Crypto Critics' Corner

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Episode 135 – Caroline Ellison Takes the Stand: the Sam Bankman-Fried Trial Week 2 (feat. Nikhilesh De)

Caroline Ellison Takes the Stand: the Sam Bankman-Fried Trial Week 2 (Feat. Nikhilesh De) – Crypto Critics' Corner

Bennett and Cas are joined by Nikhilesh De of CoinDesk to discuss the ongoing trial of Sam Bankman-Fried, and specifically the testimony of Gary Wang and Caroline Ellison. Additional resources: CoinDesk coverage of the trial https://www.coindesk.com/tag/sbf-trial/ Nik's newsletter about the trial https://www.coindesk.com/policy/2023/10/13/things-sbfs-defense-lawyers-should-be-freaking-out-about/ Bennett's newsletter about the trial https://us2.campaign-archive.com/?u=16a900a42513fb7998acad86d&id=4f3209dbfb Protos coverage of the trial https://protos.com/sbftrial/ Business Insider Alameda Research All Hands call https://www.businessinsider.com/alameda-all-hands-meeting-caroline-ellison-shut-down-audio-2023-10 Liz Lopatto Article: 'Sam Bankman-Fried is a Terrible Boyfriend' https://www.businessinsider.com/alameda-all-hands-meeting-caroline-ellison-shut-down-audio-2023-10 Sketch of Caroline from Nik https://twitter.com/nikhileshde/status/1711886306131812441 This video was recorded on October 15th, 2023.

Cas Piancey and Bennett Tomlin are joined by Nikhilesh De to discuss the trial of Sam Bankman-Fried, and specifically the testimony of Caroline Ellison and Gary Wang.

This episode was recorded on October 15th, 2023.

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English Transcript:

00:00:05:08 - 00:00:06:11
Cas Piancey
Welcome back, everyone.

00:00:06:11 - 00:00:11:06
Cas Piancey
I am Cas Piancey. I'm joined, as usual, by my partner in crime, Mr. Bennett Tomlin.

00:00:11:06 - 00:00:12:06
Cas Piancey
How are you doing today?

00:00:12:06 - 00:00:13:20
Bennett Tomlin
I'm doing well. How are you, Cas?

00:00:13:20 - 00:00:16:01
Cas Piancey
Mad because I've had to spend money on stuff.

00:00:16:01 - 00:00:21:10
Cas Piancey
But other than that, I'm great. We're joined by a super special guest. One of my favorite reporters in the entire world.

00:00:21:12 - 00:00:23:13
Cas Piancey
Nik De, who works.

00:00:23:15 - 00:00:28:06
Cas Piancey
At Coindesk and has been covering the Sam Bankman-Fried trial in person.

00:00:28:06 - 00:00:32:03
Cas Piancey
Like Mr. Morris, David Z. Morris who we had on before.

00:00:32:03 - 00:00:33:09
Cas Piancey
thank you for joining us today.

00:00:33:09 - 00:00:33:20
Cas Piancey
There's a lot

00:00:33:20 - 00:00:34:21
Cas Piancey
We could start with here.

00:00:34:21 - 00:00:36:01
Cas Piancey
I think we should start.

00:00:36:04 - 00:00:36:17
Cas Piancey
With.

00:00:36:20 - 00:00:37:05
Cas Piancey
Kind.

00:00:37:05 - 00:00:37:19
Cas Piancey
Of.

00:00:37:20 - 00:00:38:21
Cas Piancey
The beginning of the week.

00:00:38:21 - 00:00:39:13
Cas Piancey
Gary Wang

00:00:39:15 - 00:00:41:15
Cas Piancey
Still on the stand and.

00:00:41:15 - 00:00:42:03
Cas Piancey
how.

00:00:42:03 - 00:00:47:18
Cas Piancey
It seemed to be not going great at the end of last. Last week. And then at the end of this past week.

00:00:47:20 - 00:00:48:21
Cas Piancey
It's or it.

00:00:48:21 - 00:00:50:01
Cas Piancey
Still seem to be going bad.

00:00:50:01 - 00:00:50:08
Cas Piancey
But

00:00:50:08 - 00:00:51:22
Cas Piancey
What was the deal with Gary this week?

00:00:51:22 - 00:00:52:03
Cas Piancey
was.

00:00:52:03 - 00:00:53:22
Cas Piancey
He what kind of questions was he answering?

00:00:53:22 - 00:01:17:11
Nikhilesh De
Gary Wang, one of the insiders, he was a co-founder, former chief technology officer, answered a lot of prosecution questions about, you know, how Alameda was able to access funds from FTX customers and have a negative balance on FTX. How it was able to, you know, in his words, place trades slightly ahead of other parties on the platform.

00:01:17:11 - 00:01:20:10
Nikhilesh De
assume you're asking about the cross-examination from the defense, where

00:01:20:10 - 00:01:21:15
Nikhilesh De
questions were somewhat,

00:01:21:15 - 00:01:24:15
Nikhilesh De
let's say, more repetitive and less insightful

00:01:24:15 - 00:01:30:15
Nikhilesh De
I think is maybe a fair way to describe them to the point where the judge was even

00:01:30:15 - 00:01:34:13
Nikhilesh De
asking the defense counsel to get a move on multiple times.

00:01:34:13 - 00:01:43:20
Nikhilesh De
Those questions were a lot more focused on just kind of the, you know, certain details of what he was testifying about, details about his collaboration agreement with prosecutors.

00:01:43:20 - 00:01:46:20
Cas Piancey
Let me pause. Pause. You're there. What was that? Cooperation agreement.

00:01:46:20 - 00:01:52:03
Cas Piancey
Just in case anyone is unfamiliar with what What that was about and what that entails. Because I think the

00:01:52:03 - 00:01:56:04
Cas Piancey
thought from a lot of people on Twitter or whatever,

00:01:56:04 - 00:01:57:15
Cas Piancey
but the public in general is.

00:01:57:15 - 00:01:57:23
Cas Piancey
That

00:01:57:23 - 00:01:58:15
Cas Piancey
Gary.

00:01:58:20 - 00:02:11:04
Cas Piancey
And Caroline, who was the other star witness this week, but that and Nishad for next week and some of these other executives that they're going to do no prison time whatsoever. But that isn't right, is it.

00:02:11:04 - 00:02:12:04
Nikhilesh De
you're right. So

00:02:12:04 - 00:02:17:19
Nikhilesh De
Gary Wang, Nishat today and Caroline Elson all testify. I pleaded guilty to charges

00:02:17:19 - 00:02:30:00
Nikhilesh De
between late last year and early this year, basically saying admitting to, you know, things like wire fraud and conspiracy charges similar to what Sam Bankman-Fried has been charged with. And

00:02:30:00 - 00:02:40:14
Nikhilesh De
what they agreed to do is testify before the court in exchange for a letter from the DOJ to the judge overseeing their case, which I believe is

00:02:40:14 - 00:02:42:21
Nikhilesh De
the same judge overseeing payment for his case.

00:02:42:21 - 00:02:44:02
Nikhilesh De
Judge Lewis Kaplan at the moment

00:02:44:02 - 00:02:46:23
Nikhilesh De
basically outlining their testimony, their crimes and

00:02:46:23 - 00:03:01:13
Nikhilesh De
what has happened. And their hope is that the judge will take all of that into consideration and grant them a more lenient sentence. You know, in Gary Wang's case, he was very upfront about hoping he doesn't get any prison time whatsoever, but it is up to the judge's discretion.

00:03:01:13 - 00:03:08:18
Nikhilesh De
The DOJ is not going to recommend a sentence. They're not going to recommend, you know, not a sentence. They're just going to say, okay, here's what happened and here's what he said.

00:03:08:18 - 00:03:09:03
Nikhilesh De
it's

00:03:09:03 - 00:03:09:17
Cas Piancey
We don't know.

00:03:09:23 - 00:03:10:18
Cas Piancey
we don't know.

00:03:10:18 - 00:03:18:06
Nikhilesh De
exactly they'll get, right? We're not going to know until the judge comes out and says, okay, here is what I think and makes a ruling.

00:03:18:06 - 00:03:21:14
Nikhilesh De
be an opening being until after this trial, of course. So it's going to take a while,

00:03:21:14 - 00:03:33:08
Bennett Tomlin
Well, and as we mentioned last week, when David was and the one thing that invalidates these agreements and makes them liable for full prosecution would be lying. So they they can't do that.

00:03:33:08 - 00:03:46:20
Nikhilesh De
And actually extends beyond just, you know, the three of them. We also have two witnesses, including former FTX developer Adam Yedidia last week who are testifying under a grant of immunity. So they're not charged with anything yet.

00:03:46:20 - 00:03:54:21
Nikhilesh De
But what that means is the DOJ will not charge them for anything they say on the stand or that they admitted to in you know, the

00:03:54:21 - 00:04:02:21
Nikhilesh De
depositions are in conversations prior to taking the stand, as long as you know, with that same caveat that Ben just mentioned, if they lie about anything,

00:04:02:21 - 00:04:05:09
Nikhilesh De
you know, gloves are off. The DOJ can do whatever they want,

00:04:05:09 - 00:04:11:09
Nikhilesh De
which is a point that the defense counsel really, really, really emphasized during the cross-examination of Mr..

00:04:11:09 - 00:04:14:14
Nikhilesh De
Yedidia for quite a while

00:04:14:14 - 00:04:23:21
Nikhilesh De
leading everyone to think, maybe they have something that they found him lying on. And that did not turn out to be the case, at least as of you know,

00:04:23:21 - 00:04:24:21
Nikhilesh De
right now.

00:04:24:21 - 00:04:27:09
Bennett Tomlin
they're saving it for later in the trial. I guess.

00:04:27:09 - 00:04:28:23
Cas Piancey
I know I know how silly that sounds, but.

00:04:28:23 - 00:04:31:01
Cas Piancey
I guess I guess this is a good.

00:04:31:01 - 00:04:34:17
Cas Piancey
Time to bridge in to the other key witness of this past week and the one that

00:04:34:17 - 00:04:35:08
Cas Piancey
man

00:04:35:08 - 00:04:39:05
Cas Piancey
everyone is talking about in one way or another, Caroline Ellison,

00:04:39:05 - 00:04:42:12
Cas Piancey
the co-CEO, then CEO, but not really.

00:04:42:12 - 00:04:43:15
Cas Piancey
CEO of.

00:04:43:15 - 00:04:47:17
Cas Piancey
Alamaeda Research, took the stand this week and it has been

00:04:47:17 - 00:04:53:10
Cas Piancey
kind of crazy. I honestly have no idea where to start. Bennett If you want to throw a question out there about it, I like I'm.

00:04:53:12 - 00:04:55:08
Cas Piancey
It's it's been so wacky.

00:04:55:10 - 00:05:01:07
Bennett Tomlin
There was a lot of details revealed in Caroline's testimony. And, Nik, you've been there.

00:05:01:07 - 00:05:04:06
Bennett Tomlin
what struck you the most from her testimony so far?

00:05:04:06 - 00:05:10:08
Nikhilesh De
she was testifying for, you know, across three days, but roughly it was about two days worth of testimony

00:05:10:08 - 00:05:18:17
Nikhilesh De
throughout the entire thing. You know, she just really gave off this impression of someone who had, you know, unwittingly fallen into this kind of,

00:05:18:17 - 00:05:27:17
Nikhilesh De
emotionally manipulative, somewhat abusive relationship with someone who was able to take advantage of her and, you know, have her, in her words, do

00:05:27:17 - 00:05:28:10
Nikhilesh De
crimes.

00:05:28:10 - 00:05:43:16
Nikhilesh De
You know, whether that was having Alameda take funds from FTX customers, whether that was lying about Alameda as balances and you know, the assets and liabilities to, you know, documents that they sent to lenders and to, you know, other parties, investors

00:05:43:16 - 00:05:54:09
Nikhilesh De
or whatever. It's just, you know, the whole collapse of everything. You know, she really kind of, you know, emphasized over and over again that she was doing these things at the direction of Sam Bankman-Fried.

00:05:54:11 - 00:05:55:06
Nikhilesh De
And,

00:05:55:06 - 00:06:02:16
Nikhilesh De
prosecutors did bring up her relationship a little bit. The defense mentioned it briefly, and she was talking about how, you know,

00:06:02:16 - 00:06:08:03
Nikhilesh De
in her view Bankman-Fried was not particularly emotionally available for her and give her, you know, any attention.

00:06:08:03 - 00:06:18:08
Nikhilesh De
you know, there were some weird details about things like, you know, potentially working with Modulo, which was run by a different individual that Bankman-Fried had been in a relationship with prior

00:06:18:08 - 00:06:21:03
Nikhilesh De
know, that that was seen to be kind of the impression she was going for.

00:06:21:03 - 00:06:23:03
Nikhilesh De
And I think she did convey that.

00:06:23:03 - 00:06:24:13
Nikhilesh De
It really struck me, as,

00:06:24:13 - 00:06:29:18
Nikhilesh De
DOJ walked her through a number of issues and they spent quite a lot of time on things like balance sheets, which are

00:06:29:18 - 00:06:35:19
Nikhilesh De
kind of dull, but also, I think, you know, substantially more significant than some of the other things that she mentioned.

00:06:35:19 - 00:06:37:21
Nikhilesh De
you know, it was a very clear narrative.

00:06:37:21 - 00:06:40:21
Nikhilesh De
They had a very clear case that they were presenting to the jury

00:06:40:21 - 00:06:47:22
Nikhilesh De
not just from kind of like the emotional aspect, but also just kind of the fact based here's what happened. Here's what happened next and here's how we got to today.

00:06:47:22 - 00:06:51:07
Cas Piancey
I was actually going to chime in really quick and say, I wonder if

00:06:51:07 - 00:06:58:02
Cas Piancey
didn't seem like the jury understood how important balance sheets are in a case like this, or did it did everyone's eyes kind of gloss over

00:06:58:02 - 00:07:01:19
Nikhilesh De
I actually have not been in the courtroom itself for that part of testimony.

00:07:01:19 - 00:07:05:17
Nikhilesh De
basically there's an overflow room a couple of floors below the main courtroom

00:07:05:17 - 00:07:08:21
Nikhilesh De
where most people are able to watch the trial.

00:07:08:22 - 00:07:19:06
Nikhilesh De
So there's only about, I think, 20 or so reporters and members of the public who are in the actual courtroom. According to one of my colleagues who was in the courtroom, the jury was.

00:07:19:13 - 00:07:24:03
Nikhilesh De
Let's call it, you know, split. Some folks were asleep, some folks were paying attention. Some folks were,

00:07:24:03 - 00:07:31:19
Nikhilesh De
really looking for things that stood out as being different from the rest of the monotony of people saying things, answering questions.

00:07:31:19 - 00:07:36:05
Nikhilesh De
in my view, the balance sheet stuff was some of the more significant and, you know, detail stuff.

00:07:36:05 - 00:07:44:01
Nikhilesh De
So I imagine those who were taking notes are probably going to be filling in those who weren't when they, you know, break for deliberations in a couple of weeks.

00:07:44:01 - 00:08:11:22
Bennett Tomlin
One of the most interesting things for me was what she revealed about FTX Ventures, which was basically that it was Alameda Research in a poorly fitting trenchcoat where Sam Bankman-Fried had come to Caroline Ellison and Alameda Research with this idea to do about 3 billion of additional venture investing. But he was worried that alchemy this brand was no longer any good, and so he was going to do it under the FTX's brand with FTX Ventures.

00:08:12:03 - 00:08:23:10
Bennett Tomlin
But what Caroline testified to was twofold. One, the money for those investments was coming from Alameda Research and therefore indirectly from FTX customers. And that

00:08:23:10 - 00:08:37:05
Bennett Tomlin
what was more interesting is that Sam Bankman-Fried first approached her to discuss how this investment would or these series of investments would change the riskiness of Alameda Research. Can you talk a little bit about

00:08:37:05 - 00:08:37:17
Bennett Tomlin
that part?

00:08:37:17 - 00:08:38:20
Bennett Tomlin
She testified about.

00:08:38:20 - 00:08:44:10
Nikhilesh De
Yeah. And I actually thought this was a really clever approach from the DOJ as well. So

00:08:44:10 - 00:08:51:03
Nikhilesh De
a quick bit of background. In his opening statement, defense counsel Mark Cohen said that, you know, FTX and Alameda were,

00:08:51:03 - 00:09:00:21
Nikhilesh De
in his words, a plane being built in flight. And so, you know, in his opening statement, he pretty explicitly, you know, laid the blame at Caroline Ellison's feet, saying that

00:09:00:21 - 00:09:02:04
Nikhilesh De
she did not hedge,

00:09:02:04 - 00:09:06:02
Nikhilesh De
Alameda's risks when she was told to by Sam Bankman-Fried.

00:09:06:04 - 00:09:18:05
Nikhilesh De
So fast forward to her on the stand. The DOJ prosecutors walking her through this and you know, this was an assistant U.S. attorney who has been leading the case for, you know, the last nine months or ten months or whatever.

00:09:18:05 - 00:09:30:09
Nikhilesh De
first talked her through the analysis that Ellison did about whether or not those investments were safe. And Ellison testified that, you know, in her view, based on the analysis, it would not have been wise to

00:09:30:09 - 00:09:34:01
Nikhilesh De
put those further $3 billion into venture investments.

00:09:34:01 - 00:09:38:04
Nikhilesh De
And we spent a lot of time on that talking about, you know, what the risks were,

00:09:38:04 - 00:09:49:07
Nikhilesh De
you know, what exactly the possible failure scenarios were, you know, there was talk about whether or not things like asset prices collapsing, crypto asset prices collapsing might have an impact. And

00:09:49:07 - 00:09:51:03
Nikhilesh De
at the end of all of that,

00:09:51:03 - 00:09:54:01
Nikhilesh De
the prosecutor asked, okay, so what happened then?

00:09:54:07 - 00:10:17:22
Nikhilesh De
And Ellison testified that Bankman-Fried basically ignored her, went ahead with FTX Ventures a couple of months later. And fast forward to November and you know, all of the failure scenarios presented came to fruition. So, you know, first off, obviously the the obvious is that, yes, these were some bad investments and some bad decision making that led to this collapse.

00:10:18:00 - 00:10:21:22
Nikhilesh De
But also it really kind of undermined a key point of

00:10:21:22 - 00:10:40:09
Nikhilesh De
the defense argument that, you know, she had not hedged risks because Ellison testified that they couldn't there's no money left to hedge risks yet because it was all going into this venture investing. And yeah, I thought it was a very clever, slightly subtle but very clever way for the DOJ to approach that because,

00:10:40:09 - 00:10:41:14
Nikhilesh De
know, the argument is,

00:10:41:14 - 00:10:43:19
Nikhilesh De
Ellison ignored Bankman-Fried

00:10:43:19 - 00:10:47:00
Nikhilesh De
Yeah, they kind of said, Well, yeah, that's not actually true.

00:10:47:00 - 00:11:01:22
Bennett Tomlin
what I kind of appreciated about it is Sam Bankman-Fried in a series of public statements. And by passing certain frames to certain people, has tried to portray since the collapse of FTX

00:11:01:22 - 00:11:16:03
Bennett Tomlin
Caroline as at least in large part responsible and her ability as a trader in part driving that. And there have even been specific claims made, like you mentioned there, about the risk management of Alameda and who was responsible for it.

00:11:16:04 - 00:11:29:05
Bennett Tomlin
And so what I thought made it particularly powerful is that this was a point where you see her or at least her testimony suggests she laid out these series of risks. And we see some of the signal charts to support that. And

00:11:29:05 - 00:11:40:18
Bennett Tomlin
Sam Bankman-Fried took that, which ended up being the actual thing that happened and said, no, we're going to do my trade instead, in this case, 3 billion additional dollars into illiquid venture.

00:11:40:20 - 00:11:41:14
Bennett Tomlin
And that

00:11:41:14 - 00:11:44:21
Bennett Tomlin
in a significant fact, contribue added to the

00:11:44:21 - 00:12:00:16
Bennett Tomlin
immediate crisis in November, when FTX and Alameda research collapse. The broader criminality existed, regardless of that specific moment. But like it illustrates that Sam Bankman-Fried was in control and is not as good as he wants people to believe.

00:12:00:16 - 00:12:08:06
Nikhilesh De
right, exactly. That was, you know, I think a key point in that, you know, the argument that DOJ is making. I mean, you know, the DOJ case at the heart of it is

00:12:08:06 - 00:12:14:14
Nikhilesh De
Bankman-Fried took money from his customers by, you know, having all of these other details come out and,

00:12:14:14 - 00:12:15:15
Nikhilesh De
for it's for the jury.

00:12:15:15 - 00:12:34:15
Nikhilesh De
Right. And the question is, you know, how's a jury going to take? well, Bankman-Fried is saying that Ellison is responsible for all of this, but also he was ignoring her, her recommendations on how to, you know, be more careful with the money while also telling her to do X, Y, Z. And, you know, I'm sure, you know, if you look at the exhibits, you know, besides this, the signal chats.

00:12:34:15 - 00:12:41:18
Nikhilesh De
There's these documents that Ellison put together where literally it's, you know, a list of like, you know, issues and concerns and,

00:12:41:18 - 00:12:44:04
Nikhilesh De
pretty stark visual because, again, these are from

00:12:44:04 - 00:12:57:02
Nikhilesh De
when she was making these documents back in, you know, 20, 21, 2022. They're contemporary documents that are illustrating what she was saying, not just, you know, a recollection from, you know, two years later.

00:12:57:02 - 00:13:00:18
Bennett Tomlin
we've made mention of balance sheets already.

00:13:00:18 - 00:13:06:02
Bennett Tomlin
Could you speak to the eight specific balance sheets that Caroline was asked to prepare?

00:13:06:02 - 00:13:15:21
Nikhilesh De
Yeah. So this was a really wild document. And I had a field day with this one personally as a personal individual, not as a reporter covering this case.

00:13:15:21 - 00:13:24:02
Nikhilesh De
So 2022, some of Almeida's lenders, and specifically Genesis, which is a subsidiary of my employer's parent company,

00:13:24:02 - 00:13:26:17
Nikhilesh De
Digital Currency Group. For any viewers who are unaware,

00:13:26:17 - 00:13:29:16
Nikhilesh De
was asking for some kind of confirmation of

00:13:29:16 - 00:13:32:07
Nikhilesh De
Alameda’s balances, which is, you know, a

00:13:32:07 - 00:13:35:06
Nikhilesh De
seems to me a fairly straightforward request.

00:13:35:08 - 00:13:42:05
Nikhilesh De
So at the time, Alameda had a you know, we've been talking about this a lot of money tied up in

00:13:42:05 - 00:13:54:17
Nikhilesh De
things that they weren't really supposed to have money tied up in or that they weren't really paying off and had already at that point borrowed billions of dollars from FTX customers. And Ellison testified that

00:13:54:17 - 00:14:08:14
Nikhilesh De
she first off, she made a balance sheet that acknowledged that Alameda was borrowing billions of dollars from FDIC customers, but she didn't want to say that Alameda was borrowing billions of dollars of FTX customer money funds and a balance sheet.

00:14:08:14 - 00:14:15:13
Nikhilesh De
So yeah, they use euphemisms like exchange borrows or FTX borrows, FTX loans, you know, things like that

00:14:15:13 - 00:14:16:06
Nikhilesh De
which are,

00:14:16:06 - 00:14:17:23
Nikhilesh De
you know, supposed to hide

00:14:17:23 - 00:14:19:12
Nikhilesh De
kind of what exactly it was.

00:14:19:12 - 00:14:20:20
Nikhilesh De
Even that was not enough.

00:14:20:20 - 00:14:28:22
Nikhilesh De
she said she was talking with Bankman-Fried about this, but she created seven alternate documents or versions of this balance sheet that all appeared on this one.

00:14:29:00 - 00:14:47:00
Nikhilesh De
You know what looked like an Excel document that basically phrased things slightly differently, kind of move numbers around to try and hide that there was a $14 billion liability on Almeida's balance sheet to make it look like it was in a much stronger financial position than it was. So, you know, the key thing here is

00:14:47:00 - 00:14:54:00
Nikhilesh De
first off, they wanted to hide that they were borrowing billions of dollars from customers, but also that they had that they owed billions of dollars to anybody.

00:14:54:02 - 00:14:54:19
Nikhilesh De
So

00:14:54:19 - 00:15:02:19
Nikhilesh De
they created these seven alternate documents, and this is for mid-June 2022. So, you know, they only presented

00:15:02:19 - 00:15:05:12
Nikhilesh De
with Ellison the one document with the

00:15:05:12 - 00:15:07:10
Nikhilesh De
one primary thing and seven alternates

00:15:07:10 - 00:15:15:02
Nikhilesh De
and said that eventually they went with alternative seven, which was sent to Genesis and reassure them to the point that, you know, they were able to continue,

00:15:15:02 - 00:15:15:23
Nikhilesh De
you know, doing whatever.

00:15:15:23 - 00:15:21:06
Nikhilesh De
One thing that didn't come up with Ellison but that did start coming up later with, you know, witnesses like Blockfi Zach Prince.

00:15:21:06 - 00:15:25:02
Nikhilesh De
They kept doing this. They kept making these balance sheets that they kept sending out

00:15:25:02 - 00:15:29:17
Nikhilesh De
like the one sent to Genesis, these balance sheets were also

00:15:29:17 - 00:15:37:19
Nikhilesh De
modified somewhat to try and hide full, you know, the full exposure that Alameda had full liabilities on their balance sheets.

00:15:37:19 - 00:15:42:10
Nikhilesh De
Because, again, if you're telling your lender, yeah, like we owe

00:15:42:10 - 00:15:46:08
Nikhilesh De
you tens of billions of dollars of funds to our sister company,

00:15:46:08 - 00:15:48:16
Nikhilesh De
probably, you know, it wasn't a good idea.

00:15:48:16 - 00:15:56:05
Nikhilesh De
What they were trying to do is prevent the lenders from recalling their loans and saying, all right, well, we want all our money back, which worked for a time until it didn't.

00:15:56:05 - 00:16:00:22
Cas Piancey
You know what I find pretty interesting about this and I wonder if maybe this is the defense's

00:16:00:22 - 00:16:02:22
Cas Piancey
only mechanism here.

00:16:02:22 - 00:16:07:16
Cas Piancey
that I know that there were these eight balance sheets, but then last week when we had David Morris on,

00:16:07:16 - 00:16:11:21
Cas Piancey
we talked to him about how there were different internal balance sheets as well.

00:16:11:21 - 00:16:12:20
Cas Piancey
So like the.

00:16:12:20 - 00:16:13:05
Cas Piancey
Balance.

00:16:13:05 - 00:16:14:09
Cas Piancey
Sheets that were supposed to be.

00:16:14:09 - 00:16:17:07
Cas Piancey
The real numbers, nobody even knew what those were.

00:16:17:07 - 00:16:18:06
Cas Piancey
So like that.

00:16:18:09 - 00:16:23:16
Cas Piancey
Seven different bound, eight different balance sheets for everyone else. I mean, you can't even you don't even have one for yourself.

00:16:23:16 - 00:16:26:12
Cas Piancey
So is there like a level.

00:16:26:12 - 00:16:31:19
Cas Piancey
Of insane incompetence here, negligence, criminal negligence? And is that.

00:16:31:19 - 00:16:33:02
Cas Piancey
The the.

00:16:33:04 - 00:16:35:02
Cas Piancey
Position they're trying to give themselves as.

00:16:35:02 - 00:16:36:02
Cas Piancey
Opposed to like.

00:16:36:04 - 00:16:39:14
Cas Piancey
Intentional fraud, intentional money laundering.

00:16:39:14 - 00:16:43:00
Cas Piancey
Like we're just a bunch of stupid idiots? Is that the goal here?

00:16:43:00 - 00:16:49:14
Nikhilesh De
I mean, again, you know, Marc Cohen's opening argument, this was a company that, you know, in his words, made mistakes, were

00:16:49:14 - 00:17:06:15
Nikhilesh De
the phrase he used multiple times, I think was they were building a plane while, you know, while flying it, which as an aviation enthusiast is not quite how planes work. I this is a personal opinion. You know, he's you know, he called out like they had no

00:17:06:20 - 00:17:09:19
Nikhilesh De
we lost Bennett it's a personal

00:17:13:22 - 00:17:16:06
Nikhilesh De
I'm just saying yeah that

00:17:16:23 - 00:17:26:01
Bennett Tomlin
I'm also laughing because I made a I made a joke about that line from the opening argument in my newsletter to where I was talking about like,

00:17:26:01 - 00:17:36:00
Bennett Tomlin
if their defense is that they're overconfident and stupid enough to jump from a mountain and try to build a plane before smacking into the ground, then yeah, sure, that's what FTX was.

00:17:36:01 - 00:17:40:15
Bennett Tomlin
But as you said, that's not conventionally how most of aviation has been done.

00:17:40:20 - 00:17:50:14
Nikhilesh De
It's like, you know, he was like saying like, well, they don't have a chief risk officer. They, you know, Bankman-Fried was, you know, present until he was, you know, stepping away to do other stuff,

00:17:50:14 - 00:17:52:17
Nikhilesh De
you know, namely FTX versus Alameda.

00:17:52:17 - 00:18:02:11
Nikhilesh De
that is their argument is that, you know, all of this is like a, you know, horrifically tragic mistake caused by, you know, whatever building too fast, moving too quickly.

00:18:02:11 - 00:18:04:06
Bennett Tomlin
underwear, gnomes.

00:18:04:06 - 00:18:07:02
Nikhilesh De
Yeah. You know, whatever. What was it that Facebook had

00:18:07:02 - 00:18:14:21
Nikhilesh De
moved fast break things. Yeah, that's kind of the impression that, you know Mr. Cohen is trying to present and I look, I will say, you know, and

00:18:14:21 - 00:18:24:03
Nikhilesh De
Judge Kaplan has repeatedly expressed his admiration respect for defense counsel. But it is based on what we've seen so far, a tough case that they're going to have to defend.

00:18:24:05 - 00:18:25:00
Nikhilesh De
And,

00:18:25:00 - 00:18:28:23
Nikhilesh De
we'll see what the defense actually says. But so far, yes, their argument seems to be

00:18:28:23 - 00:18:29:23
Nikhilesh De
it was not deliberate.

00:18:29:23 - 00:18:48:01
Nikhilesh De
FTX funds just happened to get loaned to Alameda and then things collapsed, you know, because of attacks from crypto media and, you know, whatever attacks from rivals of FTX. Yeah, these are all things he mentioned in his opening statement that they've

00:18:48:01 - 00:18:49:05
Nikhilesh De
you know, we've seen

00:18:49:05 - 00:18:51:12
Nikhilesh De
again, documents, Google documents from

00:18:51:12 - 00:18:53:03
Nikhilesh De
Bankman-Fried and his team.

00:18:53:05 - 00:18:58:02
Nikhilesh De
They kind of suggest, yes, that is a narrative they've been trying to figure out since November of 2020 to.

00:18:58:02 - 00:19:24:06
Bennett Tomlin
Attacks from the crypto media is also funny to me because they're referring to I think your organizations where Nik if I had to take a guess and Business Insider recently actually published a recording of the All Hands of Alameda that Caroline Ellison held like as the collapse was happening. And one of the things she said during it that struck me where she's like, Honestly, I'm amazed this balance sheet didn't leak sooner.

00:19:24:06 - 00:19:27:08
Bennett Tomlin
We've been sending these around to lots of people,

00:19:27:08 - 00:19:37:01
Bennett Tomlin
what would have been particularly bad for her is if different versions of that started leaking because they were making a lot of versions, as we've now thoroughly established.

00:19:37:01 - 00:19:41:08
Nikhilesh De
This is the part where I lost my mind in court like, you know, is

00:19:41:08 - 00:19:48:20
Nikhilesh De
obviously, you know, we coindesk had this moment in November 2020 where we published a balance sheet and the details of a balance sheet which

00:19:48:20 - 00:19:50:10
Nikhilesh De
ultimately led to

00:19:50:10 - 00:19:51:15
Nikhilesh De
everything.

00:19:51:15 - 00:19:53:10
Nikhilesh De
what we realized is that

00:19:53:10 - 00:20:03:01
Nikhilesh De
first off, you know, the insinuations that the balance sheet was leaked by specific parties to coindesk, those are, as far as I understand it, not accurate

00:20:03:01 - 00:20:13:01
Nikhilesh De
regarding, you know, how my colleague and Ellison was able to source this document. We you know, we did a whole authentication thing. We verified it in ways that we were very comfortable with.

00:20:13:03 - 00:20:14:20
Nikhilesh De
And then now I'm wondering, like,

00:20:14:20 - 00:20:15:13
Nikhilesh De
hang on,

00:20:15:13 - 00:20:23:16
Nikhilesh De
did a doctored balance sheet meant to make FTX and Alameda look healthier than they were still managed to collapse this entire thing

00:20:23:16 - 00:20:25:12
Bennett Tomlin
Yes.

00:20:25:12 - 00:20:26:20
Nikhilesh De
yes, that's

00:20:26:20 - 00:20:30:16
Bennett Tomlin
Because the balance sheet from you guys reported on

00:20:30:16 - 00:20:37:16
Bennett Tomlin
accurately reported on some of their FTT holdings, but did not include any of the like interparty loans or the loans to executives.

00:20:37:16 - 00:20:39:20
Nikhilesh De
right exactly.

00:20:39:20 - 00:20:44:17
Cas Piancey
again, there's no way for them to ever have provided an actual balance sheet to anyone,

00:20:44:17 - 00:20:45:13
Cas Piancey
you know,

00:20:45:20 - 00:20:46:08
Bennett Tomlin
Yeah.

00:20:46:08 - 00:20:46:20
Nikhilesh De
It's

00:20:46:20 - 00:20:48:22
Cas Piancey
real fucking balance sheet. It's all

00:20:48:22 - 00:20:49:06
Cas Piancey
it's

00:20:49:06 - 00:20:49:19
Bennett Tomlin
Yeah.

00:21:00:05 - 00:21:04:08
Nikhilesh De
right. And like Ellison was testifying like,

00:21:04:08 - 00:21:07:23
Nikhilesh De
you know, they were looking for accountants and auditors and they were having a little bit of difficulty there.

00:21:07:23 - 00:21:10:08
Nikhilesh De
So that's why she as a trader who,

00:21:10:08 - 00:21:26:15
Nikhilesh De
she's my age also someone who went from being a trader to being a co-CEO to being a CEO of this company, was putting together balance sheets, taking over the role from a fellow former FTX executive, Ryan Salame, who was the CEO or co-CEO of the Bahamas entity.

00:21:26:15 - 00:21:28:01
Nikhilesh De
And yeah, that that was there.

00:21:28:03 - 00:21:36:20
Nikhilesh De
That seems to have been their internal accounting. We haven't heard anything so far suggesting they had something more sophisticated than, you know, Miss Ellison putting

00:21:36:20 - 00:21:40:10
Nikhilesh De
numbers into a Excel document or Google sheet.

00:21:40:10 - 00:21:40:18
Cas Piancey
not that.

00:21:40:18 - 00:21:41:14
Cas Piancey
This is.

00:21:41:14 - 00:21:44:09
Cas Piancey
Going to play a role in any jurors mind or anything but.

00:21:44:09 - 00:21:45:09
Cas Piancey
I will say that.

00:21:45:18 - 00:21:48:05
Cas Piancey
When I heard what she was getting paid

00:21:48:05 - 00:21:51:14
Cas Piancey
and that she had what almost no equity in anything.

00:21:51:14 - 00:21:54:21
Cas Piancey
I know she got that big fat $20 million bonus or whatever.

00:21:54:22 - 00:21:56:00
Cas Piancey
But to have.

00:21:56:02 - 00:22:02:03
Cas Piancey
Pretty much no equity in a multibillion multibillion dollar business in air quotes for anyone not watching,

00:22:02:03 - 00:22:04:10
Cas Piancey
it just seemed like he was being a real.

00:22:04:12 - 00:22:05:18
Cas Piancey
Piece of shit towards her.

00:22:05:20 - 00:22:10:01
Cas Piancey
you know, I don't know what that says. That's if everyone everyone would be in prison.

00:22:10:01 - 00:22:12:12
Cas Piancey
If you could go if you could go there for.

00:22:12:12 - 00:22:19:01
Cas Piancey
Doing one bad thing. But yeah, it just seems like, you know, Liz Lopatto, who I had brought up before, did an article,

00:22:19:01 - 00:22:24:13
Cas Piancey
which I don't know the exact line from it, but it was something like Sam Bankman-Fried.

00:22:24:13 - 00:22:25:07
Cas Piancey
Was a shitty.

00:22:25:07 - 00:22:25:21
Cas Piancey
Boyfriend,

00:22:25:21 - 00:22:30:09
Cas Piancey
which I like. I don't know, it doesn't say anything that's criminal, but.

00:22:30:09 - 00:22:32:08
Cas Piancey
Gosh, he just was a jerk.

00:22:32:08 - 00:22:47:13
Nikhilesh De
Yeah. Look, I love Liz. And, you know, going back to what I said at the beginning, it is that was kind of what Ellison was saying throughout her testimony is that, you know, she was in the situation where Bankman-Fried was, you know, paying her her base salary was like $200,000 per year.

00:22:47:15 - 00:22:48:17
Nikhilesh De
She had the bonuses,

00:22:48:17 - 00:22:50:15
Nikhilesh De
you know, $20 million bonus, which is

00:22:50:15 - 00:22:51:12
Nikhilesh De
nice, quite nice.

00:22:51:12 - 00:23:01:14
Nikhilesh De
But she didn't have equity in Alameda. She asked for equity in Alameda, you know, when she was named CEO. And that did not happen. You know, Bankman-Fried denied it ultimately.

00:23:01:14 - 00:23:08:06
Nikhilesh De
And she still did all of these things that are you know, that led to her pleading guilty to multiple federal criminal charges

00:23:08:06 - 00:23:13:13
Nikhilesh De
in December and then testifying this past week before a jury.

00:23:13:13 - 00:23:17:11
Nikhilesh De
And like a hundred reporters and members of the public. So,

00:23:17:11 - 00:23:21:21
Nikhilesh De
yeah, I don't know what that says, but that's it is a little wild.

00:23:22:00 - 00:23:30:11
Bennett Tomlin
So we've talked about some of Caroline's notes. Nik did do you have any thoughts on $150 million for the thing?

00:23:30:11 - 00:23:42:03
Nikhilesh De
That was I will say that was part of one of my favorite lines said so, you know, the back and forth here

00:23:42:03 - 00:23:50:14
Nikhilesh De
you know, you may have read parts of the transcript. You may have seen the quotes quoted, but it's hard to convey in text just the kind of in the intonation.

00:23:50:14 - 00:24:04:17
Nikhilesh De
Right. So you have the assistant U.S. attorneys asking Ellison, you know, okay, did you ever speak in coded thing or coded language about crimes that you committed or that crimes were being committed? And Elson said, yes. And

00:24:04:17 - 00:24:14:23
Nikhilesh De
the prosecutor asked for an example, and Ellison said, Well, there was a time we might have it. Was it We bribed the Chinese government or government officials with $100 million.

00:24:15:01 - 00:24:18:17
Nikhilesh De
And the prosecutor complete deadpan,

00:24:18:17 - 00:24:20:22
Nikhilesh De
Well, let's break that down.

00:24:20:22 - 00:24:27:01
Nikhilesh De
And again, some of us were in the overflow room. The overflow room kind of burst out laughing. You know,

00:24:27:01 - 00:24:29:08
Nikhilesh De
it was such a surreal kind of moment

00:24:29:08 - 00:24:33:20
Nikhilesh De
that, you know, there's a question about what that actually was. You know, Ellison testified that,

00:24:33:20 - 00:24:40:08
Nikhilesh De
you know, Alameda funds on what was Huobi now known as HTX and OKex were

00:24:40:08 - 00:24:55:23
Nikhilesh De
frozen tied to investigation about a user of the exchange not an investigation into Alameda itself but into a user who was I guess using alameda funds are in Alameda County and they had a couple different things that they tried to get those funds unlocked.

00:24:55:23 - 00:25:03:18
Nikhilesh De
First, they hired a lawyer to try and unlock the funds and that did not work. So then they hired and this is where things get really

00:25:03:18 - 00:25:04:19
Nikhilesh De
weird.

00:25:04:19 - 00:25:18:10
Nikhilesh De
They use identity cards or identities from prostitutes to try and engage in a trading, you know, plan to basically move the funds

00:25:18:10 - 00:25:25:03
Nikhilesh De
not linked directly off of, you know, the exchanges from Almeida's account or whatever, but to try and lose the funds and then make the funds back.

00:25:25:08 - 00:25:26:00
Nikhilesh De
And

00:25:26:00 - 00:25:48:07
Nikhilesh De
I'm explaining this poorly. But regardless, that didn't work. So then they tried bribing government officials, which apparently did work and she testified that it was $100 million. But then later she create a document where, you know, they were talking about recent expenses and assets and whatnot. And they had, yes, a line item saying 150 m for the thing, which is code for

00:25:48:07 - 00:25:50:02
Nikhilesh De
we think we made a bribe to Chinese government,

00:25:50:02 - 00:25:53:11
Bennett Tomlin
Yeah. So just for a little color on that scheme that Nik mentioned,

00:25:53:11 - 00:26:04:14
Bennett Tomlin
funds had been frozen for withdrawal, but their accounts were still allowed to trade on these exchanges. So they had a scheme where they were going to open new accounts using stolen identity documents from these people.

00:26:04:16 - 00:26:27:15
Bennett Tomlin
And then they were going to engage in a series of losing like wash trades with these accounts that they would also control. And these accounts were still allowed to withdraw. And in doing so, they'd be able to get the funds off the exchange. As Nik mentioned, that was unsuccessful and thus began the process of transferring somewhere in the range of $100 million in cryptocurrency to what is now believed to be Chinese government officials.

00:26:27:17 - 00:26:30:07
Bennett Tomlin
Just for that added color case, you were going to say something.

00:26:30:07 - 00:26:31:17
Cas Piancey
I will say this is what.

00:26:31:17 - 00:26:35:10
Cas Piancey
Is interesting to me. I don't know if you guys remember there was a rumor

00:26:35:10 - 00:26:40:08
Cas Piancey
or a screenshot going around that there was a wire wire fraud chat between all of these people,

00:26:40:08 - 00:26:45:19
Cas Piancey
and I would assume that would be submitted as evidence. No, I haven't heard about that getting submitted at all. That maybe

00:26:45:19 - 00:26:50:12
Bennett Tomlin
we've seen CIG, not that specific yet. We've seen other signal chats. You're right.

00:26:50:14 - 00:26:59:04
Nikhilesh De
Right. Yeah. Was in like the small group chat which was FTX insiders and interestingly enough I'm not sure if this has been, you know, talked about much, but

00:26:59:04 - 00:27:00:02
Nikhilesh De
Bankman-Fried’s father Joe Bankman

00:27:00:02 - 00:27:00:15
Bennett Tomlin
Yep.

00:27:00:15 - 00:27:01:14
Nikhilesh De
in that chat, too.

00:27:01:14 - 00:27:07:07
Nikhilesh De
So he's in that chat. We've seen a couple other chats that were mostly just, you know, Ellison and Bankman-Fried or Bankman-Fried, Nishad, and Wang

00:27:07:12 - 00:27:09:23
Nikhilesh De
But yeah, we have not seen wire fraud pop up yet.

00:27:09:23 - 00:27:12:23
Cas Piancey
wanted to mention one of my favorite lines that Nik

00:27:12:23 - 00:27:25:00
Cas Piancey
and his coauthor and friend who were also hoping to have on the show soon, Danny Nelson reported that the judge was getting frustrated.

00:27:25:02 - 00:27:26:00
Cas Piancey
With.

00:27:26:02 - 00:27:37:15
Cas Piancey
The line of questioning that they were going through about SBF kind of being in charge. And one of the one of the attorneys said that it would take 10 minutes to ask these questions.

00:27:37:17 - 00:27:39:19
Cas Piancey
And the judge retorted, quote.

00:27:39:21 - 00:27:41:16
Cas Piancey
Some people don't have 10 minutes.

00:27:41:16 - 00:27:42:15
Cas Piancey
Left to live.

00:27:42:15 - 00:27:49:02
Nikhilesh De
I will say this judge has some of the best lines is he's got such a dry sense of humor. But

00:27:49:02 - 00:27:53:09
Cas Piancey
that's incredible to me that like that clearly the repetition and the.

00:27:53:09 - 00:27:53:19
Cas Piancey
The.

00:27:53:22 - 00:28:00:21
Cas Piancey
The questioning from these these lawyers, I don't know if it's on both sides or if it's mostly just the defense, but he is not having it.

00:28:00:21 - 00:28:19:20
Nikhilesh De
he's taking zero nonsense. And I will say I haven't taken a formal tally or anything, but it does seem to be a lot more against the defense than the prosecution, to the point where, you know, he's even at points dismissed a jury for a break and then tell, you know, lawyers back would say, you know, stop doing this to the defense attorneys.

00:28:19:22 - 00:28:21:00
Nikhilesh De
And that was

00:28:22:13 - 00:28:31:10
Bennett Tomlin
It was the first site very with coined the term to stop being repetitive was these first day of actual questioning after jury selection ended,

00:28:31:10 - 00:28:33:12
Nikhilesh De
That sounds right. It's all blending together.

00:28:33:12 - 00:28:39:20
Nikhilesh De
you mention my colleague Danny Nelson. We had a moment the other day where we were like, this thing happened last week. No, it didn't happen Tuesday.

00:28:39:20 - 00:28:46:06
Nikhilesh De
too Time is doing a thing, but yeah, he's does it, you know without the jury he said in front of the jury and

00:28:46:06 - 00:28:56:13
Nikhilesh De
you know one of the things that kind of gets me is like if you know, a jury is like 12 random people plus six alternates, it's, you know, 18 random New Yorkers plucked from their day jobs who

00:28:56:13 - 00:29:13:04
Nikhilesh De
are already you know, some of them are clearly not happy about being on the jury. Some of them, you know, have already like complained about having to move plans around and losing money and things like that. And so they're going to probably be looking at the judge to, you know, kind of explain, well, you know, these people are all talking.

00:29:13:06 - 00:29:22:08
Nikhilesh De
Should we be listening today as we bring attention and are seeing this judge have the defense attorneys saying like, you know, keep, you know, stop repeating these things, move on, move forward.

00:29:22:08 - 00:29:24:05
Nikhilesh De
And, you know, the line that, you know, gas

00:29:24:05 - 00:29:35:05
Nikhilesh De
cited that was there in a sidebar. So the jury did not hear it, but they've heard lot of parts where the judge has been very just like visibly and audibly annoyed at the defense attorneys and to a lesser extent,

00:29:35:05 - 00:29:38:14
Nikhilesh De
some prosecutors, but primarily at the defense attorneys, which is

00:29:38:14 - 00:29:42:21
Nikhilesh De
a real you know, I'm curious to see how that factors in when they get to deliberations.

00:29:43:00 - 00:29:45:09
Cas Piancey
I know, I mean, everything I've been reading

00:29:45:09 - 00:29:46:10
Cas Piancey
I've been reading a lot.

00:29:46:10 - 00:29:48:15
Cas Piancey
Of articles about about this trial.

00:29:48:15 - 00:29:52:17
Cas Piancey
I get my my point being, even though most of them say pretty much the same thing, which.

00:29:52:17 - 00:29:54:04
Cas Piancey
Is, what the hell is.

00:29:54:06 - 00:29:57:07
Cas Piancey
The defense team doing? They're really blowing this case.

00:29:57:07 - 00:29:58:20
Cas Piancey
It's not looking good for them.

00:29:58:20 - 00:30:01:23
Cas Piancey
are we all in for a crazy moment in the next few.

00:30:01:23 - 00:30:03:13
Cas Piancey
Weeks where we all go that's what.

00:30:03:13 - 00:30:07:03
Cas Piancey
They were doing. Like, I'm just there has to be a bombshell here, right?

00:30:07:03 - 00:30:08:04
Cas Piancey
Like this is.

00:30:08:04 - 00:30:10:19
Cas Piancey
It just seems like the defense team, everyone is just.

00:30:10:19 - 00:30:11:00
Cas Piancey
Like.

00:30:11:05 - 00:30:12:09
Cas Piancey
They're doing a really.

00:30:12:09 - 00:30:13:01
Cas Piancey
Bad job.

00:30:13:06 - 00:30:15:10
Nikhilesh De
This is thing that I'm I'm wondering too.

00:30:15:10 - 00:30:24:11
Nikhilesh De
First off, so we haven't actually seen the defense really kick in yet. Right. All we've seen so far is an opening statement and the cross-examination of

00:30:24:11 - 00:30:27:22
Nikhilesh De
the first set of witnesses. And it's really this cross-examination

00:30:27:22 - 00:30:31:08
Nikhilesh De
we're all going off of because the cross-examination, you know,

00:30:31:08 - 00:30:44:08
Nikhilesh De
the assumption I think a lot of us were making coming into this is if you're a defense attorney and you know that your clients, you know, best friends, ex-girlfriend, key business partners are testifying,

00:30:44:08 - 00:30:47:08
Nikhilesh De
part of your goal might be to try and undermine their credibility

00:30:47:08 - 00:30:48:08
Nikhilesh De
to, you know,

00:30:48:08 - 00:30:50:01
Nikhilesh De
demonstrate that, well, you know,

00:30:50:01 - 00:30:56:18
Nikhilesh De
this person is only saying what the prosecutors want them to say because otherwise, you know, whatever, they're going to go to jail.

00:30:56:18 - 00:31:02:08
Nikhilesh De
So, you know, you want to get that impression I have or, you know, that these people were not,

00:31:02:08 - 00:31:03:15
Nikhilesh De
you know, competent, They were

00:31:03:15 - 00:31:08:15
Nikhilesh De
not doing what they were supposed to be doing. And that's why, you know, things fell apart.

00:31:08:17 - 00:31:14:03
Nikhilesh De
We didn't really see that happen during the cross-examination of, you know, Gary Wang, or Caroline Ellison, we saw,

00:31:14:03 - 00:31:28:21
Nikhilesh De
a lot of repetition. We saw a lot of confusion where, you know, Ellison finished up her direct testimony to the prosecutors on I want to say it was Wednesday. I'm pretty sure it was Wednesday. So we had a couple of minutes where the defense had an opportunity to start.

00:31:28:23 - 00:31:46:05
Nikhilesh De
The first question was about an internal accounting or how they labeled an account for internal tracking purposes. And it took them like four tries to get the name of the account correct to the point where Ellison was confused, The judge was confused. The jury was, I assume, very confused and the judge just said, all right, you know what?

00:31:46:05 - 00:31:51:13
Nikhilesh De
We're just going to cut it early here and, you know, move on or like we'll start again tomorrow. It's been a long day.

00:31:51:13 - 00:32:06:09
Nikhilesh De
So I think that's where a lot of these questions are coming from about what the defense strategy is. And we're seeing like, you know, other hints about this from, you know, filings and stuff. But we'll see you for real when the defense starts probably in the next two weeks to make their case and try and present their defense.

00:32:06:09 - 00:32:10:22
Nikhilesh De
But, yeah, so far the impression has been one mostly of confusion

00:32:10:22 - 00:32:15:23
Bennett Tomlin
I think we may all have to grapple with the possibility that this is

00:32:15:23 - 00:32:21:01
Bennett Tomlin
on the order of magnitude of the best possible defense in Bankman-Fried can get

00:32:21:01 - 00:32:29:00
Bennett Tomlin
just rooted in the things he did and the way they're documented and who has already agreed to testify against him.

00:32:29:05 - 00:32:50:15
Bennett Tomlin
You know, at a certain point, like defense attorneys can only do so much. You know, when you have six people sitting there all going, it was that who told me to do this thing. And here's the chat where he told me to do it. You run out of options in terms of what alternative set of facts you can try to present to create a compelling narrative for the jury.

00:32:50:17 - 00:32:55:20
Bennett Tomlin
You know, you get kind of boxed in by your own behavior when you're saying Bankman-Fried.

00:32:55:20 - 00:32:57:20
Nikhilesh De
that is absolutely a possibility here. And,

00:32:57:20 - 00:33:01:20
Nikhilesh De
this is another line that the judge said that, you know, was kind of funny is like,

00:33:01:20 - 00:33:08:16
Nikhilesh De
right after Ellison finished her cross-examination, the judge was like, okay, yeah, you're going to try and, you know, impugn her character and that's your job.

00:33:08:18 - 00:33:31:03
Nikhilesh De
You know, I'm not criticizing. I know that's your job. Like even the judge is acknowledging like, okay, here's the one possible strategy or here's a possible strategy that you can get into and you're doing it or whatever you're trying. So, yeah, it's definitely based on what we've seen so far. I think a difficult case. And again, going back to what I was saying about the DOJ having like a narrative, they have a narrative, their narrative is Sam Bankman-Fried

00:33:32:00 - 00:33:56:06
Nikhilesh De
wanted to take FTX customer funds for personal purposes and here's all the people he told to, you know, change things or do things that would allow him to do so. And the defense has so far not had an opportunity or, you know, not even tried, I would argue, to present a competing narrative that bolsters their argument that it was all, you know, just mistake or, you know, an inevitable collapse caused by

00:33:56:06 - 00:33:58:18
Nikhilesh De
they didn't say incompetence, but like

00:33:58:18 - 00:34:00:04
Nikhilesh De
it's a little implied there.

00:34:00:04 - 00:34:02:19
Cas Piancey
it's funny because I keep reflecting on like,

00:34:02:19 - 00:34:04:23
Cas Piancey
I didn't initially think this would even go to trial,

00:34:04:23 - 00:34:05:18
Cas Piancey
to be quite honest.

00:34:05:18 - 00:34:07:05
Cas Piancey
I thought Sam Bankman-Fried.

00:34:07:05 - 00:34:08:15
Cas Piancey
Would have the wherewithal

00:34:08:15 - 00:34:09:15
Cas Piancey
to plead guilty.

00:34:09:15 - 00:34:13:09
Cas Piancey
then I thought even up until a couple of weeks ago or a week ago or so,

00:34:13:09 - 00:34:14:08
Cas Piancey
maybe.

00:34:14:11 - 00:34:16:05
Cas Piancey
He'll still plead out because.

00:34:16:05 - 00:34:17:13
Cas Piancey
You know, I mean,

00:34:17:13 - 00:34:18:12
Cas Piancey
things aren't looking good.

00:34:18:12 - 00:34:19:12
Cas Piancey
And then

00:34:19:12 - 00:34:21:07
Cas Piancey
I realized at some point, like.

00:34:21:07 - 00:34:22:07
Cas Piancey
he's far.

00:34:22:07 - 00:34:24:00
Cas Piancey
Past the point of no return. And it all.

00:34:24:00 - 00:34:25:15
Cas Piancey
Goes back to his, like, effective.

00:34:25:15 - 00:34:28:14
Cas Piancey
Altruism kind of gambling.

00:34:28:14 - 00:34:33:02
Cas Piancey
Ideas where it's like, okay, if I do plead guilty.

00:34:33:02 - 00:34:48:19
Cas Piancey
There's no like, I cannot return from that. I'm going to go to jail for whatever, 25 years, let's say, or something with a maybe a chance for a little bit less. If he if he pled out right away, maybe 20 or something. But like that is a significantly long time for a 30 year old man who wants to change the world.

00:34:48:19 - 00:34:49:08
Cas Piancey
Right.

00:34:49:10 - 00:34:49:23
Cas Piancey
So

00:34:49:23 - 00:34:50:18
Cas Piancey
he goes.

00:34:50:19 - 00:34:53:18
Cas Piancey
Okay, well, then I would prefer, even if there's a small chance

00:34:53:18 - 00:34:56:13
Cas Piancey
to get no time at all. So he's going to go for that.

00:34:56:13 - 00:35:01:12
Cas Piancey
And then when that fails and he gets way more time than he initially could have, let's say, 30 to life.

00:35:01:14 - 00:35:02:05
Cas Piancey
Then

00:35:02:05 - 00:35:03:03
Cas Piancey
he

00:35:03:03 - 00:35:05:03
Cas Piancey
still has appeals that he can do.

00:35:05:05 - 00:35:09:01
Cas Piancey
Like all the way up until the Supreme Court. And for each one of those bets.

00:35:09:03 - 00:35:10:04
Cas Piancey
He's like, well.

00:35:10:07 - 00:35:12:18
Cas Piancey
I have some chance. I have odds that I can.

00:35:12:18 - 00:35:13:18
Cas Piancey
Possibly

00:35:13:18 - 00:35:16:21
Cas Piancey
effectively do an appeal, effectively do.

00:35:16:23 - 00:35:18:07
Cas Piancey
Something to get out.

00:35:18:07 - 00:35:18:21
Cas Piancey
Of this.

00:35:19:01 - 00:35:28:13
Cas Piancey
Prolonged period. And then and that's where I'm like, he's not going to there is no pleading. There is no like, this is going to go all the way to the end. He's going to get sentenced. He's going to.

00:35:28:13 - 00:35:30:04
Cas Piancey
Appeal. He'll appeal to the.

00:35:30:04 - 00:35:31:06
Cas Piancey
Damn Supreme Court if.

00:35:31:06 - 00:35:32:18
Cas Piancey
He has to, like he.

00:35:32:20 - 00:35:36:06
Cas Piancey
Wants to get off on whatever he can. And

00:35:36:06 - 00:35:44:01
Cas Piancey
I'm like, I'm fully understanding it now. I'm just like, okay, I had boy genius wrong. Like he he's a grown man who doesn't understand.

00:35:44:01 - 00:35:46:09
Cas Piancey
Like actual risk versus.

00:35:46:09 - 00:35:47:15
Cas Piancey
Reward in any sense.

00:35:47:15 - 00:35:49:22
Nikhilesh De
there was a telling moment early on in the trial

00:35:49:22 - 00:35:50:22
Nikhilesh De
the

00:35:50:22 - 00:36:06:23
Nikhilesh De
prosecutors, one of the prosecutors told the judge they had it sounded like just one single early conversation about whether or not a plea deal should be discussed. And there was no interest from the defense. And so that was it. They did not have any other discussions.

00:36:06:23 - 00:36:08:21
Nikhilesh De
And, you know, to add added to your point,

00:36:08:21 - 00:36:22:19
Nikhilesh De
obviously, they're not going to say this, but my guess is prosecutors are kind of in this viewpoint of they got everyone else to flip and plead guilty. So now they have, you know, one person who they can. Yes. Is a pretty high profile case. They're going to,

00:36:22:19 - 00:36:24:22
Nikhilesh De
I assume, try and make an example out of them.

00:36:24:22 - 00:36:26:14
Nikhilesh De
And, you know,

00:36:26:14 - 00:36:29:23
Nikhilesh De
if they win this and it's a it's a nice feather and they're happy to,

00:36:29:23 - 00:36:30:18
Nikhilesh De
end the year with.

00:36:30:18 - 00:36:32:05
Nikhilesh De
I assume they're not going to say this

00:36:35:11 - 00:36:35:17
Cas Piancey
so.

00:36:35:17 - 00:36:37:11
Cas Piancey
Next week, are we are we supposed.

00:36:37:11 - 00:36:38:19
Cas Piancey
To see Nishad soon?

00:36:38:19 - 00:36:39:12
Cas Piancey
Is that who's next?

00:36:39:12 - 00:36:40:04
Cas Piancey
Nishad Singh?

00:36:40:04 - 00:36:47:23
Nikhilesh De
So we don't have the exact order of the witnesses, but we know that he is among the next seven or so to be called and

00:36:47:23 - 00:36:49:17
Nikhilesh De
like for on like a logistical point.

00:36:49:17 - 00:37:03:10
Nikhilesh De
So there's no trial on October 20th. That's the Friday after we're recording this or the Monday Tuesday and Wednesday after that. And prosecutors expect to wrap up halfway through the first day back from that break. So,

00:37:03:10 - 00:37:11:16
Nikhilesh De
yeah, I think chances are good we will probably start to hear from, you know, Nishad saying who is another, you know, inner circle member you know, former fellow executive,

00:37:11:16 - 00:37:13:11
Nikhilesh De
Yeah. We should hear from just this week

00:37:13:11 - 00:37:17:15
Cas Piancey
Okay. And then we just have the defense after that, right? And close and closing arguments.

00:37:17:15 - 00:37:20:20
Nikhilesh De
Yeah. So defense expects to take about a week and a half by their estimates,

00:37:20:20 - 00:37:29:19
Nikhilesh De
which takes us to if they start on, you know, midway through October 26th that'll probably take us to like the second week of November.

00:37:29:21 - 00:37:31:08
Nikhilesh De
And in closing arguments, which

00:37:31:08 - 00:37:34:17
Nikhilesh De
I assume are probably not going to be super long. So

00:37:34:17 - 00:37:41:00
Nikhilesh De
by the end of the second week in November, we might be well into, you know, jury deliberation, verdict area.

00:37:41:00 - 00:37:45:17
Cas Piancey
Going to be exciting. It's been it has been wild. And like I have noticed,

00:37:45:17 - 00:37:49:08
Cas Piancey
significant uptick in everything for all cryptocurrency.

00:37:49:08 - 00:37:50:09
Cas Piancey
Related stuff While this.

00:37:50:09 - 00:37:51:14
Cas Piancey
Trial has been going on.

00:37:51:14 - 00:37:55:13
Cas Piancey
great to have you on, Nik. If there's any other color you want to present.

00:37:55:13 - 00:37:56:11
Cas Piancey
for the courtroom.

00:37:56:11 - 00:38:04:03
Cas Piancey
And the we should link to one of your sketches. You've been doing a number of sketches in the courtroom that really.

00:38:04:03 - 00:38:06:07
Cas Piancey
Do a great job of.

00:38:06:09 - 00:38:07:16
Cas Piancey
Expressing how.

00:38:07:16 - 00:38:09:12
Cas Piancey
It feels to be there.

00:38:09:12 - 00:38:09:22
Cas Piancey
And.

00:38:09:23 - 00:38:13:06
Cas Piancey
To to to be a witness. I guess.

00:38:13:06 - 00:38:20:06
Nikhilesh De
I'm so happy that people are. I literally just started as like a joke. I was like, well, you know, whatever. We're waiting for things to happen.

00:38:20:06 - 00:38:20:22
Nikhilesh De
Let me just sketch

00:38:21:20 - 00:38:35:11
Nikhilesh De
things happening and sent into like the of Slack. And then next thing I know it or like on Twitter and in articles and like everyone else is doing it, it's very fun slash cool moment but also like, it's very funny.

00:38:35:11 - 00:38:35:20
Cas Piancey
I want to.

00:38:35:20 - 00:38:37:09
Cas Piancey
Say, by the way.

00:38:37:09 - 00:38:38:17
Cas Piancey
Freakin Bennett got.

00:38:38:19 - 00:38:41:14
Cas Piancey
Put into the he's exhibit 849.

00:38:42:11 - 00:38:44:10
Cas Piancey
Of this trial, which good for you.

00:38:44:10 - 00:38:45:14
Cas Piancey
Bennett. I'm very.

00:38:45:14 - 00:38:48:03
Cas Piancey
Proud that you are a a piece of.

00:38:48:03 - 00:38:50:10
Cas Piancey
Evidence in this. And I've heard that other.

00:38:50:12 - 00:38:52:17
Cas Piancey
Reporters that were there noticed.

00:38:52:17 - 00:38:52:21
Cas Piancey
And.

00:38:52:21 - 00:38:53:23
Cas Piancey
Enjoyed that that.

00:38:54:03 - 00:38:55:20
Cas Piancey
Evidence getting submitted.

00:38:55:21 - 00:39:01:19
Bennett Tomlin
turns out Sam Bankman-Fried does control Alameda research. I was right, and he was wrong.

00:39:01:20 - 00:39:02:11
Bennett Tomlin
He.

00:39:02:16 - 00:39:04:23
Bennett Tomlin
well, thank you very much for joining us, Nik.

00:39:04:23 - 00:39:05:23
Nikhilesh De
it. Thanks for having me.

00:39:05:23 - 00:39:08:23
Nikhilesh De
It was fun as always. And great to see you too, as always.
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6 responses to “Episode 135 – Caroline Ellison Takes the Stand: the Sam Bankman-Fried Trial Week 2 (feat. Nikhilesh De)”

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