what a telemarketing fraudster case has to do with FTX how the prosecutors could indict SBF's family if he doesn't plead guilty how a jury would be selected  whether Sam has enough funds to pay for a decent lawyer and how that's going to affect the case how Martin learned about crypto while he was in prison how prisoners engage with crypto while incarcerated whether Sam could run a business from prison Thank you to our sponsors! Crypto.com Guest Martin: Socials Previous appearances of Martin on Unchained: Martin Shkreli Explains Why Sam Bankman-Fried Got Lucky With His Judge - Ep. 435 Videos on SBF: Which Gang Will Sam Bankman Join In Prison? | Martin Shkreli Gives Prison Advice to FTX CEO My Boy Sam Bankman Is Facing Life in Jail for Sure | Martin Shkreli Predicts the FTX Court Hearing Episode Links Reuters: Sam Bankman-Fried to enter plea in FTX fraud case Unchained: SBF Released on $250M Bond Secured by Parents Caroline Ellison and Gary Wang Plead Guilty and Are Cooperating in FTX Investigation SBF Signs Extradition Papers After 8 Nights in Bahamas Jail With AC and Cable TV CFTC and SEC File Damning Complaints Against Sam Bankman-Fried and FTX Former FTX CEO Sam Bankman-Fried Arrested Amid US Indictment Bloomberg: Bankman-Fried Judge Recused Because Husband’s Firm Advised FTX FTX Bankruptcy Standoff Heats Up as Bahamas Challenges US Case Fortune: Sam Bankman-Fried indicted on multiple conspiracy and fraud charges by U.S. officials Previous coverage of Unchained on Sam Bankman-Fried and FTX: The Chopping Block: Was FTX a Scam From the Very Beginning?  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 Is the Collapse of Crypto Lending Over, or Is It Just Starting? Did the Bahamian Government Direct SBF and Gary Wang to Hack FTX? The Chopping Block: Why Lenders Didn’t Liquidate Alameda When It Was Underwater  Erik Voorhees and Cobie on Why FTX Loaned Out Customers’ Assets The Chopping Block: FTX: The Biggest Collapse in the History of Crypto? Sam Bankman-Fried on How to Prevent the Next Terra and 3AC Learn more about your ad choices. Visit megaphone.fm/adchoices

Hi, everyone. Welcome to Unchained. You're a no hype resource for all things Crypto. I'm your host, Laura Shin, author of The Cryptopians. I started covering crypto seven years ago, and as a senior editor of Forbes, who's the first mainstream media reporter to cover cryptocurrency full-time. This is the December 30th, 2022 episode of Unchained. Every week, I interview crypto builders exclusively for Unchained Premium subscribers. This week, I discussed TBT and Bitcoin Bridges with Matt Luongo and McLean Wilkison, the founders of Threshold. Visit unchainedcrypto.substack.com to get access. With the crypto.com app, you can buy, earn, and spend crypto in one place.

Download and get $25 with the code, Laura. Link in the description. Today's guest is Martin Shwelly, entrepreneur, investor, and convicted white-collar criminal. Welcome, Martin. Hi, how are you? Doing well. The interview we did last week was my most covered interview ever, I believe, with everyone from Business Insider to TMZ to the Daily Mail, writing about it. And best of all, it got an endorsement on Tyler Cowan's blog, Marchal Revolution, which was quite the compliment. But that is not why I have invited you straight back to the show. There have been a number of

developments since we published our conversation. First, Sam was released on bail, the consensus, is that Sam likely negotiated bail as a part of his extradition. And although there was this big headline number of $250 million, no money actually changed hands. His parents put up their home as collateral. It's worth about $4 million. Two other unknown people also signed documents agreeing to pay $250 million of Sam flees. And let's talk a little bit about the conditions of his bail or just this agreement in general.

You know, he had to surrender his travel documents, stay at his parents' house, agreed to not open new lines of credit or start another business and not enter into financial transactions of more than $1,000. He also agreed to be monitored electronically. So I wondered if you had any commentary on what happened here with the bail? Well, obviously, I think, you know, the SD&Y wanted some kind of win where they could say that, you know, there was this quarter, you know, a billion dollar bail. I remember when Rajas Roshatnam put up $100 million in a secured bond, which I believe was

prior record, but he had $100 million, and then I put up five. Now, invariably, when you end up losing your case and the miracle chance that you win, that bail money becomes part of the government's, you know, what they sort of take from you in terms of restitution of forfeiture, something like that. So it's sort of one of the things I think most people don't know is that when you do get released on bond, you do an interview with the probation office and you have to sort of do a financial form where you disclose. I mean, I recently did one myself. It's 30 pages of virtually anything you own, including even the most, the smallest minutia they asked for jewelry. I mean, they make you itemize every single thing. So Sam would be committing a crime theoretically if he misled on that

financial affidavit statement. So I think he's probably telling the truth. We can never tell with respect to sort of his current situation and assets and things like that. Of course, if you're a conspiracy theorist, and I've heard for many people who believe that, oh, no, he's got some coal wallet, you know, some storage, so forth. And obviously, I don't think you would write, you know, a cold wallet, 200 million, you know, when you itemize your list. But I think, you know, so he's certainly telling the courts officially what he's told everybody in public, which is he's sort of on his last funds and he's in trouble financially.

which I think is somewhat reassuring to a lot of people. I think that it's okay to fail. It's even, well, it's not okay, maybe, but to some people, they may be able to stomach the idea of FTCS failing, including with their money if the founders and sitting there with a big pile of money. So I think there's something commendable to some extent about that, that he sort of said, listen, I'm, you know, this has hurt me too. I'm not sitting here gloating because there are people on Wall Street or other places

when you have a golden parachute, the company's failing, And you still make, you know, $50 million or $100, $100 million. We hear about the stories all the time. I remember the old Pfizer CEO, Jeff Kindler, was fired in essence, but he was fired with a $50 million paycheck, you know, which is a great way to be fired if you have to be fired. So Sam, of course, you know, is getting the obvious, you know, treatment, the public shame, the specter of a felony and a conviction, and he's penniless or close to it.

So I think that, you know, that's quite a lot, you know, and I think that the fact that he's willing to tell the government that as well, I think he is probably telling the truth. So, ultimately, the bond itself with respect to his house arrest, which seems like he's going to be on some form of house arrest, I'd be really curious, you know, I have a friend, Anna Delvey, who has a very weird condition where she not only is on house arrest, but she also can't post on social media, which is very, you know, kind of unique condition. And they can kind of impose whatever condition they want, right? And I think that it sort of depends. And then you also be very careful when you're on bond because bond can be revoked depending on what you say or do. So I think we're not

going to hear a lot from Sam. He's going to just kind of, you know, he's now realized how real a criminal prosecution, you know, is, how it feels like what it looks like. And he's probably finally listening to a lawyer that's selling him not to talk anymore. And he's probably realizing, gee, yeah, I should probably listen to somebody like that. So I think his confinement and his bail condition seem, again, I think it was pretty generous that the prior judge gave everyone bail. There are other judges in that building that wouldn't have done that. I think he is a first-time offender. He is a white-collar criminal.

There doesn't seem to be too much danger to the community. But flight risk does, you know, again, you know, the judge made her decision, and now we have a new judge. So I think, you know, as you said, it might have been negotiated. But regardless, you know, the state of affairs are what they are. And it'll be interesting to see how this new judge will sort of, um, Treat Sam. And why do you think that there were no restrictions put on his internet or social media? Although I guess it's probably been quite beneficial to the government when he's been on the

internet. Let's not restrict him, right? That's what the government's thinking. I think that it's rare in my experience to do that. I think the times I've seen that are people who are really dangerous on the internet, whether they're computer hackers or their sex offenders dealing in child pornography. that's the kind of person that a government really says don't touch a computer. Or if you're going to touch a computer, we want to know exactly what URLs are going to and things like that.

I think for Sam, the presumption of innocence, which is really important, and I can never understate this enough. Everyone's rushing to this conclusion. He's guilty. It's over, et cetera. I would admit that it looks bleak. I said the other day that, you know, one of my attorneys famously defended Puff Daddy where that situation looked worse than this. It was so bleak.

There were hundreds of witnesses. There were tons of ways for him to be convicted, and he was acquitted. So, you know, never say never. And always remember that it's woven into our Constitution, this presumption of innocent. And again, from my vantage point, it doesn't seem like Sam is innocent, but at the same time, what do I know? I don't, and neither does anybody have discovery. They don't have anything that could easily be exculpatory. Sam could have written in a diary to himself, you know, all about this stuff months ago,

And that would be exculpatory evidence if it said things like, you know, I really want to make sure everybody wins here. I'm not trying to take any money. I don't need any money. Like all that effective altruism stuff. If he actually wrote some of that stuff down somewhere to private messages to people, he could show that to a jury and say, listen, I'm not a bad guy. Yes, I'm a bonehead. I messed up my business, but I'm not a criminal. And there are ways to also discredit the testimony of the cooperators.

For example, for Carolyn, I don't see how she's even a witness, to be honest. I think it's very easy to discredit her as, quite frankly, possibly a jilted lover. And this is not uncommon in criminal court where we're that kind of sort of shoving aside of the evidence and saying, listen, you can't believe a word she says. You've ever been in a relationship with that went sour? This is one of those and you can't listen to that. I could see a jury spying that. That makes sense to, again, you have to put yourself in the shoes of 12 ordinary people. And a little he said, she said is something that, you know, I think the average person says,

I don't know if I'm ready to buy that hoke line and sinker. So the government's going to need every witness they can get. And I talked to a source in criminal defense world who's speculating that there are other players in FTX that met with government before Carolyn and that there possibly could be plea deals that were reached beforehand and that the first prize plea deal gets no prosecution. The second price plea deal gets limited prosecution. And the third, well, prize, well, there is no third prize. third prize would be life in prison possibly. But we should talk about Judge Kaplan, who is kind of like a new face in this, you know, really interesting.

Y'all, that was my next question, because we went deep into the analysis on Judge Ronnie Abrams. And, of course, then Friday night she accused, recused herself because her husband's law firm and actually worked with FTCS. So was your take on how lenient or strict Judge Kaplan could be if he ends up sentencing Sam Binkman-Fried? Yeah, I think he's sorry about adjusting my camera there. I think he's pretty good pick.

You know, I think... Positive for Sam, you mean? Or what does that... Yeah, good for Sam, yes. I'm looking from his perspective. So I think you're happy with Kaplan. You could have gotten Preska. You could have gotten somebody that is known to throw people under the jail and bury them,

never to be heard from again. You know, so Kaplan is the only judge that I'm aware of. And I've crossed a lot of judges in my time, both good and bad, fair or not fair, civil and criminal. I've had dozens of civil cases. Federal Trade Commission, the SEC, different lawsuits initiating and receiving. So you get to meet these judges. And Kaplan is the only judge that I know that was not a prosecutor before. So Kaplan went to law school, clerked for a judge, and then went straight to private practice. He worked at venerable firm, Paul Weiss. He was actually a defender of tobacco companies, which was, you know,

interesting. This was a time when, you know, tobacco was really seen as, as, I don't know what they're seen as now, but really, really seen as a scourge and an evil and major, major victories were won over tobacco companies and multi-district litigation and tort claims and stuff like that. So I think that Kaplan then becoming a federal judge is, again, very unusual. You know, almost every judge I've ever come across and I've had a hard time finding one that wasn't a prosecutor. So I think Kaplan can see things from both, perspectives. He is a very ill-tempered man. What everyone says about him is the same, which is if you make a mistake in his courtroom, he's going to take you to task, he's not very forgiving,

he doesn't suffer fools, he's not very patient. That probably is an okay thing for Sam. You know, his lawyers are going to be pretty good. They're going to probably not take off the judge. They're going to understand that. They're going to be creatures in the courtroom that know exactly how to make sure that judge is happy. So I think that's going to kind of be in slight edge for Sam. I think sometimes you'll see government prosecutor teams be relatively young, relatively inexperienced. The average prosecutor, I would say, is around 30 years old. They've been out of college for five, maybe out of law school, of course, for about five or 10 years, if that. And, you know, they can make mistakes.

And Judge Kaplan is known to give it to both sides. On sentencing, despite this really ill temper, he's actually pretty good. He's not as good as old judge, Judge Abrams. But I would say if Sam had an eight on a scale one to ten before, he now has a seven, which isn't so bad. I think you'd prefer Abrams, but I think Kaplan is pretty good. And I pulled up a couple of cases. Interestingly, Kaplan's been around the block on blockchain, as many federal judges have. And some of these cases are analogous.

There's obviously no perfect analogy to FTX. It's a really, really unique story. You're never going to find a case that's perfect. But you do have to remember judges aren't like us fixated on crypto and Bitcoin. all this ecosystem. They don't know much about it. They don't care much about it. They see shootings.

They see drug trafficking. They see visa fraud. They see hacking. They see all kinds of things. And so for Kaplan, you're talking about a 78-year-old man, who's a senior judge, senior judges have half the workload of regular judges. And if you want to put a conspiracy hat on, which I strongly advise against, but seems like the internet's so full of conspiracy theories these days, one of the conspiracy hats is

There are, what, 46 judges, I think, in the Southern District. And he picked, he got a senior judge, which is you have half the likelihood of getting because they take half the workload. So he had about a 1% chance of getting this judge. And you can say that about the other judges, you have about 2% chance of getting all of them other than the senior judges. But he got a fairly good one. There are softer judges in the district like Rakeoff.

But in general, he's two picks and he's gotten two quite soft judges. Again, I personally don't think there's anything to it. It's just the lock of the draw. I happen to get a very mean judge in one of my cases. So you wonder sometimes if there's, you know, this random poll that's not audited. It's not on blockchain. It's this randomly drawn judge system and nobody gets to see proof of randomness there. But there's no verifiable delayed function or something like that.

It's not on Solana. But you get this judge. And then now he's got to sort of go through all these motions. He gets discovery. he gets exculpatory material. He gets to start making motions to exclude evidence or to include evidence or what have you. The government gets to see them back. And we're going to get to see Sam most likely come to New York for these hearings.

The judge can waive that. But we're going to start to see, in my opinion, you can kind of get a sense for even in these very preliminary hearings what judge is thinking. In my case, my judge, this is many months before trial. She raised her eyebrows and she said, it's interesting. You know, in most of the fraud cases, I see, I see lavish life. I see money spent on cars and private jets and homes. And Martin didn't do any of that. And I was like, whoop, this is good.

You know, I don't know if this stick in. And of course, it came up many months from now. So we're going to see things now with Sam that are going to be key pieces over the next year. It'll be a year at least before trial, in my estimation. We could be looking at a 2024 trial, you know, could even be later in 2024, like in the middle or the second half, that would be quite a long way. But I do think this is going to be, you know, an interesting case if Sam doesn't plea, and we're going to see some of those tea leaves come out really quickly. We're going to see Judge Kaplan's emotional reaction to certain

things, even a far wing of a brow or raising of an eyebrow or say, explain that to me more, counselor. You know, those little things can really tip off the way that Judge Kaplan is thinking about and looking about this case. As I said, he's not naive to Bitcoin. There are other people that are and we had to get their first sense of, well, what is this stuff? You know, and Kaplan's seen Bitcoin before. So that could color him quite a bit. He's been pretty gentle on sentencing. There's really, I think, probably the best analogy you can get on these cases. There's two that I thought were really good. So there's someone named Trendin Shavers who Kaplan sentenced. He sentenced him to 18 months. There's actually a better case, Jeremy Spence, who was sentenced to

about 48 months, I want to say. He was a 25-year-old kid. He did a classic Ponzi scheme. He raised around $3, 4 million, and he basically just, you know, did a classic Ponzi. 42 months, not bad at all, could have been a lot more, and it's crypto-related. This is a much, bunch bigger scheme, but in many ways, this is a business failure as much as it is a crime. and even if one could color it as a crime, which certainly it's, that's the attempt being made here, and it sticks, you still can sort of say, look, Judge, I messed up. This is a business and I, yeah, I used the wrong money, but I didn't use it for me. I didn't like go sock this money away. I didn't have Cyanter. I wasn't clearly, like, planning on this. I was just trying to build a successful company and made a bunch of dumb investments. All the money's gone. I fucked up, but, you know, am I a criminal? And I think if you look at that story, I was just versus this Rhode Island guy who, more or less, sounds like he had criminal intent to begin with. You know, they're not that crazy apart. Obviously, the size of the money is so much more, and the impact to the victims is so much more.

But the fact that Kaplan looked at this guy and said, yeah, 42 months is about right. When you could argue I theoretically committed a similar crime and got 84 months from also a theoretically very nice judge, I think that Kaplan, his lack of being a prosecutor, he's an older guy, sometimes some people think that creates a little bit of leniency. If Sam behaves himself throughout this trial and puts on a respectable case, I think he could be looking at a potentially 20 or less, possibly, kind of that ballpark of 20 years if he plays his cards right with the judge. And I think the judge is sort of somebody that could, if he's lucky,

if Sam's lucky, could look at Sam as a younger version of himself or try to identify with him emotionally. Those are the kinds of things that certainly I try to do with my jury and judge. You have to show the human side of you. the judge is going to read a lot about you. They're going to be talking about you as the defendant for the next two years. So to humanize yourself and show who you really are is going to matter a lot. And I think the prosecution knows that. And they're going to try to show the nastiest, ugliest, ugliest, dirtiest emails of Sam ever texted somebody to go F themselves or that he ever said, I'll crush you or something egotistical like that, you know, those will all come up and they'll be shoved right in front of the judge.

And it's going to be a lot of interesting stuff that we're going to get to read in all these motions. So if you don't have an account on PACER, which is the public access to quiver, electronic records, I suggest you make one because this will be really entertaining. And no matter what news you get to read, it's all going to be coming secondhand for PACER. And PACER has the official documents. And people pass around the documents after they come out. But if you really want to follow this closely, I suggest to everyone listening, a PACER account would be an inexpensive way to get a ton of entertainment value at us at the very least. Yeah. And one quick question. I was a little surprised when you said that you felt that Sam could still paint this as a business

failure because from the pleas of Ellison and Wong, it looks like there was no attempt to keep customer funds secure from the beginning. Like she talked about how from 2019, which when FTX launched that they were commingling and stuff like that. So you still think that despite that it could still be painted as a mystery. I don't want to be in Sam's seat. I don't think there's a person in this world that would. But if I had to be in a seat, I would say I look at JP.

Morgan. I look at Citigroup and I see that they use customer assets to make investments. Yeah, but banks are not crypto exchanges. You can't do the same. Your Honor, I thought that I could and I was maybe a little over my skis and a lot over my skis, but I really thought that I would take that money, double it. Our firm would go bigger, stronger, better. And, you know, it was wrong. It was stupid. But this wasn't. an attempt to enrich me. This wasn't an attempt to steal. If I wanted to steal that money, I would have. I didn't. I tried to make investments. Those investments failed. I have to pay the price for that. But don't confuse me with somebody that was going to take the money and run or somebody

that was trying to lose the money or something like that. That's the, I mean, we're trying to salvage this, right? When you're in the defense seat, and I've certainly been there, it isn't always about winning. It's about getting to that softest landing of, And in my case, it was the argument we sort of tried to make was, okay, even if you accept that there was fraud, nobody lost money in the end. Now, all our investors made a lot of money. So you might have been lied to, but on the plus side, you know, it's not so bad. And for Sam, he's got to do something similar where he says, okay, I know I wasn't supposed to use the money, but my intentions were pure. My intentions were to make this healthy company, of course, make money for everyone, make better services, et cetera, et cetera.

The counterpoint to that is, well, you were greedy. You took that money to make investments. Who would the investments have benefited? The largest shareholder of FTCS because the depositors, you weren't going to share the upside with the depositors, right? You're just going to use the depositors money to write some lot of tickets and you hope lot of tickets would pay off. If they did, the money goes to you. Not to the person that deposited a thousand dollars in FDX because when they deposit a thousand dollars of FTCS,

they withdraw whether or not you made money on your silly investments. They still get the thousand back. You know, you were going to give them a cut of these startups that you were creating or distributing or whatever. So I think that it's going to ring a little hollow, obviously. And especially if they can pin him down on saying, well, you knew you weren't supposed to do this. If there was an email, if there was a meeting perhaps where Carolyn said, Sam, you know, we can't do this. And he said, you know, it's going to work out. Don't worry about it. You know, which is probably kind of what I think would probably happen. But, you know, nobody

knows for sure. And we're going to have to see that testimony. Again, if I'm Sam's lawyer, I'm already coming up with plans on to discredit the other witnesses. I had 26 witnesses. testify against me roughly, maybe it was 30. I prepared a dossier for my attorneys of basically an attack plan and an introduction to the person, their photo, an attack plan. Here are their weak points. Here's where you have to hit them. And you know Sam's going to have something not on specifically that's a kind of weird review, but it's going to have some information or some knowledge at the very least of what are these people's weak points? You know, perhaps Gary, for instance, is nervous person. You know, that's something that a defense lawyer can exploit.

Obviously, we know Carolyn had a romantic involvement with him. Huge, hugely exploitable. If you're the government, you do not want that as your start with this. That is somebody you can put on the stand and say, well, you know, you had a relationship and she's going to have to have the poise of a brilliant actress to say, well, that was the past, you know, and the relationship didn't change the nature of what we were doing. You know, and she has to have to be completely nonplussed and completely unflappable on the stand, which is not easy to do with a good defense attorney needling you and needling you and needling you and needling you,

you will eventually kind of wither and admit, yeah, I had a relationship with this person, but, you know, it didn't affect the situation. And, you know, you can't easily get flustered on that stand, knowing the whole world is watching. Interestingly, I don't think we're going to get a televised case in this case. And federal cases are never televised. So we won't be able to do that. But court is generally an open process. So if I were retired and had nothing to do, this would be extremely fun. It's better than a baseball game, right? I mean, you just, you just, to go into court, sit down, and you know, you can't really, really bring food or drink, but, you know, but I think having a front-roast sicket to this FDX trial would probably go for quite a lot of money. There's usually the right side of the galley where people can sit is done with the journalists, and the left side is done usually just for the family. But, you know, there's an overflow room where it's sort of monitored, but this funny, like, oh, anachronism, I guess, of court has to be open for the public. about 30 people can fit into a galley on each side.

So it's not really open to the public. So they make this overflow auditorium. Well, the overflow has another overflow room if the case is big enough, as it was in my case. So, you know, and a lot of this is boring, minutial, like, you know, procedural meetings are very boring. But you get a glimpse of Sam. I mean, you really sitting, could be sitting 10 feet from you or five feet from you. And in fact, people have been known to lunge at each other in these open meetings because you're right there, right? And it can actually be quite dangerous.

I was recently saw a case where the defendant was so mad at the prosecutor, he lunged at her. And that almost got him remanded. And they had to pull videotape and so forth. So everything's in this very, like, closed and small environment. You know, you can be an elevator with Sam. I was constantly in the elevator with journalists covering my case or sometimes there were fans or sometimes they were people that just wanted to bend my ear over something. And we'd have to be like, listen, you're in the middle of something. And pretty important here.

I can't talk to you about stocks or something about that. You know, so there'll be people that are really trying to just, you can get a minute with Sandbank. And every single time he comes to the court, he has to walk down the same street you do. He's to walk down the same, you know, opening you do. So it'll be really interesting to see how he navigates that.

I, for instance, got very flustered when reporters, those pesky people, would put a microphone in my face and ask me like a hard question or something like that. And there'd be a camera crew. CNBC is going to be shoving cameras in this guy's face for the next year. every time he has to go meet. The next time is January 3rd, I believe, where he has to enter presumably a not guilty plea. You never enter a guilty plea. Even if you intend to enter a guilty plea weeks or months from now, you don't do it on the arraignment date. You know, even if you have

100% yeah, even if you have 100% confidence that you're going to be pleading guilty someday, you plead not guilty now. Why? Because in the last, in our last conversation, you said that you would urge him to plead guilty like as soon as possible. It still has to be negotiated. You know, so if he went to, on January 3rd, he went there and he said, and the judge said, how do you plead? And he said, anything but not guilty, everybody's draw the drop because there has to be a guilty plea hearing. And that's very structured. There has to be prepared sort of remarks from both sides. It's a whole orchestrated thing.

You don't just plead guilty out of the blue like that. So he'll be pleading not guilty. Even if he wants to plead guilty next week, they'll still be pleading guilty. And sometimes a judge will throw out, Your Honor, we're in the midst of. A negotiated, you know, they use this kind of a euphemism. They'd say something like, a negotiated ending to this proceeding or something like that, you know, basically guilty. And so they'll kind of hint to the judge. The judge will sometimes just ask, like, is there, or is there any progress towards a resolution to this case? It's like, you can't settle these things

in any amicable way. You have to, you're settling them with, with jail time. So it's a very euphemistic thing. But the judge will probably ask that. And we may get our first glimpse of the prosecution saying, no, your honor, there's no progress. Or, and, you know, again, body language can say a lot. And the judge could ask something in response like, do you anticipate there will be, you know, a resolution to this case short of trial? And again, the prosecutors will respond in a way that, you know, will sort of tell us or not tell us. Or maybe the defense will respond in a way that will tell us or not tell us what they're thinking. And we're going to get this really rich experience watching these people work. The prosecutors here, this is opportunity of a lifetime. You can make your whole career and then some. and become extremely famous in this case, or you can flub it. The same thing with the defense. You know, we've seen with the Johnny Depp trial, some of those lawyers become celebrities in a way. And I think, you know, this is a time to shine.

We're going to get to know these people really well. The people that will be in the courtroom every day covering this trial will have a treat because you really get to see those personalities, the little frustrations, arrogance sometimes from some of the attorneys, the meekness sometimes of some of the witnesses or attorneys. Like you get to really see this play, almost a Shakespearean play, envelop before you. And again, you know, for a front row seat, I'd certainly pay money to be there. And just quickly, earlier you said that there were two cases that Judge Kaplan, but you didn't mention a second one.

When was the second one that's similar? Yeah, I think the Spence case was pretty good. I will just add one more thing in the Spence case, where the judge gave him a lenient sentence because he felt that Judd that Spence, the fraudster, had. redeemed himself quite a bit after the fraud. So if you're Sam, the first thing I'd be doing is trying to redeem myself, you know, maybe through some kind of not-for-profit or something like that, because now we know the judge looks at that. He looked at that with Spence, and he took that into consideration. And that probably could have cut Spence's sentence at half. So if you're Sam, I'd get busy

doing something to do that. The next case is not a Bitcoin case. It's very different. But again, I want you to think about these judges the way through the lens that I have, which is through a lot of experience, they don't necessarily say, okay, this is my Bitcoin column, this is my murder column, this is my fraud column, or my drug column, and this is how I sentence in these three columns. They don't think of the world that way necessarily. I think that they will look at other crypto crime and kind of see apples to apples. They'll look at other judges they're friends with. If I don't know who Judge Kaplan is friends with, somebody probably does know that.

And if you're on Sam's team, you probably want to know that ASAP. But let's say he's very close with Rakeoff. They could be fishing buddies. We just don't know. He's going to look at, well, what Rakeoff do with that one case that was really bad? You know, and they'll sort of talk amongst each other, water cooler talk to figure that out. So for me, the other case that speaks a lot to me is this very strange case of Warren Stellman. And Warren Stelman was a telemarketing fraudster, and he was from the Caribbean.

And again, you might say, what does that have to do with FTX? Well, there's a deeper level of deception here than with some of the other cases. And there were elderly victims. And I'm trying to get a sense for how mean can Kaplan be. This was a 75-month sentence. So what is that, roughly seven years? Six years, six years. This was a case that was pretty bad.

He basically preyed upon elderly victims. took quite a bit of money from them and still only got, you know, 75 months. So Kaplan could have easily sort of, you know, thrown the book at this fellow Warren Stelman and instead sort of gave him a relatively modest sentence. You know, it's actually hard to find too many cases where Kaplan gives 10, 15, 25 years. It was difficult for me to find cases like that, which is a great thing if you're Sam. It means that there's a chance you can walk away from this with 10, 15 or 20 years, you know, pointing at Elizabeth Holmes and saying, why don't, why don't you give me that? You know, that was a billion dollar fraud. We're kind of the same age. I actually built a real

robust business. That business was kind of completely built on lies. I made a big tactical error where I took the customer's money and invested it and lost it. But that was, that's kind of a little a little more innocent, if you ask me, than Elizabeth Holmes trial. Now, so 12 years, you know, maybe that's what you hope for if you're Sam. I don't think you can do a lot better than that. And again, with Kaplan, he's not thrown 20s and 15s and 30s out like it's like they're going out of style. He's sort of giving these relatively modest sentences. So there's a chance if you're Sam that you can live to see the light of day with Kaplan, I think. And again, it's really important that he behaves himself, according to Kaplan himself. It's a chance. It's a chance. It's a chance. It's

It's very important that he tries to redeem himself somehow. I think he probably thought he was trying to do that on his little PR tour. But he really has to make maybe a more earnest effort to do that, whether that's, you know, again, he's probably limited with his house arrest and what he can actually do. But maybe there are ways that he can really help. And again, I think the best bet other than fighting is to throw yourself into the murderousy of the court, plead guilty, redeem yourself, show that this was a mistake. And again, maybe if he's really lucky, he can.

get something like 10 or 12 years, in which case you do roughly half of that, maybe 67%, two-thirds of that. You know, you have to do 85 by law, but there's other little things you can do to get a lesser sentence. So if I'm saying, that's a big win. Six years in prison is doable. You're not going to go to, you know, the bad places in prison. You're going to kind of have a relatively subdued environment. So if I'm Sam, that's sort of, I think, your best case. And Kaplan, it sounds like it's possible. Again, his guidelines will be astronomical, right? The guidelines will be, you know, off the charts. But Judge Kaplan, there was a New York Times article that covered him about 20 years ago that said Kaplan makes up his own mind when it comes to guidelines.

He doesn't consider the guidelines to be too important. There are some judges that really were schooled in the guidelines and they treat them really seriously. And there's some judges that say, you know, all that math, you know, I can't take the individual and all the facets of this case and distill it down to a table. you know, that's too dehumanizing to do. And I think so many judges have gone past the guidelines and said, I'm going to make up my own mind. And in this uniquely singular case, that makes more sense to me. Despite that, the guidelines will still say sentences got alive. And he's not going to take a lifetime sentence to give the guy five years, right?

He's going to look at the guidelines and say, that's a big ask, how much can I really depart from this? I can't let him walk. I can't give him five years. But it's, I think, in the realm of the possibility that they can get 10, 12, 15, which any of that, I think, is a big win. You can do 10 or 12. Any human being can do it. Take it from me. But you can't do, you know, 30 or 40.

I think that's the kind of sentence that, you know, is really, there's almost no words for it. Right, right. But, yeah, as we discussed last week, that is what the guidelines say. So it would definitely be a departure if he gets a significantly less. All right. So in a moment, we're going to talk about the. plea that's going to take place next week. But first, we'll take a quick word from the sponsors who make this show possible. Join over 50 million people using crypto.com, one of the easiest

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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. Back to my conversation with Martin. So as we were discussing, you were saying Sam is most likely going to enter a not guilty plea. And you kind of talked about how this could potentially go to trial. But I think most of us think it's probably smarter, at least, for Sam, if that doesn't happen.

So can you talk a little bit about the other scenario of, you know, what? So you're saying next week, he'll enter not guilty. eventually maybe they'll get to a plea agreement. Is it at that point that he would enter a guilty plea? Yeah. So he'd hammer out. So next week, I mean, it's a 99.999% chance that he just says not guilty, Your Honor. And it's very perfunctory, very formalistic.

There's not much to it. I think the prosecution would, you know, be shocked if he said anything other than not guilty. There's a little debate in the community about whether you say you use that time to, like, add a word or two in. you're really not supposed to, but if you want to set the judge the tenor of the case, like if you're really going to fight, you might look the judge in the eyes and say, 100% not guilty, absolutely not guilty your honor, or something with some gravitas to sort of show the judge that you mean business. You might try to look wounded that, you know, this is your shock that that you're here.

You know, I do think those things matter a little bit. But wait, you're saying even if he has the intention to later plead guilty. Well, that's my point. I wouldn't do that if I were intending to plead guilty. And that's where I wonder if we can read some tea leaves here. If he looks dejected, he looks beat up, if he's just sort of not defiant at all, if he looks like, yeah, not guilty, Your Honor. You know, we kind of know what's going on in his head.

If he's standing up tall and proud and saying, not guilty, Your Honor, you don't get to say more than that. And you'll be cut off if you try. But, and it's not the time to do it. And his lawyers will tell him that. I don't think I added any words. O.J. Simpson famously added, you know, the absolutely 100% not guilty. which was, you know, the headlines for days in newspapers.

So if I'm Sam, I try, you know, if I'm not going to plead, I'm going to try to look defiant, look proud, look like I'm sort of surprised and wounded that I'm here. This is a travesty. I just made a business mistake. You can also, again, I want to go back to what one thing we were discussing because if he doesn't know that using the customer funds, if this is a story, doesn't know that using the customer funds was illegal. or not permitted at the very least, he could argue that as long as his mental state was good, that it's not a crime. And there's so many different charges here. And I think we'll see a superseding indictment. He might face 100 counts, for instance. It's very hard to be a case like that. And I would imagine that they're telling him, here's the indictment. It's a page long or a couple pages long. There's eight counts. Free guilty to this or the next indictment is 150 counts. And

your plea deal is going to look a lot different. And that's the sword that you use if you're the government. And I asked my attorney once, I said, if you have a case with 100, you know, 100 charges, how do you how do you do you do that, like, formalistically? Like, how do you realistically expect a not guilty verdict? And he said, Martin, I once heard the word not guilty from a juror, the foreman of the juror, 54 times. Asked to count one, not guilty.

Asked to count two, don't guilty. You actually have to go through each one. So if you're saying, you don't want a superseding indictment, almost three. certainly there's a superseding indictment waiting. And what's interesting about the way the superseding indictment works is the government typically will hold out on doing that to see how that negotiation is going. They're going to call his attorney and say, so let's talk about a plea. What are we doing here?

What do you want to do? Are you going to plead to the whole thing? That's what we want, et cetera, et cetera. And if the lawyer says, a bad news for you, my client's not pleading. They say, okay, you know what? No problem. We're coming with a superseding indictment. We're adding, in my case, they have.

have seven counts, they added one, which wasn't that big of a deal. They thought about adding more. In Sam's case, every single client, arguably, every single time he pitched an investor is arguably a new account they could add. They could theoretically add 200 counts here if they felt like it. You don't want to make too much of this, though, if you're the government, strategically, you're going to have to prove each count. And if your evidence isn't so great, maybe you just go with the best stuff, and that's enough to sort of give them life. The other thing you see a lot of, and this is really going to be bad news for Sam, if the government thinks about doing this, and they probably will, is they'll say, oh, you're a tough guy. You don't want to plead guilty, interestingly. Are your parents tough?

Is your brother tough? Is your, you know, et cetera, et cetera, all these people you care about. Are they tough? Do you want to put them through hell too? Because it's not hard to indict somebody. And the government will often, and I think this is one of the reasons I don't like the way the DOJ works, is they will do this happily. They will say, I have a lot of friends I met in prison who said, listen, they said, plead or your wife's getting indicted. And that's a really hard thing. Sam's not married, but it's a really hard thing to stomach. And they've drug grandmothers into cases if they had to. Because let's say, for instance, a drug dealer who's 20 years old, lives with his grandma, and grandma knew that there were drugs coming and going from the house. Well, it's not hard to put

grandma on the stand and say, of course you knew. This was your grandson. You must have been blind not to know. And it's a sad thing, but the government will do whatever it takes to win. And if that means putting a seven-year-old grandma, or in this case maybe, a 60- or seven-year-old father or mother, into the witness table or into the defendant's chair. They don't care. You know, so it's something that if I'm the prosecutor, again, the dirtiest thing to do, I personally would never, ever do it, but if you're the prosecutor, you have to be thinking, just how involved were his parents? Were they aware of this stuff? Is there one email from a son to father or son to mother that says, dad, can I use customer funds? And any email like that, immediately, it's an indictable

crime. It's a crime to know of another crime. It's called misprison. It's a very weird word. I would wager very people who ever heard this word. It's misprison. Again, look it up. I didn't make it up. I was shocked to see this word to know of a crime and not reported. That's a felony. So you can be charged with misprison. And it carries jail time. And nobody wants to be indicted. So if you're you're Sam's dad or mom and you're the government and you're not getting what you want out of Sam, you can get what you want out of Sam by threatening that. Again, it's not nice. I personally think it's unethical, maybe even a little unconstitutional, but it's the way it works. And that's why you never want to be in these crosshairs. So I personally didn't have a vulnerability like that,

but I've known many, many people in this case where, you know, there's no, nothing protecting, inditing a spouse or other people. If they wanted to, they could say, listen, well, not every single person that worked at FTX. You know, if you care about these people, are you going to let them do that, Sam? And again, he might be defiant and say, you're going to indict everyone, die my family. I don't care. You know, I'm going to trial. I'm going to defend myself. And that kind of posturing can work. You know, if you have that kind of posturing, you might call their bluff and say, okay, indict my parents. Try it. We'll fight that case too and we'll win that case. This will all be like a circus. So you don't want to overbet your hand if you're the government either. You know,

it can be very, very tricky to navigate. How far do I push this versus, you know, because if you push too hard, you can get a person like Kaplan saying, wait a second, this seems too much. You know, you're indicting the parents. You're indicting the 60 people that have nothing to do with this. Maybe this whole case is a sham. Maybe I've got to start thinking about this case differently. And you don't want that if you're the government. You want to hit, hit them and hit them hard with factual good stuff.

And I think there's plenty of that here. But again, if there's some burning desire, they really, really want a guilty plea, there are ways to sort of, I hate that. to use the word coercion. But personally, I think it's coercion. A government person would say it's not coercion. We're just fully prosecuting the crime of all the crimes we know about. And again, technically, that is their job. So it would be really interesting to me to see how the parents come out in this. I don't know their involvement. They could have no involvement. We know that they were on payroll at some point. That's usually enough. If you're on the payroll of a company that's committing crime, you know, usually that's enough to say that that's good enough. For example, if I was Sam's

father. Very simple question. Son, I saw you bought $500 million of Robin Hood stock. I'm pretty sure you don't have $500 million. So you've never had a job that paid you $500 million. Did a bank loan you $500 million? That, by the way, that was my guess. I'm in the startup world. I've been in the startup world for many years. I once had a public company that was worth $500 million. I own 20% of the company. So I had a $100 million net worth just in that stock. I asked every bank that existed if they'd loan me money against my stock. And I said, I'll even take 2%. So it's got to be a safe loan.

I have $100 million of this stock. It would have to go down 98% for there to be any risk to your bank. I was declined everywhere. And this is before I had any controversy because the bank said, listen, it's a stock. It's, you know, we're not comfortable with this. Elon Musk gets a margin loan from big banks. It's not easy to get a margin loan on a privately held company. let alone on a publicly held, let alone a privately held,

which Sam is a privately held company. If you're Jamie Diamond, you might say, I like this kid, he's worth $30 million on paper, $30 billion on paper. Let me rent them $500 million. You know, what's the worst that could happen? And obviously, as a bank, you have to think about what's the worst that could happen. That's your job to be really nervous about that. And so Sam never got a loan like that.

Sam just took his customer's money. He wanted to buy $500 million. Robben, no problem. Customers money. I want to make good investment. He even had the gumption to say, I'll lend Elon Musk a billion dollars or something like that. I'll co-invest with Elon Musk.

I'll use customers money. So my estimation, not knowing him personally, not being in his friend's circle, is that's how he was getting access to all these funds. His father must have asked him, son, how'd you buy that? How do you have all these palatial things? Like, is Jamie Diamond lending you this money? Is Morgan Stanley lending to this money? Is a Citigroup lending of this money? Is a foreign bank lending to this money?

It's a private investor saying, I believe him so much, I'm willing to lend you this money for 7% interest or 10% interest. You know, when you have this big paper net worth, as was the case for me, different from Sam, a couple of zero is different. You want to spend that money. You're saying, I'm rich. You know, why can't I have some of the things rich people have, right? I'm a hundred million dollars on paper. And I want a better apartment.

I want a better something. And if you're Sam, you save that. And the traditional way to do is to go get a loan or sell some of your stock. In this case, he didn't do either of those. You just did this third route, which was seemingly illegal. And again, his father, working at the company, knowing his son so well, maybe even having thrown on private jet of his sons or seen his son's home, most parents visit their kids. Look around and you say, wait a second, this doesn't look like the apartment you had when you're at Jane Street.

This doesn't look like. This is weird. What happened here? Do you have a salary? What's going on? And at some point his father must have known some of this was going on, or at least maybe could have inferred it. And I think that he could have asked his son, are you using the deposits? How are you doing this? And if that conversation ever took place, unfortunately, his father is now also has committed to crime. And I think, again, the government, you know, has to know stuff like this. And they know, they have this playbook that they use against drug dealers, against mafia people. They have ways of sort of dealing with these very irascible people that are very hard to pin down.

They have codes of silence in many cases in the mob and things like that that are kind of hard to penetrate. And they can use these tools that they've built up over the years like RICO or other things that like using the family as leverage, you know, there are ways prosecutors can come to bring to bear a guilty plea. Sorry if those are long-winded. Well, but what I wanted to ask was so since you're saying that the best deal for Sam would be to eventually plead guilty and, you know, next week he's most likely going to plead not guilty, which it sounds like what you're saying is that will kick off some period of negotiation. They may be negotiating right now, you know, and like I said, At the status conference, they may say, Your Honor, my client's pleading not guilty today,

but we are engaged in productive discussions with the government. And the judge might look down as, and he's doing this every day for the last 20 years, and I'd say, okay, when do we, when could we expect some kind of resolution? And the parties are looking to say, a couple months. Yes, no. Think sooner than that. You know, the judge is like, okay, because the judge has to organize his schedule and say, do I have to block out six months for a big trial next year, you know, because he has to

reside, right? So if he's all these other trials, he doesn't want to block out six months and say, and he might actually probably won't be this meeting, but probably around March or April, he had a trial date. And even if that's tentative, even if nobody has plans on doing, he has to do it just in case, because he needs a block of three, four months. This is a really complex case. A two, three-month trial isn't out of the question. Even a six-month trial isn't on the question. That would be terrible for all parties involved. My trial was five weeks, and it was the longest five weeks of my life. So to block out a good six months in late 23, early 24, mid-24, even late 24,

he's going to have to do that and set a schedule. If you're Sam, every day free from here to your trial is a happy day, knowing full well that all the days after your trial may be been incarcerated. So if you're Sam, you're hoping for something with a 2024 date, and you're hoping Judge Kaplan already has conflicts. His 23 is booked up with trials, right? That's the goal. And you're even going to pitch that.

Oh, yeah, this is going to be a six-month trial. The government says, yeah, it's going to be a six-week trial. You just schedule it for, you know, it's a holiday period. Right, and there's tactics to that. As a defense attorney, you don't want the holidays. You don't want the summer. And there's other people who disagree with this. When it comes to a jury, we're going to probably do this again, Laura,

we're going to talk about, okay, well, do you want a woman on your jury? Do you want a guy in your jury? Every attorney has their own, like, little system and tea leaves, and it's a rush to sit there. And Sam's probably going to make the final call on some of these jurors and going to say, no, juror 17. We don't want juror 17. I saw the way she looked at me. She's going to convict me.

Let's get to her 19. You know, who's in the voir dire, which is the jury statements, they're going to have to say things like, have you ever had crypto. Do you know what crypto is? There's going to be really interesting to see people say, yes, I had money on FTX. Well, that's probably going to disqualify you from sitting on this jury. But let's say you had money in finance. Does that disqualify you? I don't know.

Did you hear about this? It's going to be hard sometimes to not be able to find people who have never heard of this, but you probably can. If there are people that say, well, if you don't know about crypto or you don't have a crypto account, is that because you hate crypto? And will that color your judgment? There's going to be a mass-speaking mystery if this goes there. But again, it'd be smart for Sam to settle here and find a if it's possible, right?

Again, we've talked about this last time. If they're telling him, plead a life, I can't do that. If you're telling me plead of 50 years, I just can't. You know, what's the point? Let me at least go down swinging, spending a bunch of money, you know, fighting this stuff. The other thing that's really interesting here is I understand that Sam's family has some money, but legal cases are expensive. My legal case was over $15 million.

Some of that was paid by insurance. Some of that wasn't. Some of those paid by me. Insurance is something that reliable smart companies have for their executives. I have no clue if Sam had insurance. Apparently they didn't. You know, so that means, a defense attorney is going to have to be paid, and they're going to be paid a lot.

I mean, for a marquee defense attorney, you are talking about $5, $10 million to go to trial, and they want that money now, and they will leave the case if they don't get it. So these aren't cheap, you know, folks. And I think that, you know, I wouldn't want to go to trial with an attorney that costs less than, if I'm Sam, less than a couple million dollars at trial. And I think that would be because you have to pay for each person. A trial is like really just hiring a whole law firm for months or a year at a time. I know it was remembered in a similar case to mine.

The tab came and was fully covered by insurance, this tab, came out to over $25 million. And basically, because insurance was paying for it, the company, the defendant put on the biggest defense he could, which is what you would do if your life was on the line, right? And Sam's life's on the line. So if he wants to put on... But are you implying that because... he doesn't have money to pay that kind of lawyer that he probably is incentivized to not go to trial? Yes, that often will come into play.

It's not exactly where I was going with it, but to answer your question, many, many criminals will, when faced with the prospect of a trial, well, they need an attorney to go to trial. And you can go to trial with a federal defendant. It's not something I would do. It's something Sam in his right mind would do either. But let's say you're his parents. And I don't know, let's say you have $10 million. Do you want to spend every single dime you have defending your son? You know, maybe you have other kids, right?

Maybe you're Sam. Do you ask your family for that? Do you say, mom, dad, we have $10 million total? I need you to sell a house and pay every dime, you know, in my case that I'm sure to lose. You know, that's a tough ask. I think that's really punitive. If you have a billion dollars, then you say, okay, let's spend $100 million defending ourselves.

Let's get the best lawyers in the world and then some put every single lawyer. In fact, I was familiar with this crazy case named a guy named Reza Zarab, who was a Turkish money laundrom. And this guy was so wealthy that he hired virtually every criminal defense attorney of note, including my lawyer, but also Rudy Giuliani and many other very big names. And he hired all of them, even though you can only bring like one lawyer to question people at trial, really, I mean, maybe one or two. He had like 30 of these people. And the reason was resources and links and connections that, you know, one of these lawyers is going to have a better relationship with the prosecutor. One might have a better relationship with the judge. One might have

better relationship here. One might be able to secure me bail. You know, like you're just like, I need them all. You know, that's the full court press that Sam, if he had insurance, if he had, and that's the business having insurance, it's called DNO insurance. It's a directors and officers insurance. And the insurance company would fight it. And they would say, no, the company's bankrupt. They can't pay. And the trustee would fight and say, no, we can't use money fraudulately gotten to defend the fraudster. No way. And so it's going to be really interesting over the next several months, we're going to start to see some of the stuff as to who's the attorney, what are they cost? We're not going to know that necessarily, but we get some sense of it and who's paying.

Because it's not hard to get an attorney to, you know, negotiate your bail and stuff like that. The bill for that might be $50,000 for an ordinary person, a huge expense. For Sam's professor of parents, maybe not, but eventually it gets very expensive. And it gets into the millions of dollars and the lawyers will be point blank and say, listen, unless you can show up with $3 million by kind of like next month, I'm out of here. And I've seen many cases where a client, a defendant will go through half a dozen lawyers. Eventually, the judge says, this is nonsense. If you can't pay for a lawyer, we're just appointing a federal defender. And there's nothing wrong with federal defender. In fact, in the Southern District,

federal defenders are some of the best attorneys there are. But they are swamped. They have a ton of work. And they often have good relationships with the judges because they're in there all the time. So some great defense lawyers haven't seen a judge in years, and they don't have those relationships. Whereas the federal defenders are there all the time, and they can really impress upon the judge. Like, I really think my client's guilty or innocent, I should say, because I've shown you lots of clients, and they're not always. This guy really believes innocent. And that means something coming from a federal defender. It doesn't mean something coming from somebody who's not in the courtroom every single day like a federal defender is.

Again, the federal defenders don't have the reputation as being the greatest because, you know, you want that superstar. lawyer, the Jose Baez is the best lawyer at trial. And Ben Brathman, my attorney and Mark Igniflo, my other attorney, I have to give them the plug. But theoretically, if money was no object at all, today I would either go with Ben, who did a marvelous job for me and Puff Daddy and many other famous clients he's had, like Michael Jackson and others where money was no object. Or I'd go with Jose Baez, who Casey Anthony and Aaron Hernandez and many other folks have hired, he also seems to be able to tease and not guilty out of the jury somehow. And it's very much theater.

You know, I think Sam, you know, if you go sort of the egghead lawyer that's like very smart and technically good, that may, that person may be terrible in front of a jury. You know, you really need to tap dance and be a comedian and be an action star and all these different facades that the jury can buy. And they end up sort of like an election. It's whether they like you more than they like the prosecutor. And the prosecutor is making out to be a bad guy. And you have to sort of find a way to sort of be a chameleon and show who you are to this jury.

And the best people that do that are not always the best cerebral lawyers, but they're cerebral in a different way. And so it'll be really interesting. If we got to try it, it'll be a treat, especially if Sam testifies himself, which is always advised against, that'll be an even bigger treat. But we still have some wood to talk between now and then. All right. Last quick question. Last week, you were talking about how you took the time in prison to learn a lot about crypto. And I wanted to ask you how you did that because I didn't know what your internet access was.

And you also mentioned something about people maintaining businesses from prison. This might have been after we had wrapped the interview. But I also wanted to ask, like, if Sam ends up there, I don't know if you thought he would be able to do that. Yeah, so I probably could. So I learned a lot in prison in general. I still had a staff. And the same staff from before has continued throughout until, today. They used to joke that I was in the New Jersey office. My prison was in New Jersey. We didn't

have a corporate office there. So I had people helping me, assistance, sending me books, family members, great friends. They would just send me, I had so many books I couldn't read them all or store them all. I would have to lease space from other inmates. I would give them cookies and food and stuff like that. And they would hold in their lockers, gigantic number of books about crypto, including your book, which I didn't get a chance to finish in prison. But many other books about crypto and other things. And I would get white papers and things like that in prison. I would jump on the prison phone where we were limited to 15 minutes and I'd have my brother go down the entire coin market capitalist as fast as he could with prices. And I had a contraband

cell phone depending on the prison I was at. So I could use that sometimes. It wasn't always reliable. Sometimes I have to sit in a toilet at 3 a.m. on a blockchain explorer like looking at different wallets. And, you know, I'm also developing my own software now, some financial information software, as well as sort of simulation software, and both could be, I think, helped by the blockchain. But, you know, for me, crypto is sort of an additive thing to a lot of different software. It's not necessarily transformed.

In some cases, it's absolutely transformative. In my sort of view of the crypto world and my startups, we're focused on taking existing software, making it better in a lot of ways that have to do nothing with crypto and also ways that add crypto. So I was able to sort of think a lot about, well, how would I go about, you know, doing a software startup when I got home, and how would I put that together?

And how would I sort of use the best technologies in all kinds of things? You want the best database, right? You want the best front end. You want the best middleware. And crypto sort of adds a little bit to every software company can use a little bit of crypto to add value to their stack. In some cases, it will be really transformative, like in certain financial applications. But in some cases, I think I saw BMW today, said they're going to do their rewards point system on the blockchain. Well, that makes sense.

You know, that's sort of a not going to change. the face of BMW, but it's a little boost that you can use to add your business. So that's kind of my general philosophy on crypto. It doesn't have to be like the sea change that changes everything. It can just improve a facet of your business five or 10%. So I was lucky enough to read so much about ECC and other sort of relatively esoteric parts about crypto that a lot of people don't know. And then also sort of the more mundane stuff, I followed NFTs and stuff like that. I actually onboarded a lot of people onto crypto in prison. So I get guys metamask accounts. and we bought their first NFTs and stuff like that.

It was a lot of fun. You know, there were even the day I joined one prison, there were a cadre of prisoners trading ICOs. So this was really funny. And I was just sitting there like flabbergasted, like, man, times have changed. I figured you'd be all like selling drugs or stuff like that instead of flipping ICOs. And they said, oh, we do that other stuff too. But wait, wait, so they have computers or an internet access or?

This is contraband cell phone. So this is a cell phone you pay $500 to some cases $5,000 of cash to some go-between who probably gets it from a corrupt guard at some point. And some prisons know they have a contraband cell phone problem, don't really care. They kind of are like, it's kind of inhumane not to let people go on the Internet, but that is the rule. And then some prisons are really cracked down on it, and they don't accept it zero tolerance whatsoever. So if you're smart and you kind of like keep it under your pillow or something like that, And, you know, you can find a way to get away with it. But again, it depends on leniency in the prison.

The lower level prisons that are catered prisoners with lower sentences, they're much more lenient. They kind of are like, yeah, whatever, you can have a cell phone. What are you going to do with it? You know, the penitentiaries and the mediums and stuff like that, it's harder. It's more expensive. It's more difficult. So if you're Sam and you want to stay in touch with this stuff, which, why not?

You could, I was there chatting with, you know, I had different chat groups. on WhatsApp that I would correspond with. I probably went too far because once people start talking about how they're talking to you in prison, you know, the prison could find out and you can get in trouble that way. But you try to keep people a profile. But if you're Sam and you go to, you get a 10-year sentence or 15-year sentence, you could feasibly be keeping tabs on crypto, maybe even using theoretically if you had a cold wallet or some other wallet. You could, you know, I certainly, you know, did it myself.

You can certainly transact a bit. you could trade crypto theoretically from inside jail. You could even retrofit your quarters into like a crypto trading center where you know you get your bunkmates in on the action and you know because they're all looking to make money too. So there are ways to sort of survive. I heard Sam Waxold, a famous biotech CEO who went down with the Martha Stewart scandal, that he was he basically kind of made that prison his like new office. So you can you can improvised, but of course it's nothing like, you know, being completely free or anything. But it's not impossible to sort of, you know, stay in touch on things and then also possibly transact.

You can also call your family and say, hey, can you do that thing I asked you to do? And they'll say, oh, yeah, I did that thing that you asked me to do. And that was sort of a traditional way of talking to your family or friends and getting them to do things without necessarily, you know, that all the calls are recorded. So you can still kind of write down something and say, here's here's my public-private key, go send this money to, you know, tornado or something, some crazy crime like that. You could perpetrate that theoretically still while you're in prison. And then you could ask, like, did you send it through the tornado or the cyclone or whatever? You've come up with some code word. And they said, yes, yes, it's, the weather's gotten better here or something like that.

And, and, you know, you would do that in the face-to-face visit. So there are ways to do all of that. I think if you get a really bad sentence, I think those options are off the table. And that's why people are willing to plead. Sometimes their lawyer tells them, listen, five years, I can get you to club fed. You might have a cell phone. That's honestly one of the great things my lawyer said. I said, when I was sort of looking at, okay, well, what's going to happen here? I said, I hate this idea of prison. I'm not going to be on the internet.

This is he said, don't be so sure. And I said, what? And he said, there are ways to go on the internet in prison? And I said, are there? And all of a sudden, my whole countenance, my whole outlook on life, right? Because when I heard that, I said, there are? You know, so I think if you're Sam, you know, it's not the end of the world. No matter what happens, there's life after this.

And, you know, I hope that he's learning from this and becomes a better person after this. And certainly for me, I took the, you get the time to take stock and say, okay, well, here are the things I want to change about my life. Here are the things I'm doing well. And no matter who Sam was before, he'll be somebody different and probably better after. So, again, may not mean much to people who have lost money in FDX. It may not mean much to people who scorn him, but he, you know, it sort of can only get better from here from his personality perspective and things like that. So again, at the end of the day, I know everyone wants to trash him and sort of we're sort of watching this train wreck unfold in real time. But he's still a human being.

I still think he deserves some decency and respect as a person, especially until he's found guilty or not found guilty as a case may be. that, you know, I hope that everyone can sort of have it in their heart to respect our legal system, which dictates that he is innocent until proven guilty. And I think that that's something that can be really damaging because sometimes we don't respect that. There are going to be actual insid people that don't get that benefit of the doubt. And that's truly a tragedy. So in this case, we don't know if he's innocent or guilty, but I think, you know, I haven't seen a whole lot of decency for Sam or a whole lot of sort of benevolence or even just what you would expect. if it were you. So it's something to think about for all the listeners. All right. Well,

hurting words of advice. Thank you so much for coming on Unchained. Yeah, thank you so much. Don't forget. Next up is the weekly news recap. Stick around for this week in crypto after this short break. Thanks for tuning in to this week's news recap. FTCS customers fight for money while more assets get mysteriously swiped. A group of FTCX customers, customers filed a lawsuit against the failed exchange, arguing that any assets recovered should be earmarked solely for customers and not shared with other creditors. They seek a ruling that customer assets, such as those held by Alameda research, not be considered FTCS's property. The case also aims to ensure that customers will be repaid first, even if the court finds that these customer assets

are the property of the exchange. According to the firm's reported user numbers, FTC's collapse may have affected over 1.2 million customers in the U.S. It also owes around $3.1 billion to its top 50 external creditors. On Wednesday, blockchain researchers noticed activity from Ethereum addresses tied to Alameda. These wallets swapped alt coins for Bitcoin, Ether, and USDT, and then sent the funds to mixers. Speculation around these transfers is heightened due to the recent release on bail of former FTC CEO Sam Bankman-Fried. Just weeks prior to these funds movements, tokens worth $352 million, were mysteriously removed from FTCHA coffers, leading to speculation of a hack. This has been confirmed by the U.S. Justice

Department, which is currently investigating the incident. In addition, this week, Caroline Ellison, former CEO of Alameda, admitted in a federal court in New York that she and Bankman Freed deliberately misled lenders by creating false financial statements regarding the amount of money the firm was borrowing. In her guilty plea, Ellison said that, starting back in 2019, the year FTX launched, Alameda's account on FTX was granted an unlimited line of credit without being required to post-collateral, pay interest on negative balances, or be subject to margin calls. Moreover, according to an affidavit filed with the high court in Antigua and Barbuda, FTC's co-founders, Bankman Freed and Gary Wong, borrowed $546 million from Alameda to

buy a 7.6% stake in Robin Hood. Mango Markets' exploiter is arrested. Avraham Eisenberg was arrested in Puerto Rico after U.S. prosecutors charged him with fraud and commodities manipulation for his involvement in an exploit on the Mango Market's DFI protocol in October. According to the complaint, Eisenberg artificially inflated the price of MNGO relative to U.S.D.C., allowing him to borrow and withdraw $110 million from other investors. 's deposits. Eisenberg claimed in a tweet that he had used the protocol as designed and that he was pursuing a highly profitable trading strategy. Mingo was eventually able to recoup $67 million of the funds, but Eisenberg kept the remainder. In an interview on Unchained, Eisenberg, when asked whether

his trade and others like it were hacks or market manipulation, responded, sometimes the code doesn't match the docs. Sometimes the docs say something and it's just not implemented. And sometimes, the code does exactly what was intended. It's just that what was intended isn't what anyone wanted. Eisenberg's travel records suggest that the day after the alleged market manipulation, he flew from the U.S. to Israel in an attempt to avoid law enforcement, said FBI special agent Brandon Rax. This case could have regulatory impact on DFI, with Delphi Labs' general counsel Gabriel Shapiro noting that this is not a good case on which to settle such matters. He tweeted, no one who is pro-Defi should be celebrating this arrest, even if it is morally and legally justified.

It is likely to set the movement back in bigger ways. Gemini is sued by investors. Crypto Exchange Gemini and its co-founders, the Winklevost twins, are facing fraud allegations from investors over the sale of interest-bearing crypto assets through the Gemini Earned program. The Winklevass brothers have been accused of unlawfully offering a product without properly registering it as a security in compliance with U.S. securities law. The lawsuit alleges that Gemini abruptly halted its interest earning program in November after FDX filed for bankruptcy that led to a liquidity crisis at Genesis,

which had borrowed the Gemini earn assets. According to the court filing, the halting of this program left its investors effectively wiped out, leading to significant financial losses. The investors who filed the lawsuit are seeking a trial by jury and are petitioning for a class action lawsuit in order to receive damages, restitution, and other statutory and equitable relief from Gemini. Three commas admits data breach affecting thousands of users. Three commas, a crypto bot trading service, admitted that its database of users' API keys

had been leaked, which could have allowed malicious actors to gain unauthorized access to its user's accounts. In a statement posted at Twitter on Wednesday, three comma CEO, Yuri Surokin, said, we saw the hacker's message and can confirm that the data in the files is true. He added, as in an immediate course of action, Three Commons requested all its supported crypto exchanges, including Binance and Ku-coin, to revoke all API keys connected to its service. API keys are essential for tying the Three Commons bot service to a user's crypto exchange account and allow third-party services to execute trades on the user's behalf. Earlier in the day,

Binance CEO Cheng Peng Xiao warned users that they should disable their API keys if they had ever connected to three commas. mission comes after weeks of repeated denials and assertions by Three Commas and its CEO that users were losing their assets due to fishing attacks. Three Commas users have lost at least $6 million to hackers starting in October, but that some has more than doubled in recent weeks, according to users who spoke to CoinDesk. In light of this breach, three commas users are now planning a class action lawsuit against the company, claiming that they have collectively lost $14 million due to the data leak. Popular NFPA,

projects Degods and Yutes leave Solana. To have Solana's most prominent NFT projects, Degods and youths, confirm their migration from the Salana network to Ethereum and Polygon, respectively. The reason for the move comes down to the waning performance of the Salana blockchain in the second half of 2022, according to Degods leader Frank. Rumors suggested that the Degods team had asked the Salana Foundation for $5 million to stay on the platform, but the team has categorically denied this. According to Coin desk, Ute's move to Polygon is understood to have been paid for by the blockchain's partnership fund. However, details of the deal haven't been made public yet. The announcement triggered a surge in D-Godd sales, with the collection's floor price increasing by 12%.

Yutz's floor price jumped by 5 Saul. Both projects accounted for around 70% of Solana NFT sales volume in the week leading up to the announcement, according to Magic Eden Day. data. While one of the main reasons to move to Ethereum is the high network effects, research shows that wash trades accounted for over $30 billion of Ethereum NFT trading volume, representing more than half of total NFT trade volume in 2022, and almost 45% of all-time NFT trading volume. This week, leading NFT marketplace OpenC made a controversial move, as it delisted Cuban artists and collectors from its platform in order to comply with U.S. sanctions. On a related note, Investment Giant Fidelity filed three trademark applications in the U.S. related to providing services in the Metaverse.

Argo blockchain is saved by Galaxy Digital. Argo blockchain, a NASDAQ listed Bitcoin miner, is set to receive a bailout of $100 million from Galaxy Digital, Michael Novagrats' crypto-focused financial services firm. The bailout deal involves a two-year hosting agreement between the two firms, which will enable Argo's miners to keep running at its Helios mining facility in Texas. The agreement includes the sale of the Helios facility to Galaxy for $65 million and a new $35 million loan from the firm. Argo CEO Peter Wall expressed his gratitude for the deal.

He told CoinDesk, this deal with Galaxy achieves all of our goals and lets us live to fight another day. One day before the announcement, Argo had requested that trading of its shares be suspended on NASDAQ. Argo's case is not an isolated one. The bear market has battered other miners, too, with Core Scientific filing for Chapter 11 bankruptcy protection earlier this month. According to a report by hash rate index, Bitcoin mining companies finished 2022 with a total of $4 billion in debt. In addition, Tom Dunleavy,

a Missouri analyst, said that publicly traded Bitcoin miners sold nearly all the coins they mined in 2022. On the topic of miners, Bitcoin mining equipment and hosting provider blockware solutions is being sued for allegedly breaching a contract, negligence, and fraud by a customer, seeking at least $250,000 in damages. The bear market continues. The crypto markets are still in a downward trend. The stock of Coinbase dropped to a new all-time low of $31.89 per share on Wednesday, and it's down 87% this year.

In addition, crypto exchange Cracken is ending its operations in Japan, citing unfavorable market conditions and a need to restructure. Payward Asia Inc., the firm's Japan-based subsidiary, will efficiently deregistered with the Financial Services Agency on January 31st, giving customers until then to withdraw in fiat currency or transfer them to a private wallet. Micro Strategy, the largest corporate holder of Bitcoin reserves, revealed that it sold some of its BTC holdings for the first time ever, but only to generate a tax benefit.

After selling 704 BTC, the company acquired 810 more tokens. Micro Strategy now holds 132,500 BTC, and its average purchase price is around $30,400 per Bitcoin. At today's prices, that's roughly a 50% unrealized loss. Time for fun bits. Despite being in a bare market, there's clearly a bull market for memes around FTX. Autism Capital, an anonymous Twitter account

that has been linking all kinds of details on FTX and Sam Bingman-F shared an animation video about SPF. The video features the disgraced founders saying he accidentally stole the customers life savings to create a giant over-leveraged Ponzi for himself. Throughout the video, SPF says he's sorry a gazillion times in different locations, the Bahamas, FTX's office, in a garden eating a cucumber, with NFL star Tom Brady and even playing League of Legends. If you deposit it, I donate it, reads a street poster alluding to Sam's effective altruism. After that, he gets arrested, but not for long.

Ladies and gentlemen, we got them. Some breaking news in the case against disgraced crypto founder Sam Bateman-Fried. He was just released on $250 million bond. Thanks so much for joining us today. To learn more about Martin and the case against Sam Bankman-Fried, check of the show notes for this episode. Unchained is produced by me, Laura Shin, withal from Anthony Youen, Mark Murdoch, Matt Pilgerd, Juan Ovanovich, Sam Shree Rum, Pamma Jim Dar, Shashank, and CLK transcription. Thanks for listening.

listening.