Sam Bankman-Fried is so fucked.
I have come to court every day since opening arguments thinking, Surely things cannot get worse for this man. Surely we have reached the bottom. Unfortunately, there is no bottom — in the prosecution’s telling, FTX and Alameda Research, his exchange and trading company, were matryoshka dolls of crime. Today, the defense started its case, which should theoretically present Bankman-Fried in a better light. But if what I saw of him on the stand is any indication, he may be more damning for himself than any of the prosecution’s witnesses.
Whatever Bankman-Fried can’t pin on Alameda CEO Caroline Ellison, he is essentially trying to off-load onto FTX lawyer Dan Friedberg. But blaming your lawyers for your decisions often implicates stuff — conversations, communications, documents — that are sometimes covered by attorney-client privilege. (If you blow up your own attorney-client privilege, it’s much worse for you than it is for anyone else, which is why most adults blame their own lawyers only under extreme circumstances.) The defense appears to be trying to thread the needle by saying that Bankman-Fried believed everything at FTX was fine because lawyers had been involved.
So today the jury got to go home early while the judge conducted an odd evidentiary hearing to figure out exactly what Bankman-Fried wants to tell the jury — and how much of it is going to be admissible.
Bankman-Fried took the stand as part of this hearing. This meant that prosecutor Danielle Sassoon got a crack at him, and boy howdy, she beat him like a piñata.
We’ve heard a lot of testimony in this trial about disappearing messages on Signal, which the prosecution has strongly implied are evidence of wrongdoing. I don’t believe this to be true! Plenty of businesses destroy documents as a matter of course, for a wide variety of reasons, many of them harmless.
The defense is seeking to testify that the disappearing text messages were part of a document retention policy which had been approved by FTX general counsel Friedberg. Though Bankman-Fried has testified that important business records were retained, the defense has been unable to produce the actual document retention policy, though they say it exists.
We saw a document that cataloged all 288 Signal chat rooms set to auto-delete that Bankman-Fried was in. Some of those chats contained lawyers. Bankman-Fried said that Slack messages were more official than Signal messages, though informal conversations about serious matters did take place in chats that disappeared. In rambling testimony that I have heroically condensed, Bankman-Fried noted that some sensitive business records relating to know-your-customer laws needed to be deleted for customer safety — photos of passports, for instance, or social security numbers. He then added that in November 2022, in response to the concerns of regulators, he turned the auto-delete feature off on most of his chats.
We saw a document that cataloged all 288 Signal chat rooms set to auto-delete that Bankman-Fried was in.
Defense lawyer Mark Cohen did his best. Unfortunately for him, the cross-examination was conducted by Sassoon, who looks like someone who uses “summer” as a verb, and often appears deceptively timid, with her hands held close to her chest. In her cross, she simply unhinged her jaw and ate Bankman-Fried.
She asked him when he had specifically discussed the auto-deletion of messages with his lawyers, leading to a very long pause, the first of many. Bankman-Fried said he thought that was shortly after he started using Signal, around the spring of 2021. “I mentioned it” to them, he said. Sassoon asked if he had sought approval, and Bankman-Fried said he didn’t know that he sought approval, exactly. It was a jumble of word-salad. It was — well, see:
So I remember — my memory of the policy is that it laid out various circumstances in which it was not permissible to do so or in which there needed to be a lengthy retention period for company communications, and that outside of those sets of topics or forums, there was permissibility to have effectively whatever data-retention link or setting felt appropriate.
Sassoon was about to ask another question when the judge broke in. “What does it mean, there was permissibility about that?” Kaplan asked. “Does it mean you could do whatever you wanted?”
Yes. That was exactly what it meant.
Bankman-Fried, who swayed back and forth during the cross-examination, had said earlier that Slack was for formal communications. But Caroline Ellison had testified that she sent him the seven prospective fake balance sheets over Signal. Was that a formal document, Sassoon wanted to know. It was a draft, and thus not formal, Bankman-Fried replied. What specific conversations with his lawyers led him to that conclusion, Sassoon wanted to know. Bankman-Fried couldn’t really answer.
Earlier in the trial, we had seen a memo about shutting down Alameda Research, and Gary Wang, another alleged co-conspirator, had testified that he’d said that was impossible because of all the money Alameda owed FTX customers. “I don’t specifically recall such conversations” about the $11 billion hole in the balance sheet, Bankman-Fried said. What about Adam Yedidia’s testimony that Bankman-Fried told him that Signal messages autodeleted because keeping them was “all downside?” Bankman-Fried didn’t recall that either.
Bankman-Fried’s defense, in the direct testimony, was trying to put blame on the lawyers: FTX chief regulatory officer Dan Friedberg, for instance, or Can Sun, another FTX lawyer, who drafted the terms and conditions. A significant thrust of questions was about a bank account controlled by Alameda Research that did not bear Alameda’s name; it was instead called North Dimension, it came into existence around 2020 — that is, while Bankman-Fried was still Alameda’s CEO — and it was where FTX customers were told to wire their funds.
It was like watching someone get run over by a very slow-moving steam roller.
Bankman-Fried said that the North Dimension bank account was all Friedberg’s idea. Sassoon asked if Bankman-Fried, as Friedberg’s boss, had given him any direction, or if Friedberg just popped ideas across Bankman-Fried’s desk. The word-salad began again, interrupted only by the judge saying things like “So I take it the answer is you don’t remember; is that about it?” or “Listen to the question and answer the question directly.” It was like watching someone get run over by a very slow-moving steam roller.
Neither of Bankman-Fried’s parents seemed to be enjoying this. Michael Lewis, whose most recent book, Going Infinite, is a portrait of Bankman-Fried, was in the courtroom for the first time. I really enjoyed his book, by the way! Though the reporting in Going Infinite suggests that Bankman-Fried is an unrestrained sociopath, Lewis’s general attitude toward Bankman-Fried may be best summed up as “I love my gamer son.” In the courtroom, Lewis looked pretty bummed, occasionally shaking his head.
Sassoon brought out the terms of service Bankman-Fried had testified to and asked him to point out where in the agreement it specified that FTX was permitted to spend customer funds. The court sat in absolute silence for more than a minute. You could have heard a mouse fart. Finally, Bankman-Fried said, “I am not a lawyer” and definitely said a lot of words, none of which made much sense. Sassoon asked the same question again, drawing an objection from Cohen, which Kaplan overruled — because Bankman-Fried had not answered her question. The line Bankman-Fried eventually pointed to was that funds were “held and / or transferred by provider.”
The court sat in absolute silence for more than a minute.
His parents looked even more unhappy.
Did Bankman-Fried know that Alameda’s account was exempt from liquidation? Bankman-Fried’s eyes darted around the room, before saying that he wasn’t aware of the “allow_negative” code by name. What was he aware of? That there were “some speedbumps” in place. We then went through an exhaustive routine of Sassoon asking what he meant by “speedbumps” and Bankman-Fried not answering, and then Sassoon asking again. As this was happening, Lewis slumped over, folding his arms over the wooden bench in front of him, his head down.
Kaplan wasn’t amused by any of this. “The witness has an interesting way of responding to questions,” he noted. Kaplan then told Bankman-Fried that he had been asked a number of times whether he knew that Alameda was allowed to have a negative balance on FTX, and he hadn’t adequately responded.
Then Sassoon did what I had been waiting for: pointed out that Bankman-Fried had been the one who hired Friedberg in 2020. She asked if he’d been hesitant to hire a general counsel. He said he had been hesitant to hire the wrong general counsel — “I did want a general counsel who was comfortable with reasonable risks.” Sassoon then asked if Bankman-Fried was aware of Friedberg’s history of working at a company that had an insider trading scandal? (The company in question, by the way, is UltimateBet.) That there had been a criminal scandal? “Were you aware that Dan Friedberg used illegal narcotics with your employees?” Cohen objected to the last two questions; only the one about drugs got sustained.
After that, Sassoon sat down, and Kaplan said he would make his decision tomorrow morning. Barbara Fried, the defendant’s mother, sat with her head in her hands as the judge talked with the prosecution and the defense.
Look, if what I saw today was a taste of what Bankman-Fried has to expect on the cross-exam in front of the jury, he’s cooked. He was obviously evading questions, trying to pour forth verbiage to distract Sassoon from what she’d asked. It didn’t work. And as she asked the same questions over and over, he looked worse and worse, trying to wriggle out from answering them. This is to say nothing of the long, repeated sections of “I don’t recall.” Unless he pulls out of testifying, the jury is in for a once-in-a-lifetime shitshow.