Pod Insights Equity Podcast SBF's trial has started, and here's what you missed (Equity x Chain Reaction crossover) About this episode This time, we teamed up with the Chain Reaction podcast and Jacquelyn Melinek to talk about the ongoing trial of former FTX CEO Sam Bankman-Fried, also known as SBF.
The rise of FTX and its later implosion rocked the crypto world when the formerly massive crypto exchange went under last year. In the aftermath, the company's executives have been charged with financial crimes. Many have pleaded guilty and are cooperating with the government. SBF is not.
Here's TechCrunch's reporting on the trial thus far that we went over on the show:
SBF’s trial has started, this is how he and FTX got here
SBF’s trial promises to be just as riveting as the rest of the FTX drama
US government confirms it didn’t offer any plea deals to Sam Bankman-Fried
Meet the 12 jurors on Sam Bankman-Fried’s trial
Was FTX an empire ‘built on lies’ or a startup that ‘grew too quickly’?
That last entry goes over the opening statements, which we got into during the show. Jacquie, of course, hosts TechCrunch's Chain Reaction podcast, which is focused on all things crypto. We're lucky to have her back on the mic.
More to come on the SBF trial. Stick close to TechCrunch!
For episode transcripts and more, head to Equity’s Simplecast website.
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Transcript 0:10 Speaker 00 Hello and welcome back to Equity TechCrunch's Venture Capital Focus Podcast, where we unpack the numbers and the nuance behind the headlines. My name is Alex and today we have a special treat for you because we are doing a crossover episode with our dear friends over at Chain Reaction, TechCrunch's crypto-focused podcast. Because if you haven't heard, there is some big stuff going along in a legal room in New York, and that means we have Jackie Melinick here to talk about all things SBF. Jackie, I think we need some more acronyms, so I'm very glad that you're here.
0:37 Speaker 01 Coming to you live from New York, or what is it?
0:40 Speaker 00 Yes.
0:40 Speaker 01 Saturday night. No, it's actually SDNY, which is the SBF trial location, which is the Southern District of New York. There's another acronym.
0:48 Speaker 00 No, I appreciate it. Between all the acronyms, I actually think I'm slowly becoming intelligent. But we are here because Sam Bankman-Fried, the former CEO and co-founder of FTX, a formerly major crypto exchange, is facing seven counts of variously security fraud, wire fraud, and conspiracy to launder money. If you don't know, those are bad things that you shouldn't do.
1:11 Speaker 01 Don't do that, yeah.
1:12 Speaker 00 Very much don't do it. Even if your friends say you should, you should not, because SBF is facing up to 115 years in the clink, as they say. And that's more than one lifetime, Jackie, last time I checked.
1:22 Speaker 01 Yeah, and he's in his 30s, so unless the technology exists to keep him alive for 140 years, don't check my math on that, 150, I don't think he's gonna make it.
1:32 Speaker 00 Yeah, but we have Jackie on not only because lots going on, but because we had dispatched her each and every day to go sit in the courtroom and listen. And so we're going to talk about what she's learned, what she's seen, and what is up ahead for Sam.
1:44 Speaker 01 Lots to talk about.
1:45 Speaker 00 We've been looking forward to this trial for, well, looking forward is not the right phrase, anticipating this trial for some time now.
1:51 Speaker 01 Anticipating, yes. It has been on our docket since we got the date back in January, I believe.
1:56 Speaker 00 It's been a minute.
1:57 Speaker 01 And this isn't the only trial. There is going to be another one in March 2024, but that's on different charges, and we're not going to talk about that today.
2:03 Speaker 00 Yeah, but I have not been waking up in the pre-dawn hours to attend this court case, but I presume, Jackie, that you have to get up so early to get into the court because there is outsized interest in the proceedings.
2:15 Speaker 01 Yeah, so there's a lot of reporters who show up. And today, I think I was like fifth in line. And yesterday I was also fifth in line. We are recording this on Wednesday around 5:30 in the afternoon. For context, on October 4th, which is the second day of the trial.
2:30 Speaker 00 And I just want to point out that we're recording this like Jackie literally just got back to her computer.
2:35 Speaker 01 I sprinted back.
2:36 Speaker 00 So she is as current as you can be today on the trial proceedings. But Jackie, you and I know the backstory here because we were covering FTX before the implosion and during the implosion and now in the wake of that. Can you rewind the clock a little bit and just bring people back up to speed on some of the high, the high points, the most important points from the FTX saga?
3:01 Speaker 01 Sure. So FTX was one of the largest crypto exchanges out there. It was called the third largest for the most part. Some people called it the second, but the debate is up in the air about whether or not it was. It was basically one of the biggest. And Sam Bankman-Fried, the co-founder and CEO of FTX, was a very prominent figure in the crypto space. That's like just a genuine, true statement. He had advertisements everywhere. He had celebrity endorsements. Well, they were paid celebrity endorsements. He was working with politicians. He donated to politicians. There was a 60 Minutes thing that just came out on Sunday that said he offered up to, or he wanted to offer up to $5 billion to have Trump not run for president. I mean, he had a lot of money.
3:45 Speaker 01 He was a billionaire before he was 30. Some people compared him to Warren Buffett, which even at the time I found ridiculous. For context, TechCrunch never did that. But basically Sam Bankman-Fried, or SBF as we typically call him in a casual tone, he ran FTX and he had a sister company, or he was the parent company of another one called Alameda. Alameda Research is the longer term and it's basically a crypto hedge fund that kind of traded cryptocurrencies. And what happened here allegedly is that every dollar that a customer deposited to FTX, this is all alleged, went to a bank account in Alameda that Alameda then could use or SBF could then use to go buy real estate
4:30 Speaker 01 or endorsements or whatever he wanted to use the money for.
4:33 Speaker 00 Yep. Turns out fraud, same kind of thing, no matter if it's on the blockchain or on traditional fiat rails. But FTX came out of nowhere. And in retrospect, to me, watching FTX become the giant, it was at least putatively said to be at its peak, when it was worth, was it 32, 39 billion dollars?
4:55 Speaker 01 32 billion.
4:55 Speaker 00 32 billion dollars backed by some big venture names. It seemed very fast to me. And in retrospect, that should have made my alarm bells go off more. But Jackie, at the time, I mean, this was back when crypto was the opposite of where it is today. I mean, if we're in a crypto winter today, we were in a crypto summer then. And so it was the era of big money, fast investments, quickly built companies, new billionaires. And SBF, Sam, was, you know, top of the echelon there of kind of faces of new money.
5:26 Speaker 01 Yeah, you've got a point there. And that's actually something that the defendant's lawyer, Mark Cohen, said today at the trial. He argued that one of the reasons FTX later collapsed in November of 2022, almost a year ago, was because it grew so quickly. And that's why they didn't have a CFO or risk management's in control. And as startups do, this is all kind of his analogy, not me, as startups do, sometimes they grow really fast, and sometimes things break. And he was a CEO just creating two businesses that happened to break in the outcome of the crypto markets going crazy.
6:04 Speaker 00 Man, I hope that lawyer comes and like explains to my boss when I miss a deadline or don't hit a metric. And they can be like, Alex is just this little boy. He didn't know what he was doing. We're going to give him the most sympathetic reading.
6:16 Speaker 01 Well, Alex, you're not on trial.
6:18 Speaker 00 I'm not on trial. But I mean, to me, that rings hollow from the very beginning. Because one thing we've learned is that the company's backers were like, you should get a CFO. You should have normal financial controls. And he was like, nah. And so it's not like that didn't occur to him, or there wasn't time. I mean, he had enough time to buy up an enormous amount of Bahamian real estate and spend tens of thousands of dollars at Margaritaville, or whatever the hell it was. Clearly, there was time. You can't attend every single high profile get together of famous people that you bought your way onto if you don't have spare time. Hire a CFO and you're flying.
6:49 Speaker 01 Right.
6:50 Speaker 00 So Jackie, I know there was a lot more action on day two and we're both very excited to talk about it. But I want to pause because we made you attend both opening news, the trial and many more to come. So day one, fewer fireworks, more procedure, but still important because it picked, I believe, the jury.
7:06 Speaker 01 Yeah. And you know, Alex, I was happy to attend, even if it was bright and early in the morning. But day one was all about jury selection. SBF was there. He came in a suit that was a little too big on him. And initially, the reporters and anyone who wanted to watch was not allowed in the jury room just because of the sheer mass of jury selection people that were there. It was too much. And so we were all put in overflow rooms to watch from like tiny little HP screens. But from the screen that day, you could tell, one, he got a haircut. And two, the suit was too big on him, which I read that apparently the Wall Street Journal reported it was a Macy's suit. And that apparently another prisoner gave him a haircut. Just context there for you. But anyways, there were a lot of jurors who kind of either wanted to opt out.
7:51 Speaker 01 It seemed, you know, they were being as honest as possible. Some people said they had weddings, others said they had travel booked that they couldn't get refunded. One person said that she actually was in that court herself with her husband for racketeering charges. And they got it dismissed, but it made her heavily distressed. She was in the end not chose for jury. She was also trying to go to Maui for six months. So there was a lot of interesting characters. I know people call jury selection very boring, but I think it kind of painted the picture of like, who are these people that are going to be deciding the fate of SBF, of whether or not he's guilty? And that's like a really big weight and responsibility. And this is like a guy who came from having everything in the world, being a billionaire, talking to celebrities,
8:36 Speaker 01 having multimillion dollar homes to...
8:40 Speaker 01 The everyday American, basically, listening in, they probably don't know much about crypto, to be honest. Most of them seems like they didn't. Some actually expressed concerns that, hey, we don't know much about this. And now they are determining his fate.
8:53 Speaker 00 Yeah, well, jury of your peers does not mean jury of people who share the same intellectual space as you. Same interests, right?
9:00 Speaker 01 Right, and it's not to say these people aren't smart, you know? So in the end, they picked 12 jurors and six alternates. Basically, six alternates are the ones who come in if one of the 12 jurors have to get excused. And from that list, we had a physician assistant who has a career in medicine, another medical person who was a nurse. There was unemployed social worker, a divorced stay-at-home mom. I'm kind of reading off a list here. We had a train conductor, high school librarian, a USPS worker, a Bloomberg IT worker. And then one of the most interesting ones to me was a man who was born in Hong Kong, and he now lives in the States. He's retired, he's a former investment banker, has no kids. His wife also has a banking career.
9:43 Speaker 01 And he went to Rice and Stanford. And he has non-Hodgkin's lymphoma. And he basically said, if anyone in here gets COVID, I can no longer do this trial because that literally puts me at a huge health risk, which totally agree.
9:58 Speaker 00 Totally agree. But the person who has cancer is going to be on the jury?
10:02 Speaker 01 Yes, he's the one from Hong Kong. And he has the IB background, and he went to Rice and Stanford. So, I mean, those are definitely merits.
10:10 Speaker 00 Yeah, I feel like if dude with cancer can make it to jury duty, all of my excuses in the past.
10:17 Speaker 01 There was also a guy, and I felt so bad, who was on the alternates list. He works overnight at a hotel downtown. And he failed to disclose this when they were going through jury selection until after he was picked as an alternate. But his work schedule is 11:00 PM to 7:00 AM.
10:33 Speaker 00 Uh huh.
10:33 Speaker 01 Jury is typically nine to five. And the judge, who was typically friendly, you know, outgoing, we could get to that. He basically was like, you should have told us this before. Maybe we would have dismissed you, but we've had people with worse schedules. So you'll make it work.
10:47 Speaker 00 Oh.
10:48 Speaker 01 This man is not gonna be sleeping for six weeks.
10:50 Speaker 00 Oh, man, that's brutal. Okay, so day one, jury's put in place. We get that locked in. Now we can kick things off. Day two was opening statements.
10:59 Speaker 01 Yeah, so day two in the morning, they actually finished the jury selection, kind of what we got into. But then after that, it was the opening statements where the prosecutor spoke first. And basically, the prosecutors kind of took the angle of lies and fraud. And they kept repeating billions of dollars taken, you know, billions of dollars from customers. He took the money, and this is all their words alleged. He said he used the money towards real estate, family, friends, political influence, etc. And he kept saying that he lied, SBF lied. And he took money he didn't have, basically all your money from the investors, the everyday person using FTX. Not everyday person, these are crypto people, you know, but to.
11:43 Speaker 00 Your everyday Dejans, you know, yeah.
11:45 Speaker 01 Yes, exactly.
11:46 Speaker 00 Sad with a lot of affection.
11:47 Speaker 01 And I would say the prosecutor's angle was a little more accusatory, which would make sense. They also showed old photos of him during the opening statement and also during the witness part, which I think was done because he's showing up to court and he has this haircut. He's in a suit that's a little big on him, but he looks a lot, lot more cleaned up than his time when he was at FTX. And so basically, the prosecutors are showing you this was the man who was in charge, kind of not looking like the guy who's sitting here today, which they might have cleaned up for PR purposes.
12:21 Speaker 00 Yeah, can I just say that?
12:24 Speaker 01 You used to love his fits. I know.
12:26 Speaker 00 But I will say that Sam Bankman Fried was for a very short period of time, the the paragon, the archetype of slacker attire. And I was very proud that finally we had someone who was hanging out with like ex-presidents who looked terrible.
12:42 Speaker 01 They actually did use that photo of him at the Crypto Bahamas conference that FTX hosted with him, Tony Blair, and Bill Clinton. And it's him on stage. And honestly, I don't even remember his hair looking like that, but it was like a massive frizzy thing on top with a white t-shirt and cargo shorts. So they really, they really pulled out the photos.
13:03 Speaker 00 I'm just saying, next time we get a fashion icon, I hope they don't get in trouble for alleged multi-billion dollar fraud and so forth, because he sets lackers back.
13:13 Speaker 01 Fashion icon is an interesting choice of words.
13:17 Speaker 00 How dare he let me down, is my point. Okay, so the vibes are what I'm very curious about, because courtrooms are famously a little bit dry and procedural.
13:27 Speaker 01 Let's talk vibes.
13:28 Speaker 00 Clearly, the prosecution has a case to make, and the defense wants to point out that he's just a wee little boy who got lost and didn't know he needed to see F O.
13:35 Speaker 01 Right.
13:36 Speaker 00 But the judge, you mentioned the judge having a relatively interesting affect. I'm curious about how that impacted the overall feel of things.
13:42 Speaker 01 So the judge, Judge Lewis Kaplan, he's a federal judge of the Southern District of New York, if you want to look him up, that's him. He was very jovial, very friendly, very, but very straightforward. He would crack jokes about how he's not good at using computers and how certain people's excuses weren't that good. Like, he wouldn't say that directly, but he would be like, you have your husband's coworker's wedding? And then like, people would laugh, you know? So he was definitely more funny, I will say. I noticed in the beginning of day two, when he cracked jokes, Sam Bankman-Fried did not laugh. He just like stared straight ahead. I was in the room among about 12 other reporters,
14:25 Speaker 01 and I had like a direct view of him for the first half of the second day. So I watched his every single movement while the whole trial proceedings were going on. And SBF basically sat there, looked pretty straight. He had a laptop in front of him with a screen protector, which from the side you can't see. But later on, I was sitting behind him, and you can see the screen. So the screen protector only protects so much. And basically, he was constantly shaking his leg under the table, which is not visible to the public eye. But because of the angle I had, you saw that. And that's like something of his, you know, he's always fidgeting, always moving around. And he also kept biting his lip. And like, kinda like sucking on it. I don't even wanna, I don't even know how to explain
15:07 Speaker 01 that properly. And then when the jurors came in, when, prior to them being selected, he kinda looked straight ahead, but you could tell he was looking out of the corner of his eye to look at them. And then after the jurors were selected, very, very strangely, he kept looking at his sheet of paper, looking at his screen, and then staring intently at the jurors.
15:29 Speaker 00 Creepy.
15:30 Speaker 01 Yeah, he was staring, like, full on trying to make eye contact with them. And then at one point, I did see him smirk at one.
15:35 Speaker 00 You know.
15:36 Speaker 01 I don't know what the jurors' response was, if they smirked back, or...
15:39 Speaker 00 It's, it's very rare that I have to say this, but we should apply some rules I learned in rehab to the courtroom, because one of the things that was banned in rehab was quote, "mad talking." And I didn't know what that meant, but it turns out it's what you're saying, when you just stare at someone, lock eyes on them in a threatening manner. If I was the defendant, though, I don't know if I would do that to the people who can give me up to 115 years in prison.
16:03 Speaker 01 Yeah, and I'm not sure he was doing it with the purpose of intimidating them, because I've seen photos of me onstage at panels where I look so angry, but I'm actually just, you know, listening. So I'll give him the benefit of the doubt there, you know? But yeah, he had, he, he did like squinty-eyed at the jurors, like, he was kinda like trying to see who they were. And he had this, like, thousand-yard stare for most of the trial. He was just staring straight ahead with his hands crossed on his laptop unless he was typing, and he looked down at his papers, you know? And really, the only person he made eye contact with, aside from the wall straight ahead or the judge, was his main lawyer, Mark Cohen. Even if other people were talking around him, he was looking at
16:47 Speaker 01 Mark to speak to Mark the whole time, I would argue. And also, it's important to mention that his parents were in attendance, and they were sitting two rows behind me initially. His mom and dad were there. The mom has really short, black hair. She had some earrings on, a gold necklace. And she also had a notepad with her, a yellow notepad, and she was writing away incessantly. And the dad, which makes sense, had a frown on for the most of it. And he also- Had a bench full of quote unquote, family members is how the security officers like referred to them when they sat them down. They're like, oh, for the family of Bankman Freed. So I don't know who the others were, but yeah.
17:24 Speaker 00 If you're curious why Jackie has so many interesting, frankly, details on SBS parents and what they were wearing and so forth.
17:31 Speaker 01 It's because I was sitting there.
17:33 Speaker 00 And it's because they banned for nearly everybody laptops and phones inside the venue, which means that Jackie has been going back to the stone age every day to sit there for how many hours a day?
17:45 Speaker 01 It starts around nine 30, ends around four 35. So it's, it's a whole work day.
17:50 Speaker 00 A whole work day of, of a crypto reporter with paper. Like it's, it's like, I didn't set out to torture Jackie all week long, but it appears that's what I'm doing because she has to just sit there and listen to the court. Oh God.
18:05 Speaker 01 I have never written down so many details in my life. I mean, it's, it's actually kind of fun because it's okay. Fun is, fun is as fun it can be, you know, but the details I think kind of make the story. Like you could all read the transcripts, but you don't know the fine little things that were going on there. You don't know that he was shaking his leg under the table or how he was looking at the jurors. Unless you're physically in the room and that's not to attack you. Alex is holding up his hands. Don't come for me.
18:35 Speaker 00 Attacking me all you want. It's totally fine. I just wanted to point out that I'm not trying to criticize you. I'm just trying to say that it's interesting to see the difference things we, because if you were out on your laptop, you would be answering Slack messages, tweets, you would feel the need to live tweet it, right? But instead it's cool to see, this is what I was trying to get at, like the, the different result of going stone age in this trial.
18:58 Speaker 01 Of not having a phone to distract you at every waking moment. Yes.
19:02 Speaker 00 I don't know what that's like.
19:04 Speaker 01 You should go to a trial.
19:05 Speaker 00 No, no, thank you. The IPO market's way more boring than the crypto market when it comes to legal proceedings, at least in my experience. Okay, so we've gone over day one, talked about day two, talked about the vibe. I'm curious, has there been anything that surprises you here? Because so far, this is all very interesting, very important, but nothing that I'm like, oh, shit, that's not what I expected.
19:25 Speaker 01 Hmm. I was surprised by the first witness. I've heard from other lawyers that it should always be started off extremely strong and it should end really strong. So everyone was whispering like, who's it gonna be? Is it gonna be Caroline Ellison, which is the former CEO of Alameda and SBF's on and off girlfriend is how they phrased him. They're not together anymore, obviously. Well, hey, maybe not obviously, who knows?
19:49 Speaker 00 Actually, can we pause and talk about that for a second? Because it's not just drama.
19:53 Speaker 01 Briefly, yeah.
19:55 Speaker 00 Briefly, because I think it does show why people expected her to be there as a possible witness, because after Sam was taken into custody and given house arrest, he leaked something.
20:06 Speaker 01 Hmm. Yes. So SBF leaked Caroline Ellison's Google Doc diary to the New York Times. I think he had about 100 phone calls with them. And basically, what happened during that period of time is they talked about the diary, he got access to it, and New York Times published an article on it. And it basically illustrated Caroline Ellison as someone who was not secure in their role. She was upset. She was incapable is basically what I think he was trying to paint a picture. And for reference, Caroline Ellison, among two other executives and really close friends of SBF are, you know, gonna be witnesses.
20:47 Speaker 00 They're cooperating with the government.
20:49 Speaker 01 They're cooperating. We know that Gary Wang, who is the co-founder of FTX, who was one of those three people I just mentioned, is speaking on Friday, which we will get to later. And yeah, so as a result of him leaking that, he got his bail revoked by Judge Kaplan, and he got sent to the jail in Brooklyn. I think it's the MDC Metropolitan Detention Center. Those are the details.
21:14 Speaker 00 So now, back to witness number one.
21:16 Speaker 01 Yes. So witness number one came on around like 3:30 PM, 3:00 PM, and his name was Marc Antoine Juilliard. And if that name does not ring a bell, it did not for anyone in the courtroom either.
21:32 Speaker 00 Okay, good.
21:33 Speaker 01 Yeah, yeah, I know. Everyone was writing it down and then he walked in and some of us were whispering like,
21:37 Speaker 00 Who the hell?
21:37 Speaker 01 Like, who? You know, and it's not to diminish the witness, but it's just the fact that he is a user of FTX, or was, I should say. Well, he still is because he still can't withdraw his funds. And basically, he is from Paris, grew up there, lives in London now, he's a commodity trader and a cocoa bean broker. He trades the commodities of cocoa, just for context. And basically, the way the prosecutors painted it, back and forth conversation, he bought crypto on FTX because he believed and trusted in it. He saw the ads about FTX. He followed FTX on Twitter and SBF on Twitter, sorry, or X.
22:20 Speaker 01 I'm calling it Twitter because they called it Twitter in court, okay. And he described SBF as one of the leaders of the industry, and he assumed he could trust FTX's exchange.
22:30 Speaker 00 So.
22:31 Speaker 01 He used it.
22:32 Speaker 00 Yeah, but just thinking back to your point about starting strong, ending strong, it sounds like what they're trying to do, you know, here I am with my speculating hat on, point out that this is not just an intra FTX issue, but it's something that impacts real people around the world.
22:48 Speaker 01 Yes.
22:48 Speaker 00 And so, show the harm, maybe, and then show the alleged malice?
22:55 Speaker 01 Yeah, so Marc Antoine actually deposited about 100,000 pounds, which is like 140K US dollars.
23:04 Speaker 01 That's the math they said on stage. Who knows if that's exactly correct? But that's how much he deposited. And then it lowered to, you know, about 52,000 based on market movement. And then when FTX was collapsing, he talked about how he read SBF's tweets that was saying, all the assets are fine. Don't worry about it. And that was November 7th. And then he said he tried to go on November 8th to deposit funds and it never worked. So his funds are still sitting in there.
23:36 Speaker 00 Whoa, whoa, whoa. He tried to deposit funds?
23:39 Speaker 01 Oh, no. Sorry, sorry. Withdraw funds.
23:41 Speaker 00 Okay, cool. I'm like, this guy had
23:43 Speaker 01 Yes, withdraw. Oh, my gosh.
23:44 Speaker 00 Bullishness if he was trying to deposit on that date. Okay. Had to withdraw, but it didn't work out. So essentially, again, we have FTX's actions and words setting the market expectation and then the rug being pulled out from under this person and a bunch of other people.
23:59 Speaker 01 Yes.
23:59 Speaker 00 Allegedly.
24:00 Speaker 01 Yes. And so one part that stood out to me that was pretty interesting was when Mark Cohen, SBF's lawyer, did like the cross examination. He asked him like, how much of it was of your savings? And he asked if it was like 70%. And Marc Antoine was like, I don't know the exact percentage, but it was a significant amount of my savings. And so for the jurors, I don't know their financial status or anything, of course. But for some, 100,000 might be like more money than they've ever seen. And for some, it might be like nothing. So I think the context that this witness provided, basically saying, this was a lot, if not majority of my savings, and now I can't touch any of it.
24:43 Speaker 00 Was the
24:44 Speaker 01 I think was definitely worth noting.
24:46 Speaker 00 Was the defense lawyer trying to argue that it wasn't that much of his money? So we shouldn't feel that bad?
24:52 Speaker 01 I think he was trying to see, because he said he's never met him before. So it's not like he knew how much that was. Yeah, maybe. I don't know. I know. We should get him on the podcast.
25:00 Speaker 00 It's an interesting strategy. Did you lose all of your money? Tell me you did. No, it's not my client's fault. Like, that's a, that's a odd, not a lawyer, but like just off the top, it doesn't sound reasonable to me.
25:11 Speaker 01 And also, Mark Cohen's kind of argument was, and like, you knew that crypto was risky. You could make a lot, you could lose a lot. And then the prosecutors actually came back up again and they asked him, when you invested on FTX, did you see the risk of it?
25:29 Speaker 01 No. And then they asked, did you see the risk of crypto? And of course he said, yes. So it was like, the risk is within buying crypto, not putting your money on that platform. Like when I put my money in my bank account, I'm not like, I really hope today Chase doesn't withdraw at all, or like stop me from withdrawing any money, you know, like.
25:48 Speaker 00 Yeah. I think that's a really interesting strategy. They didn't go well for the defense.
25:53 Speaker 01 Yes.
25:54 Speaker 00 Also, it's not like his money went down by 50% and then he tried to sue FTX for his investments losing value. He lost his money because FTX allegedly didn't have it anymore.
26:05 Speaker 01 Yeah.
26:06 Speaker 00 That's, uh, that's not good. Can I, can I throw a beef into here that I'm annoyed with?
26:11 Speaker 01 Please.
26:12 Speaker 00 This was not a run on the bank. There's been some tweets that I've been seeing some people making that argument. Uh, an exchange is not a bank. They're not the same thing.
26:21 Speaker 01 Mark Cohen made that argument as well, that it was a run on the bank during his opening statement. Uh, he basically argued that because of a competitor who put out a tweet and then the CoinDesk article and so on.
26:32 Speaker 00 It's not a run on the bank. I, I, I mean, I can write an article tomorrow calling it a green washing tub and it still would not be a verdant thing for washing clothes. It would still be an exchange and that's what it was marketed as. That's what its services were. And I think run on the bank tries to flip the script and make it seem like it wasn't his fault. He was doing fine. It was external forces that allegedly brought this thing down. Not gonna say house of cards.
26:57 Speaker 01 Well, that is actually a point that he was making, that the crypto market volatility combined with the not proper enforcements being there before the market started to collapse. You know, whether it was having no risk control or CFO. And apparently he told Caroline Ellison to hedge their funds because he had a feeling that it wasn't going to go well. And they blamed her and said she didn't hedge. Therefore that is why the collapse was so big for FTX. Cause had they hedged, maybe it wouldn't have been this bad.
27:29 Speaker 00 Yeah, but. All of that's downriver from the use, the alleged use of customer funds at his prop trading desk, right? Not to mention a lot of other stuff like, like it is, they spent money on a lot of things that were non-core and had nothing to do with a lack of hedging at the hedge fund side business. So to me, like, the more I keep hearing the defensive strategy or the commentary around why he may not be as guilty as many people think he is, I don't find a lot of value there. I don't, I don't see the argument that's changed my view of, of the behaviors and the activities and, and so forth. And you and I have read a lot of documents about this company.
28:12 Speaker 01 Too many.
28:13 Speaker 00 No, I wouldn't say too many. I think we got a couple more in us. I'll be very curious how this trial goes. And that's kind of what I want to talk about next, which is just, apart from making you go to the court again tomorrow, what's, what's coming up? A six weeks trial? Like what happens next? What's the end game?
28:30 Speaker 01 Yeah. So they are anticipating six weeks. The judge hopes it's less. He says he thinks it's a bit long, but who knows? And the lawyers are anticipating six weeks on both sides. So at the end of the day today, around 4:00 PM, they brought in the second witness, Adi Madia. For context, he is a longtime friend from college of Sam Bankman-Fried. They went to MIT together and they remained friends after. He worked for Alameda for a bit and then he went back to finish his PhD and then he worked for FTX and he was a software engineer for him. And he described it as a quote, "close friendship" because, you know, I have everything written down here.
29:07 Speaker 00 He was a witness for the defense?
29:08 Speaker 01 He was a witness for the prosecution.
29:10 Speaker 00 Oh.
29:10 Speaker 01 He said him and SBF hasn't spoken since November 2022, when this all happened. And he also lived in the house with SBF, that infamous house with 10 people. They called it a polycule. He didn't say he was a part of it, but it was the $35 million penthouse in the Albany community in the Bahamas.
29:32 Speaker 00 Yes, but it was the hedging that was the problem.
29:36 Speaker 01 We didn't get to that today. But also, interestingly, I think this is important note. Adam mentioned he did not have a subpoena to be there, but he did get an immunity order, which basically means it protects him from being prosecuted as long as he's telling the truth. If he doesn't tell the truth, then he could be prosecuted.
29:53 Speaker 00 That's the best deal ever.
29:54 Speaker 01 Yeah, well, and the reason he said he did that, you know, back and forth through the conversation, is because he wouldn't have testified because he was, quote, worried the code he wrote would have committed to a crime.
30:06 Speaker 00 Oh, interesting. So he's worried that if he wrote the magical thing that took the money from FTX customers and gave it to Alameda, he could be accessory to the... If you make the pipe-
30:15 Speaker 01 It's like Oppenheimer with the atomic bomb.
30:19 Speaker 01 He made the bomb, but he didn't put off the bomb. I don't know. We don't know if Adam actually created the code that gave SBF this quote unquote, "special button" to take any money from Alameda.
30:27 Speaker 00 Right, I'm just saying that I can imagine a situation in which if you were a developer there, you might be worried about that.
30:32 Speaker 01 Yeah, and I get that because we've seen that in other cases where, you know, developers who created crypto products and services, like that crypto mixer, tornado cash, they've been kind of arrested for that. Not kind of, they have been arrested.
30:46 Speaker 00 Also, crypto mixer sounds like we're getting drinks.
30:49 Speaker 01 Oh, God, anyways, anyways. So that happened today. That will finish up tomorrow, October 5th, on Thursday. And by the time this episode comes out, his whole testimony will probably be over, which maybe you'll see some live tweets about it. But as for Thursday and Friday, we overheard the prosecutor ask the judge if we're good to go on the following witnesses. One was Adam Yedidia that we just mentioned. Another was Matt Wang, who is the co-founder and managing partner of Paradigm, which is a, quote, "research-driven technology investment firm." I'm pretty sure he used to say crypto investment firm, but, you know, to each their own. And then, before we get to that, last one is Gary Wang, the co-founder of FTX,
31:33 Speaker 01 which I'm sure will take up a lot of time.
31:36 Speaker 00 Yeah.
31:36 Speaker 01 Gary Wang is one of the people who agreed to a plea deal, which means he's fully cooperating with the government, supposed to tell the truth, and will definitely be testifying against SBF to save his own butt.
31:50 Speaker 00 Wow. I wonder if SBF is gonna, at the end of this, wish that he had not tried to plead not guilty. But we will see because the wheels of justice will grind on. And Jackie, where should people go to stay up to date on all things SBF trial if they're big fans of old TechCrunch?
32:06 Speaker 01 I would say, obviously, techcrunch.com. You could look up my name, Jacqueline Melanick. And then I am trying to tweet as much as possible when I get my phone back outside of the courtroom. So you could follow me on Twitter at J A C Q M E L I N E K, which is Jack Melanick. And yeah, that's where we're at.
32:26 Speaker 00 If you're listening to this podcast and you don't follow Jackie, shame, for shame.
32:29 Speaker 01 Yeah.
32:29 Speaker 00 She is foregoing the sun for weeks to bring me the news. The least you could do is follow her on Twitter. We're not gonna call it X.
32:36 Speaker 01 And the weird little details. I mean, how are you gonna know about?
32:39 Speaker 00 SBF's mom's haircut.
32:40 Speaker 01 SBF's haircut, yeah.
32:41 Speaker 00 Multiple haircuts, actually.
32:43 Speaker 01 Everyone's haircut.
32:44 Speaker 00 I just want to close out by saying, Jackie, thank you for, for doing this. I'm glad the trial is local to you, making this a lot easier. But it is so, an enormous pain in the butt to do all this. So I appreciate it. And you doing it means that I don't have to. So thank you.
32:59 Speaker 01 Week one is going well. Ask me again in week two or three if I'm, if I'm missing sleep.
33:03 Speaker 00 Yeah. And if something big happens, we'll do this again, right?
33:06 Speaker 01 100%. We have to. We have to do updates.
33:08 Speaker 00 Awesome. Jackie, thank you so much for this again. We really appreciate it. And of course, everyone, Equity is back on Friday with our usual news rundown. If you need more Equity in between now and then, we are Equity Pod on Twitter, or X if you want to call it that, and also Threads. Come hang out with us. We have a good time over there. And we'll talk to you soon. Hugs, bye.
33:28 Speaker 00 Equity is hosted by myself, editor in chief of TechCrunch Plus, Alex Wilhelm, and TechCrunch senior reporter, Mary Ann Azevedo. We are produced by Teresa Locan Solo with editing by Kell. Bryce Durbin is our illustrator. And a big thank you to the audience development team and Henry Pickavet, who manages TechCrunch Audio Products. Thank you so much for listening, and we'll talk to you next time.
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