Unchained - Why SBF's Testimony So Far Has Likely Already Doomed Him - Ep. 563

Episode Date: October 30, 2023

Sam Enzer, a partner at the law firm Cahill Gordon & Reindel, told Laura that former FTX CEO Sam Bankman-Fried did about as well as he could in his testimony Friday but that he was unlikely “to withstand the scrutiny” of what prosecutors have already said will be a robust cross-examination when he takes the stand Monday.  Enzer noted that Bankman-Fried’s attempts to explain why he thought his trading shop, Alameda Research, could borrow billions in dollars of FTX customer assets “defies common sense,” and that the company’s own terms of agreement or any other communications offered no justification for this belief. A Thursday hearing without the jury present, in which the defense gave a preview of some arguments it wanted to make, ended up giving the government answers from SBF that it can now use against him. Enzer also said that Bankman-Fried’s contention that his biggest mistake – a failure to implement proper risk management – did not constitute criminal fraud, did not address the core of the government’s case; namely, that he lied about how FTX was handling customer deposits. Show highlights: why Enzer thinks Sam Bankman-Fried’s testimony is unlikely to sway jury sentiment or withstand cross-examination why the evidentiary hearing in which SBF testified without a jury may hurt his cause the purpose of the evidentiary hearing how Judge Lewis Kaplan hinted at what he thought about SBF’s testimony how Bankman-Fried is likely to fare against prosecutor Danielle Sassoon in what she has promised will be a robust cross-examination how the defense tried to recast SBF’s image by humanizing him why the defense now has the strongest grounds for an appeal than it previously did  what the jury is likely to make of SBF’s contention that he was in the dark about core allegations  why the prosecution said it will call rebuttal witnesses what a charge conference is and why that will take place after SBF testifies Thank you to our sponsors! Crypto.com Arbitrum Foundation LayerZero Popcorn Network Guest: Sam Enzer, partner at Cahill Gordon & Reindel Links Previous coverage by Unchained on the trial of Sam Bankman-Fried: How Heated Sidebars During the SBF Trial Could Impact the Jury’s Decision SBF Trial, Day 1: Possible Witnesses Include FTX Insiders, Big Names in Crypto, and SBF’s Family SBF Trial, Day 2: DOJ Says Sam Bankman-Fried ‘Lied’ While Defense Claims His Actions Were ‘Reasonable’ SBF Trial, Day 3: Why a True Believer in FTX Flipped Once He Learned One Fact SBF Trial, Day 4: SBF’s Lawyers Annoy Judge Kaplan, While Wang Reveals Alameda’s Special Privileges Sam Bankman-Fried Trial: Here's Everything That Happened So Far SBF Trial, Day 5: SBF's Defense Finally Found Its Legs, But Can It Counter Caroline Ellison? SBF Trial, Day 6: Caroline Ellison Recalls 'The Worst Week of My Life' SBF Trial, Day 7: In SBF Trial, Did the Defense Lose Its Opportunity With the Star Witness? SBF Trial, Day 8: Former BlockFi CEO Adds Credibility to Fraud Charges  SBF Trial, Day 9: Nishad Singh Describes Former FTX CEO as a Bully and Big Spender SBF Trial, Day 10: Defense Struggles to Discredit Nishad Singh's Testimony SBF Trial, Day 11: How Alameda Got FTX Into a $9 Billion Hole SBF Trial, Day 12: Former FTX General Counsel Speaks Out Against SBF SBF Trial, Day 13: Before Judge, Former FTX CEO Sam Bankman-Fried Gives Few Straight Answers SBF Trial, Day 14: Sam Bankman-Fried Casts Blame on Others for Key Decisions at FTX Did Sam Bankman-Fried Have Intent to Defraud FTX Investors? Good Morning America: FTX's Sam Bankman-Fried on crypto giant's collapse: 'A lot of people got hurt. And that's on me' Learn more about your ad choices. Visit megaphone.fm/adchoices

And why is that bad for SBF, that line? Okay, so we know there are representations, SBF said during, while he was running FTCS that they safeguarded customer assets. We know the government's theory is that there was embezzlement of the funds through Alameda, right? And now he's acknowledging safe embezzlement is the opposite of safeguarding. In other words, if in fact they were embezzling and he knew about it, they have proven that that statement is a fraudulent represent. And they've got his own words to say it, and I guarantee they're going to try to use that on cross-examination. 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 at Forbes, was the first matrimed meter porter to cover cryptocurrency full-time. This is the October 30th, 2023 episode of Unchained. Defi just got way easier with Voltaxor. Popcorn's no-code defy toolkit for building, deploying, and monetizing automated yield strategies. From institutional service providers to defy DGens, anyone can use VaultCraft to supercharge their crypto with custom cross-chain yield strategies.

Learn more on VaultCraft.io. 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 web, and establish itself as the HTPS within Layer Zero messaging. Visit Layer Zero.network to learn more. Arbitrum's leading Layer 2 scaling solutions can provide you with lightning-fast transactions at a fraction of the cost, all while ensuring security rooted on Ethereum.

Arbitram's newest edition, Orbit, enables you to build your own tailor-made Layer 3. Visit Arbitrim.io today. 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. Today's guest is Sam Enzer, partner at Cahill, Gordon, and Rindell. Welcome, Sam.

Thanks for having me on again, Laura. It's a pleasure to be here. Pleasure to have you back. Heads up, everyone. You may have noticed that during the SPF trial, we've been releasing some interviews on Mondays. We're doing that again today, but this is a lot of this. will be more similar to the short interviews we typically publish on Fridays. I will have a long episode coming out this Friday. So, Sam, the prosecution rested Thursday morning and then Sam Bingman-Fried

took the stand. He's not yet finished with his direct examination, but at this point, how well do you think it's going for him? I think that it's going as well as it could be for him, but I don't think that he is going to turn the tide or prevail. I think that a lot of what he's saying won't withstand the scrutiny of cross-examination and that I think the jury will see through a lot of what he's saying. Oh, interesting. Okay, well, we will dive into that. Just give a taste of some of the moments that happened that made you think that he won't stand up to cross-examination. So I think a good example is he has weaved a narrative that in his mind it was okay for Alameda to borrow billions of dollars of customer money based on this very contorted argument that in his mind Alameda was allowed to borrow the collateral of margin customers. And so in his mind he claims, you know, since.

they were allowed to borrow the collateral of margin customers. And there was a thing in that the terms of service had a provision for margin customers that said that if a margin customer ended up with a negative balance, they might have to socialize losses that is take other customers money to cover a loss. In his mind, it was okay that Alameda had all of these billions of dollars in customer funds. borrowed that it could not cover. That, to me, defies common sense. I doubt he believed it. I think that he is a smart guy. He knows that the terms of service do not have anything that would give him a justification for that view, except this weird provision about margin trading. And so he has come up with a theory, an argument stretching how he could have formed a belief about that for Alameda's

activity. And there's no document that supports this. There's no contemporaneous communication. There is no lawyer who said that that was a reasonable view. None of the other witnesses said that this was how they understood the terms of use. And no investor or customer has said that, nor will the defense, as far as we know, be calling a customer who would support that view. This is a self-serving interpretation of the terms of service that he is creating in retrospect, I think, to justify his behavior and try to create reasonable doubt where there is none. Oh, wow. You're right. That, like, for someone like you and me, that seems probably the most likely explanation. But I wondered, like, do you think that the jury will also think that? Because honestly,

sitting in the courtroom, at least, I would say, the first part of Friday, it started to feel like, oh, okay, or maybe, I can't remember if it was Thursday. It was one of those days where it sort of felt like, oh, okay, maybe you really didn't know. You're right, that by the end, it felt like it went the other way. But I just wondered, is it also because I already know so much about the case and same with you? Or do you think that the jury will also think that? You know, it's a couple things. First of all, remember, there's cross, right? There's a reason that the defense lawyers on direct examination have taken a long time to go through basic background because they want the jury to forget the government's case. They want the jury to get acquainted with Sam Bankman Fried, humanize him, and normalize some of the

concepts. And then they're sort of at certain moments, they didn't dive right into attacking the government's case. They go through all this background. And, you know, part of it is you need some background, but you don't actually need all that background given that we've heard the trial. could go right to it. They're strategically going through background concepts to try to make the jury think, you know, this is a regular guy. He actually, maybe there's something to this. Maybe he's not such a bad guy. And then sort of attacking pieces of the government's case. But I think on cross, you'll see the government. Danielle Sassoon is a very effective prosecutor. And she's already gotten a crack at cross-examining SBF, which we can talk about. There was a little hearing in which

SBF gave a preview of his testimony to just the judge. So I think she's going to take this apart, you know, and I think on cross, it's at least some of the jurors are going to understandably have serious doubts about the credibility of things he's saying. If they have a doubt about any piece of it, they may toss the whole thing out given the weight of the evidence against SBF. And I also think, while not every juror may know exactly why that pertinent, line of testimony about margin is not accurate or why it's dubious, I would bet some of them are

saying, I don't know what he's saying, but it sounds weird to me, right? They may have an intuitive instinct that this is confusing. I mean, and I think generally when they're faced with a clear, understandable narrative versus a confusing narrative that very often they're going to go with the clear, understandable one. Yeah, that makes sense. That makes sense for sure. And just obviously, even the simple fact that you already have the three co-conspirators saying, you know, this is what happened. And then he's the only one that's saying something different. Well, let's now talk about that evidentiary hearing on Thursday afternoon, which at the time that Judge Kaplan said we were going to do it, he actually said that he had at least not done it in a very long time in his 30 years

on the bench, if ever. And so that was very unusual. And my lay understanding of it was that the defense wanted to introduce certain lines of testimony as part of their defense. And the two sides couldn't agree on whether or not this was permissible under, I'm not sure. Why don't you explain what happened there and why he did something so unusual? Sure. Under the federal rules of evidence, and in particular rule 104 for those who want to check it out. The trial judge is the gatekeeper who's there to decide which evidence comes to the jury and which one, which evidence doesn't. And very often, that will be decided either through an attorney proffer where an attorney says, listen, this witness is going to say XYZ. We think this should come in for this reason. And the defense may

say, no, no, no, it shouldn't for this reason or vice versa, right? Or this could be done in briefs where a party says, judge, we expect the testimony will be XYZ. We think that's admissible or not admissible for these reasons. But rule 104 does allow the judge, if the judge believes in their discretion, that they need it, to actually hear a preview on the record of what the testimony is outside the presence of the jury. And that is what Judge Kaplan did here. There's testimony that SBF and his team wanted to offer on the issue of whether or not lawyers were present for certain aspects of relevant events and whether the presence of counsel negates criminal intent, demonstrates that he had a good faith belief that what he was doing was lawful, appropriate,

and not a crime or a fraud. And so that was what the focus of the hearing was. Now, Judge Kaplan, it is true that a judge will rarely ask, actually make the defendant get on the stand and testify outside the presence of the jury to make an evidentiary ruling. It is rare, but it is allowed under Rule 104. And Judge Kaplan doesn't remember, but he did it in a case that I tried in front of him in 2017. I tried a murder case in front of him and he used this same procedure where a cooperating witness was going to testify about an issue that went to state of mind, criminal intent. And he had the jury excused. He, he had the jury excused. He

asked the witness questions and had the witness explain what the testimony would be. And then with a concrete record, he made a ruling about what would and would not come into evidence. And that's what happened here. And what we heard, the jury doesn't know this, but we know, because we have access to the transcript or for those who were in the courtroom and could see it, we know that the areas of testimony that SBF wanted to offer, these all relate to this presence of counsel defense. one was whether his use of slack and signal and the auto-deletion policy were innocent, whether they were inconsistent with advice he got on when he could delete communications from lawyers, payment processing, that is, customers giving money to North Dimension in Alameda,

and whether that was something that was in some way run by or through lawyers and whether lawyers had approved that. This concept of socialized losses in the terms of use for FTX International as applied to margin and whether that supported his belief, his claimed belief, that Alameda could borrow this money. And the promissory notes, the loans that Canson and some other lawyers, including this law from Fenwick, participated in drafting and whether he had a good faith belief that the loans were kosher because lawyers have been involved in drafting. And after argument from both sides, the judge determined that he was going to allow the testimony about the deletion policy.

So he believes that because Sam Bankman-Freed had got lawyers to write a document retention policy, that he should be allowed to testify about what the policy was, whether he understood his actions to be consistent with it and whether that shows that he was not deleting communications to hide stuff from regulators, but rather because he thought it was okay. Now, the other stuff, what the judge said, the judge drew an analogy. He said, he gave a hypothetical. Imagine you have a bank robbery. You know, a bank robber goes in, robs a bank, comes out, has all the money, and goes to a lawyer, doesn't tell the lawyer where the money came from, and asks the lawyer for help, you know, investing the money.

In that circumstance, the presence of the lawyer, the fact that a lawyer was involved in an after-the-fact collateral transaction without knowledge of the circumstances does not in any way suggest that the bank robbery was okay, that the bank robber could have believed that the lawyer's involvement blessed or somehow made it kosher, right? And so Judge Kaplan said this other stuff, okay, it's all similar to the bank robbery analogy. Collateral involvement of lawyers in this or that detail does not mean you really had a basis to believe that a lawyer was blessing, okaying this. And thus it's unduly prejudicial.

It's not that probative on the key issue of intent, but it would confuse unfairly the jury. And so he's keeping it out. This also gets into an issue that we've discussed, I think, in one of the prior episodes that I was on, which is the difference between an advice of counsel defense, a full-throated advice of counsel defense, versus this hybrid presence of counsel. A full-throated advice of counsel defense is the concept that if I go to a lawyer before doing something, I lay all the facts out about what I'm doing, and then the lawyer opines that it's okay. I should be able to introduce that advice that I relied on it in good faith as a defense.

And the government can test that defense by getting all the communications that would otherwise be privileged with the lawyer and examining whether the lawyer really knew all the facts, whether the lawyer really told me what I did was okay, whether I followed that advice to the T, and whether there were other circumstances that would give me reason to doubt that I had a good faith belief in it. For example, if I talk to three lawyers and two lawyers said, I can't do it. And one lawyer who is kind of a dirty lawyer tells me I can, that would be relevant to whether I have good faith reliance on that lawyer. And we heard in the cross-examination of SBF during this Rule 104 hearing, we heard some indications from the prosecutor, Danielle Sassouin, some questions that go to whether one of the lawyers, Daniel Friedberg, whether he was. was somebody who was shady or inclined to give shady advice. Specifically, Danielle asked whether SBF knew that Friedberg had previously been involved at a company with an insider trading scandal, whether SBF knew that Friedberg did drugs with employees of FTX. So she was asking questions, casting doubt on whether this was a reputable lawyer that he could really rely on in good faith.

Yeah. Yeah. I honestly, in a way, that evidentiary hearing, thought the judge kind of did the defense of favor in not allowing them to include that testimony, because you're right that I feel like it just didn't come across as, oh, hey, I got the okay from my lawyer, therefore it must be okay. It was literally just, oh, the lawyer drew up the documents. But then Danielle Sassoon kept pressing him, who directed him to create these documents, who made the business decision, basically. This is around North Dimension. And Sam got super evasive. His answers became convoluted. It was just a little bit, yeah, it was not very convincing at all. And so I actually think it was beneficial,

frankly, to the defense. But you're right that I don't, I don't think Judge did it for that reason. He did it because it's not germane to the core question of, you know, did Sam Pinkman-Fried do this, thinking it was like, legal or not legal. It's like the lawyer appears to not have known, or at least Sam's team did not present any evidence that the lawyer had sanctioned that behavior. So that's why I think he was like, this is just going to waste time. In that, I think there are so many interesting things happen in this little hearing, right? One thing, which I think was maybe during the exchange you're talking about, the judge tipped his hand a little bit about what he thinks of SBF's testimony.

And I think this is at 22, 56 to 57 of the transcript, but there was a back and forth and Judge Kaplan said, well, look, I'm going to allow this. I understand your point. I've gotten beyond my tether here. I'm going to allow this. I'm going to acknowledge the point you make. But all things are relative and there is a good deal to what the government says also. And part of the problem is that the witness has what I'll simply call an interesting way of responding to questions for the moment. So the back and fourth there was, and this is relevant for what happens after trial, the defense lawyer, Mr. Cohen, was objecting the judge, you know, I gave a small little preview on direct of a few topics that we want to introduce. You are allowing the government to cross-examine our client about all this stuff that really has nothing to do with the narrow topics we want to introduce. And why was the government doing them? because they are going to use this transcript to cross-examine SBF after his testimony in front of the jury. Oh, that's not going to be good.

They are locking him in. They're exploring, they're exploring topics and locking him into things so that they have more material to use to cross-examine him in front of the jury. And so, you know, Mr. Cohen is objecting, you know, judge, this is prejudicial to my client. it's hurting my client to have all this stuff happen, all these questions happening beyond the scope of what I covered. And the judge is allowing it. And he's basically saying the reason I'm allowing all this other stuff is because your client's evasive. Your client is being evasive. Judge Kaplan is implying that when he says he has an interesting way of responding to questions, right?

Oh, yeah. But I don't even know if it was simply the evasive part, but also his answers were so long. and so wordy and so not direct. And that part where he says, I've gotten beyond my tether. It's because he had gotten up and walked around his chair and stood behind his chair because SPF was going on and on and on and on. You know, his like, I don't know if you noticed in the transcript.

Some of his answers take up like a full page of the transcript. And so when he says, I've gotten beyond my tether, it's because we couldn't hear him in the mic. And so he had to like move from where he was standing to be able to be heard in the mic, if the government's going to use that, it's definitely not going to go well for Sam, because that part was bad for him, in my opinion. Frankly, in my opinion, Danielle Sassoon has the, has like a mind like a vice. Like if you, like I noticed, obviously Sam, like I just said,

talks very, very long. So I noticed if he said something at one point and then obviously in between there's many, many, many, many, many, many words. And maybe she asked like a few questions. and then she would ask maybe the same question a different way, and he would contradict himself minutes later, she would immediately jump on that and notice and say, oh, but you said before, blah, blah, blah, and now you're saying da-da-da. So I was just like, wow,

how does she remember that given the whole word salad in between? Yeah, she did that a few times where she says, which one is it, Mr. Fried? You know, which one is it? Yeah, yeah. Honestly, a bunch of us reporters are a little bit scared of her because she's very, very, very smooth. Anyway, I know her well.

I worked with her. She's brilliant. Before coming to SD&Y, she was, she clerked for the Supreme Court. I believe she clerked for Justice Scalia, if I'm remembering right, before he passed away, obviously. So she's a very sharp lawyer, obviously a very good trial lawyer. And there's a reason, well, I think she's very well suited to cross. examine SBF. Part of the dynamic also is I think Nick Rose is going to close. And the closing will likely happen right after SBF's testimony. And so it's common that if you're closing, your trial

partner should do the cross of the defendant so that you can focus on prepping the closing. Yeah, yeah. And I think he did the opening, if I remember correctly. So that would probably make sense. Oh, it's Thane Ren. That's right. That's right. So in a moment, we're going to talk about the explanations that SPF gave in his real testimony in front of the jury. But first a quick word from the sponsors who make this show possible. Arbitrum stands at the forefront of innovation as the premier suite of layer two scaling solutions, bringing you lightning fast transactions at a fraction of the cost, all with security rooted on Ethereum. From defy to gaming, Arbitrum 1 plus Nova is home to over 500 projects.

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Download the crypto.com app and get $25 with the code, Laura, link in the description. Back to my conversation with Sam. So now let's actually talk about what he said in his defense. I mean, I can give you free reign here, but I was actually just going to ask you about the initial part of it where he sort of tries to recast his image. He gives different explanations for his clothing, his hair.

He talks about his relationship with Caroline. He talks about marketing, sponsorships. What did you think of that part? He's clearly trying. to cast his spin on some of the facts that the government has used to their advantage to paint him in a negative light. You know, he begins right out of the gate with, I didn't intend to defraud anyone. I made mistakes, small ones, big ones, and the big one was the biggest was no risk management, right? In other words, this was just a risk management problem. Well, that's not really what the government's

saying, pal. I mean, what the government is saying is you lied, right? So whether you, it, risk management goes to why did you actually lose the money? But even if you never lost a penny, you can't get money from people by lying about it. So it's like a non sequit. And I found a lot of his testimony, these long-winded sort of cutesy stories about his background and this and that to be irrelevant to the heart of the issue. Now, I get why the defense is doing it. They're doing it to humanize him. They want to warm up to the harder topics. They want the jury to get acquainted with him. And it is sort of how you should do this as a defense if you're calling a client. Now, I think one thing that's very interesting to think about, which may not be obvious to

lay folks, is there are ethical rules about whether a lawyer can elicit testimony that they have reason to know is false. So one thing you can infer, there are circumstances where a lawyer may have good reason to think their client is going to perjure themselves, but they don't want to hurt their client because they have a duty to their client. And so there's a compromise under the ethics rules that allows a defense lawyer to say, why don't you tell the jury what you want to say, step back and not ask specific questions. And that's not what Mr. Cohen did here. He's asking specific questions going into the heart of the case. So he must believe, he must have satisfied himself that he actually believes his client. And I don't know what he's basing it on or whatever,

and I'm not criticizing him for doing that. But it is a very interesting thing. He is really questioning him as he would any other witness, as though he truly believes this witness. But one thing that I notice is I don't think Judge Kaplan would allow him to ask an open-ended question, nor do I think Danielle Sassoon would, because they- Narrative. Yeah, exactly. Yes. You left hearing that. Yes. And so basically, can you just describe what that means for people? Yeah. In circumstances where you're not invoking this ethical rule, we're questioning a witness

as though you have a good faith belief that they're telling the truth and that you're just following their testimony, you're supposed to, the witness is supposed to respond to the question. Part of that is because it just makes it easier for the jury to follow if the witness is responding to a specific question. But part of it also, and I think particularly for this witness, SBF, it's to control the witness. SBF has an agenda. He wants to get certain things across. Some of those things may not be allowed. And it's to make sure that the presentation of evidence is within the confines of the rulings the judge has made. And we've seen SBF go off the rails. Even his own lawyer got angry at him at one point. So during the hearing, the Rule 104 hearing on Thursday before

SBF was testifying to the jury, there came a moment where Danielle Sassoon was cross-examining SBF during the hearing. And she asked, is that the limit of your understanding of what it means to safeguard assets? Answer from SBF. No, I apologize. I think that answer was cut short, a small fraction. There are a number of things that I would have considered to be related to that. Question, would that include not embezzling customer assets, for example? Mr. Cohen, objection, Judge Kaplan, sustained. Even though the objection was sustained, SBF goes on to answer.

Yes, it would include that. And then his own lawyer says, you didn't have to answer if it has been sustained. Haven't you been sitting here for four weeks? Yeah, but actually, I was in the courtroom and they were kind, everybody laughed and he said it in an exasperated tone, kind of a little bit laughing. Everybody laughed.

But yeah, I mean, what I was. is going to say is I do agree that that is evidence of what you had said previously, which is that even before trial, it looks like SPF was being a difficult client for Mark Cohen. And that moment, I think, just sort of encapsulates that notion. So. Yeah. So why is that bad for SPF, that line? Okay, so we know there are representations, SBF said during, while he was running FTX, that they safeguarded customer assets. We know the government's theory is that there was embezzlement of the funds through Alameda, right? And now he's acknowledging safe embezzlement is the opposite of safeguarding. In other words, if in fact they were embezzling and he knew about it,

they have proven that that statement is a fraudulent representation. And they've got his own words to say it. And I guarantee they're going to try to use that on cross-examination. Oh, wow. Oh, my gosh. Okay. Yeah. That's bad. That's probably why Mark Cohen said that. Correct. Yeah, there's just numerous indications, both from Mark Cohen and the judge, even Danielle says soon, basically that SPF needs to limit his answers. Just everybody seems to be trying to get him to do that.

But actually, Danielle Sassoon, she'll let him run. But when he's being examined by Mark Cohen, then she'll point out, he's not answering the question or he's whatever. Anyway. And I should say before we go into the substance of evidence of evidence, SBF's testimony, I think it's important to note that if SBF gets convicted, one question will be whether he has a shot at getting the conviction reversed on appeal. I think that what happened in the back and forth on whether he could offer presence of counsel testimony and in Judge

Kaplan allowing such an exploratory questioning of him on cross in that Rule 104 hearing, those things create the closest I have seen to the kinds of issues that the defense could try to use on appeal to get the whole conviction tossed if there is a conviction. And to be clear, I don't think that they will win. I think that for a variety of reasons, the government would have strong arguments that this is not reversible error and that Judge Kaplan acted within the bounds of his discretion appropriately. but it was prejudicial to have this rule 104 hearing to the defendant. But they kind of wanted it. They wanted the testimony. They didn't want to give a deposition to the government. Normally, when a defendant testifies in a criminal trial,

the government is not entitled to speak with them beforehand. And the government is not entitled to even notes of what the defense learned from talking to their client in prep. unlike any other witness, the defense does not have to give over that kind of material for the defendant. In other words, the defendant is entitled to the element of surprise. And it's the one exception to all the other witnesses in a criminal trial. But here, Judge Kaplan set it up that basically if you want to offer this testimony, you're going to have to present a hearing. And I'm going to give the government an opportunity to question, to question the witness.

And what that effectively did was give them a deposition, a pre-testimony, deposition that I assure you they will use to every advantage in cross-examining him. And you notice on the day of the Rule 104 hearing, Mark Cohen didn't really make that objection. He made objections that the questioning was beyond the scope of the initial direct examination. In other words, his preview of what he wanted to offer. It wasn't until the next morning that he realized, wait a minute, what really happened wrong here, the way this really hurts my client, is that this was effectively giving them discovery, a deposition of my client before his testimony, and that's unfair. He makes that objection Friday morning, and the judge

notes, the horse is out of the barn. You didn't timely object. So one issue you'll have on appeal if they make this argument is whether he preserved the objection. Wait, preserved, meaning because Mark Cohen didn't do it in time. So basically it's his fault, kind of, is that what? Exactly. You have to object at a time when it can be corrected. That's the rule. Right. And if you don't, you waive the objection. Right. Okay. Yeah, that makes sense. So actually, before we get into the meat of SBF's testimony, I just have to ask one really fast question, which is, I don't know if you've read the transcripts of the two other defense witnesses. One was Crystal Roll. I did. Nicholas Rose asked her, when you were coming here to the courtroom this morning, did you have a sense of doing anything wrong

or some kind of question like that? What was that about? I couldn't figure out that out. what he's doing is using the defense witness against the defense. So basically, on the cross-examinations of the government cooperators and government witnesses, you heard the defense say, you met with the government, you didn't meet with us, you met with the government a bunch of times. In other words, the defense was implying and may argue in closing that the government witnesses were coached by the government to say what they said. And so what he's doing is saying both sides did this.

The defense prepped their witness. She's a lawyer. She's telling you there's nothing wrong with that. She's a King's counsel. And she says in her experience, there's nothing wrong with that. What does it mean? What's good for the goose is good for the gander. If it's okay for the defense to prep their witnesses and that doesn't in any way impugn the credibility or integrity of a defense witness, then the same must be true of government witnesses. And they've sort of removed that question from the case. Oh, okay. I thought it was something like when you're a lawyer, anyway, whatever, it doesn't matter what I thought. Now let's talk about the core allegations in the government's case. There were things like his explanation for the allow negative function. He talked extensively about how Caroline Ellison did not hedge. There were other things where he often said he was surprised to see, you know,

there was this bug even though other. And he said he learned about it in June 22, even though other people had said they learned about it in December 2021. So, you know, what do you think about the fact that he so often seem to be casting himself as being in the dark about the core allegations? I find it hard to believe, especially given the evidence we heard from so many others about how in the weeds he was, how much this was his baby. Caroline didn't have equity, felt like, you know, she was basically a functionary to execute Sam's will. you know, it's not, I think it's hard to believe that. And I think the government's going to have a lot to come back on cross with to press that claim. But he's basically saying, I'm up in the ivory tower. I relied on other people. I'm the aloof CEO, right? I trusted other people to do this stuff. I had a belief that what was happening was okay. And now I know, oh my God, it wasn't that way. What a surprise. Oh, oh, my God. God.

He used the word surprise, I think five or six times. I counted, but now that I think I can't remember which transcript that was. I think that's hard to swallow, especially on so many issues, right? If he did it, if this was a one issue case or a two issue case, maybe. But, you know, over and over again, each of these different things, for example, the seven balance sheets, right? Lenders are asking for their money back. Caroline Ellison says she was asked to present false versions of this. She gives seven scenarios, each is misleading, and he picks the most misleading one.

And he just sort of gives it a wave of the hand, like, oh, it seemed reasonable. He's implying that he didn't drill down into the details. That's very difficult to believe. He's running this company. They're way in the hole. if the lenders aren't put at bay, the whole thing could unravel. Do you really think that he didn't look carefully at it? I mean, indeed, the very notion that he would get seven and then select one of them suggests

this was something he thought about carefully. And I'm not even privy to the discovery, okay? I don't have access to the government's discovery. I haven't gone over their investigative file. This is just common sense stuff, right? And I think that the government will be able to pull holes in this. It's very difficult to swallow. I doubt the jury buys it.

Yeah. Yeah, he said something like, it seemed fine to me. And then what about the extensive testimony he gave about how Caroline didn't hedge? Do you think that, I mean, Judge Kaplan sort of made a point earlier that he feels like it's not germane. Correct. Yeah. So what does it have to do with the price of tea in China? So here's what I would say if I was the government.

All right. Let's pretend that this is the Bernard Madoff fraud, right? And I think most people are familiar with that. Would it matter whether Bernard Madoff hedged? No, because we told you, I'm going to invest and I have these returns. He wasn't investing it. And he's lying to you to get the money. The hedging, all the hedging has to do with is why they ultimately

failed. In other words, hedging has to do with why they got caught. It's not about whether they got the money through a lie. It's just about why they got caught and why the fraud didn't last longer. And that's why it's irrelevant. Yeah, we've said this before in this, or you said it before on the show. I just wondered, like from the jury's perspective, do you think that that has any weight with them? I think that the jury, first of all, I always think jurors are smart, especially as a collective group. There's going to be one or two who figure that out immediately. And as a group, when they all deliberate together, I expect that people will share that thought.

I'm sure it has occurred to them. But even if none of them has thought that through yet, that's what we have cross-examination for, an argument, right? There's going to be closing arguments and cross for the government to have an opportunity to contextualize that testimony. They're going to challenge it. They're going to introduce these thoughts. and, you know, we're kind of examining this testimony midstream. His testimony is not over. His direct isn't over.

He hasn't been crossed. There's probably going to be a redirect. And most importantly, they'll be closing arguments. All right. So we've kind of talked throughout about how his performance will likely be under cross examination. But are there any other thoughts on that that you would want to bring up? First of all, what I've seen in his cross on the hearing, the Rule 104 hearing,

he tends to fence with the questioner. And I think that that will be perceived as evasive. So even if you were to read a transcript of it and the words on the page could be plausible, you have to remember the jury's there watching his demeanor. And if they feel like he's fencing, if he's playing games and not directly answering questions, they're not going to trust him. I mean, this is why we have live testimony. you were there. I would love to hear your thoughts on what you, what did you think of his demeanor?

Well, so the one day that I was there was the day that they did have the evidentiary hearing. And so I saw the jury in the first part of the day, but I didn't see their reaction to him. But something, I mean, granted, I was in the very last row. So maybe I just didn't see it. But, you know, I've met Sam different times and he's been on my show. And he's always so jittery. I didn't see him be jittery. And that surprised me. He seemed to be pretty calm and composed. The one thing I did want to bring up actually about the cross on Thursday is that there were moments where there were really long silences when Danielle Sassoon would ask him a question. And then he just would pause. And I would write in all caps like pause in my notebook, long pause.

And Coind us that one of them actually was two minutes. It was that moment when she asked him to look at the agreement and say where it said that Alameda could use FTCS funds. And, you know, he kind of stared at the agreement and then ultimately, you know, he didn't find anything explicit. But for sure, at least, just from that alone, that like I would say the dynamic between them, like I said, was that, you know, he was evasive. He seemed obviously comfortable with Cohen and then, yeah, more. evasive with her. And yeah, just was, I felt like he was caught a few times. And so that's why we had those uncomfortable moments. Yeah, for sure. And just wait for the real cross. I mean, I'm sure when I was a prosecutor at STNY, what we would do to prepare, somebody would play the part of the defendant.

I bet you in the trial room right now, somebody is pretending to be SBF and they're doing drills where Danielle is mock crossing somebody to get ready and has lines of cross prepared. And they also have all weekend to pour through the testimony they heard Thursday and Friday and poke holes in it. All right. Well, so one other thing that is probably going to happen is they said that they're going to bring rebuttal witnesses. So can you just explain what that is and how that works and who you think might be the rebuttal witnesses? So rebuttal witnesses, if the defense puts on a case and they

introduce a new concept that may not have been covered in the government's case in chief, then the government is entitled to introduce a witness to respond. So I don't know who they have in mind. But let's say, for example, you know, let's say SBF gets for this testimony about the deletion policy. In theory, if the government wanted to, they could call back Cannes' son, or they could call other lawyers who were involved in those policies. Fenwick or Dan Friedberg, not saying they would do that, but that would open the door for them to call one of them back to rebut SBF's take on this. Or they may call an expert. So if there's expert testimony to address a point they've made. And here, he's.

year on that, the defense introduced an expert who analyzed data from the FTX database, and the data, according to him, showed that there were lines of credit to Alameda, and that those lines of credit were at many times positive, and were smaller than what some of the cooperators were saying. Now, I think what the government did effectively on cross was demonstrate, this is not apples to apples with the numbers that the cooperators were talking about. The data that the defense expert examined was a limited, it was like one specific field or a few fields of data. It didn't consider the accounts that the cooperators were talking about. It's apples to oranges. It's like irrelevant, but they might want to call an expert to say, we examined the following records, including the

records like the at fiat account or whatever that the cooperator spoke about. And here's what it shows. Okay. Yeah. I actually feel like they kind of effectively pointed out that it was useless when he said, did you, the prosecutor said, did you check any of this against the actual bank accounts or the actual crypto assets in their wallets? And he said no. So then it was just like, okay, well, you know, the database can say whatever it wants. But unless you're actually looking at the money, then what's the point? So, well, then the next thing I want to ask about is, is they're probably going to do a charge conference? Can you explain what that is? Right. So after the lawyers give closing arguments, the judge will give what's called a jury charge,

which is where he explains to the jurors. Their job is to decide the facts of the case. His job is to tell them the law, and they have to follow his instructions on the law, including what are the elements that the government has to prove beyond a reasonable doubt, what are the elements of any defenses, how are they supposed to evaluate witness credibility and the like. And the way this gets done is lawyers, the government and the defense, submit proposed instructions of law to the judge. The judge considers both sides drafts his own proposed instruction. He gives it to both sides to review the draft and then they make objections. And then he will ultimately resolve the objections and then give a final charge. And this is very important because

one of the areas that could be up on appeal is whether the judge correctly instructed the jury on the law. And if he is incorrect in anything, whether that was a harmless mistake or whether it actually unfairly impacted the fairness of the trial. So it's a very important thing. I think many jurors will probably gloss over, you know, like tune out when they hear the instructions on the law. But it is considered very important for purposes of appeal. Okay. So it's rebuttal witnesses. then I guess it's closing arguments, then the charge conference, and then deliberations. So tell what happens in deliberations, or did I get that wrong? It's defense case, rebuttal witnesses.

The charge conference is the lawyers hatching out with the judge which should go in the charge. Then you have closings. So the charge gets finalized before the closings to the lawyers. The lawyers need to know when they argue what the actual instructions of law will be. Oh, of course. They may reference it in their arguments. You'll hear the government close first. So Nick Rose.

Then the defense will close. I think it's going to be Mr. Cohen, but it could be Everdale, Chris Everdale. Then rebuttal, I think that's going to be Danielle Sesson for the government. So in other words, the government gets two summations, an opening summation and a rebuttal summation. Then the judge will give the instructions of law, the charge. Then the jury deliberates. They go back to the jury room. There will be a four person designated.

who is there to just sort of be the master of ceremonies and run the administrative things. If the jurors have questions, they can write notes. So as a group, they may come up with a question. The foreperson will write the question and sign it, and it goes to the judge. And then the judge will present it to the lawyers. Hey, we have a jury note. They want to know X. They want to see this exhibit.

They have a question about this aspect of the law. They'll give the judge input on how to answer it, and then the judge will make a ruling on how to answer it. And then ultimately, they will render a verdict. You know, they could be, they could find guilt or acquittal on any of the counts. If they are unable to reach a verdict that's known as a mistrial or a hung jury, and that's basically what's left. And when they are doing their deliberations, do they get the transcripts?

They can. So the judge, and that's a very good point. they get the transcripts, but they're not supposed to see the parts of the transcript they weren't privy to. So the government will probably be right now preparing redacted sets of the transcripts, a set of the transcript that has the parts that were admitted, but that blacks out the parts that were stricken or that they weren't supposed to hear so that that stuff can go into the jury room for them to look at. Okay. Okay. Yeah. because I was wondering if it's just all relying on their notes, what if they got things wrong?

But it's good that they can kind of check against what was actually said. They can. They can ask for testimony to be given to them. They can ask for exhibits. And sometimes they'll ask for what's called a readback. So that will be like two jurors may have a dispute in the jury room about what somebody said. So the jury gets brought into the courtroom. And then the court reporter will read back the relevant part of the testimony. And sometimes you can tell who's fighting because you'll see one juror go. And then the other juror goes, because you can see that they were having a fight about it. Okay.

And then the last quick question is that during that time when the jury deliberates, then do all the people gather in the court again? Or I don't know, like, I'm just wondering, do I am I going to be waiting there? Or like, how does that all work? It's preference by judge. I believe Judge Kaplan lets people hang out. in the courtroom while the jury deliberates. And they could be deliberating for five minutes, for an hour, for a week, for three weeks. It's one of the most trial lawyers hate waiting for a jury.

It's nerve-wracking. I always loved it because my part was done. It was in God's hands now. And I'm just going to wait to hear what the jury has to say. Okay. Well, I guess I will, I'll probably be there because I'll need to report on any news that comes out. Well, Sam, as always, it's been a pleasure having you on Unchained. Thank you for having me, Laura. Thanks so much for joining us today to learn more about the criminal trial against Sam Biggred Feed.

Check out the Shendos for this episode and our daily coverage. Unchained is produced by me, Laura Shin, with help from Kevin Fuchs, Matt Pilcher, Juan Oranovich, Megan Gavis, Shashon, and Margaret Korea. Thanks for listening. Unchained is now a part of the Coin Desk Podcast Network. For the latest, and digital assets, check out markets daily seven days a week with new host Noel Atchison. Follow the Coin Desk podcast network for some of the best shows in crypto.