I was reading the trial report by Inner City Press. The AUSAs were incredibly thorough and strategic. The evidences were air-tight, the cross-examination was masterfully controlled with precision and incisiveness, and of course the closing argument was forceful. It was a great joy to read the report, as if I was watching an extended episode of The Good Fight. On the other hand, the defense was really weak, quite hand-wavy, and resorted to arguing about not-so-irrelevant specifics like how hard SBF worked. The closing arguments of the defense can be summarized as SBF was not guilty because he spent all the customer money on investment, on political donation, on private plane, and on company-owned real estate properties. They were company expenditures to build a business, not for personal gains. Therefore, SBF did not have any intention of committing a crime.
The defense really had no option. Several of Bankman-Fried's previous defense teams quit on him due to his behavior. Even in this trial, during a session with just the judge, the defense made an objection to a question, the judge sustained it, but Bankman-Fried answered anyways. His own defense team asked him where had he been this entire trial because the objection was sustained, you didn't have to answer that. Bankman-Fried retorted that he felt like he had to answer that one. Just think of how crazy you need to be to frustrate the only lawyer who would take Ghislaine Maxwell's case.
At the end of the day, the defense had an unwinnable case. Their defendent is an idiot, and all of his co-conspirators plead guilty to all charges.
This says something of culture of hubris that is so easily elevated to leadership positions in America's tech culture. It's nice to see one of these fail-bros get taken down.
But two points remain.
1. Had they been able to sustain this Ponzi scheme to IPO, he would be celebrated as a tech-god, as opposed to facing hard time.
2. The VCs aren't required to disclose their sales of crypto. My guess is they made money of this clown, directly at the expense of all the FTC users he fleeced. As long as that keeps happening, this sort of thing will never stop.
SBF pulled an Alex Jones. A losing case, answering questions for which objections were sustained, thinking he can talk his way out of everything, going through counsel like candy while ignoring their recommendations...truly, a match made in hell.
An odd question, but: why is he like this? Even from the start, before the criminal charges, his press tour was so bizarre. Is he just a delusional narcissist who thinks he can talk his way out of anything no matter what?
I feel like even very, very long into his prison sentence he's still going to try to talk your head off insisting it was all a big misunderstanding. And he's going to be denied parole because he's going to try the same thing with the parole board every time.
I'm going to go out on a limb here and say that the AUSA's performance here was not particularly impressive. Yes, they constructed an airtight case, but to do that, they handed out immunity deals like candy to all of SBF's co-conspirators. Sure, they got their guy, but it almost looks like they wanted to craft a narrative that puts all of the blame on him. Because of that, several other huge fraudsters here (eg Caroline Ellison) get to walk. The US attorneys seem to have set up SBF to be the fall guy, while being far too soft on everyone who conspired with him.
> several other huge fraudsters here (eg Caroline Ellison) get to walk
Caroline Ellison pleaded to two counts of wire fraud, two counts of conspiracy to commit wire fraud, conspiracy to commit commodities fraud, conspiracy to commit securities fraud and conspiracy to commit money laundering.
Looking at the Federal Sentencing Guidelines[1], even accepting for her being a cooperating witness, she's very likely going to prison too for a fair amount of time. Just for (probably much) less time than SBF.
>The US attorneys seem to have set up SBF to be the fall guy
The fall guy? Come on.
Some low-level bank executive commits fraud and this place calls for the CEO's head. SBF was in charge an knew everything that was happening. IT sounds like he orchestrated most of it. There was zero element of rogue employees, or anything of the sort.
Carolin pleads guilty on multiple counts of charges, and per her words on the witness stand, her corporation with the AUSA would get her a letter to the judge from the AUSA that acknowledges her corporation.
And the AUSA rightly made crypto a non-issue. This is not about crypto but simple fraud. As a result, people who are not familiar with crypto can still easily understand the trial.
To be fair SBF convicted himself on a platter. Only he knows what made him think he'd get away by facing trial. Maybe he was just dumb, overconfident, ill-advised, or a combination of everything.
He is one of those people who think they can talk their way out of everything. Everything is not only negotiable, but the only possible "truth" is what they are saying right now (yesterday's "truth"? "You're remembering that incorrectly - I never said that!"). I hated working for people like that, and I'd feel like I needed to take a shower after every meeting. If you only encounter them occasionally, a normal person would just think "wow, they're really charismatic". Daily, repeated contacts with them crawl under your skin. I'm grateful that the word "gaslighting" has entered common vocabulary as I didn't have words to describe them (back then).
A 100 yr and a 70 yr jail sentence are basically the same thing. My guess is they knew they could win at trial pretty easily so they just didn’t offer him much of a deal, and from his perspective it was all or nothing so he might as well give trial a shot.
> They were company expenditures to build a business, not for personal gains
I’d guess that the defence team knew they’d loose and this was in some way the start of their sentencing reduction plan: “the money was stolen to cover mostly business losses and to keep FTX going rather than for personal gain”.
Fact is, this could have helped him and his company, eventually.
Another two or three years of very sympathetic (bought) politicians on his side and his business could have become legit as a result of those politicians forcing the liquidation/closure of almost all SBF's competitors (certainly Binance would have become bust), and the US "standing behind" FTX as a beloved crypto assed in the fight against China. I.e. very, very similar to what's happening now with AI and with people like Sam Altman.
Which is to say that I'm surprised to see that the defence hasn't pushed more on that "SBF was just a pawn in the hands of very corrupt politicians"-card, that could have worked given a politically divided jury.
It isn't a legal defense for the charges he's facing. He can't take money out of a customer's brokerage account and spend it on anything, and there is no political donation that could make that legal.
SBF is a dumb criminal, who then screwed over everyone he abused into creating this theft. I honestly can't imagine many easier setups, less sympathetic defendants, or parades of pissed off co-workers willing to put the knife in him before he got it in them.
> SBF did not have any intention of committing a crime.
His fraud started early on, and he used the same tactic over and over again. He lied to his customers about how their funds were held, then abused them whenever any problem involving money came up in his life. Least self aware villan ever created.
"Your honor, I never intended to commit a crime, I simply intended to start with mere childish mistakes and then exponentially escalate their damage and viciousness throughout my entire life without any repercussions. Is that so wrong?"
In under five hours! The jury was home in time for dinner.
One question for legal people—why is there such a long gap between conviction and sentencing? In this case, the sentence won't be set until March of next year.
Because there's essentially a whole second sentencing trial. After the verdict, the Parole Office prepares a Presentence Report (I'm not sure if these are public? I'm always looking for them and never finding them on PACER†), the "PSR", which is like the opening bid for the recommended offense levels and grouping. The prosecution and defense then respond to the PSR with exculpatory, mitigating, or aggravating claims, victim impact testimony, your scout leader when you made Eagle Scout, all that stuff. Only then does the judge work out what the actual sentence is.
The guidelines calculations, contrary to public belief, are pretty easy! You will have a pretty good success rate just carefully reading the charged statutes in the indictment and then following the instructions in the guidelines. But the PSR, prosecution, and defense filings all take a bunch of time, and involve "reporting" or "research" or whatever you'd want to call it.
That process ostensibly can't even start until everyone knows what the precise convictions were.
For what it's worth, I think there's a very good chance he just gets the statutory maximum penalties here, because the dollar loss and victim count numbers max out the 2B1.1 guidelines (which, for instance, cap out at $10MM in dollar losses). Attributing specific dollar losses and victim counts is ostensibly one of the things that makes sentencing take so long, but as long as it takes I think the outcome is a foregone conclusion.
† Later: they're definitely not public; there's a whole victims rights thing about getting victims partial access to PSRs so they can be heard in the sentencing process. I guess I can stop looking for them.
A guy named Lev Dermen just got 40 years with a guidelines score of 47 (the table doesn't even go that high). He was charged with defrauding the government out of half a billion dollars in biodiesel tax credits, went to trial and kind of like SBF all the other conspirators testified against him. That case also had destruction of evidence, witness intimidation, and at the time of sentencing the government was still trying to recover a Bugatti and a bunch of money in Turkey from him.
But the number of victims and the hardship element probably means he's looking at life.
Having been called upon to serve on a jury before, I will admit that I tend to err on the side of the accused, but here the guy did everything, often in his own words, to tank any reasonable defense and doubt one could have. I followed the case and shook with disbelief at some of the things that were said. I was amazed at the initially lenient treatment he got. My jaw landed on the floor when I saw python code that did not even try to hide randomized balance. And those are just the highlights off the top of my head.
It is not often that I get to say this lately, but the jury restored some of my tired faith in the system in US.
I was on the jury of a federal fraud trial with 2 defendants with 15 charges, ~30 million in losses.
We were thorough and went through each count separately, including reviewing some of the evidence, and were done in maybe 8 hours spread across 2 days.
We ended up with a mixed verdict: one count not guilty for both, another not guilty for one. I fully believe they were aware and committed fraud for the not guilty counts, but the prosecutor wasn’t able to cross the “reasonable doubt” threshold in our minds for those specific instances.
Only thing we weren’t super careful about was the first requirement for Mail/Wire fraud, which is “Mail and wires” were used.
It was amusing that the prosecutors brought in a bank IT guy to explain that “the internet uses wires”, but not really something we questioned.
“So, contrary to popular belief, the internet is not some big truck that you can just dump something on a la Ted Stevens; it’s more of a … series of tubes?”
There’s quite a bit that goes into sentencing hearings especially if there are a lot of victims and/or the defendant has a lot of money. All that takes time to line up.
We were done in 30 minutes for a DUI case in local county court the last time I served. 25 of those minutes were spent trying to find any reasonable doubt after we all agreed on guilt.
For anyone curious, Ken White has a good and entertaining article breaking down maximum sentences in print (here, 110 years) and what people actually serve. It's worth a read:
"1. Maximum sentences have very little relation to actual sentences in federal law. When the government quotes the maximum sentence, they are trying to scare you. When the press quotes it, they are uninformed or lazy. Exercise skepticism. Resist emotional appeals to "how is this sentence reasonable when murderers get less?"
The opposite thing is going to happen in this case, and I'm sure you'll hear Ken on Serious Trouble saying the same thing next week (you can get Andrew McCarthy, another former AUSA, saying the same thing in the National Review today if you want that with a dash of anti-woke conservative racial politics). In basic economic crimes, sentences scale primarily with dollar losses, and FTX lost billions. He's going to do something resembling the statutory max, and then only if statutory limits take life off the table.
The whale sushi article is excellent and is a good intuition for most white collar crimes. You run into the big exception in these ultra-high-dollar cases like Theranos and FTX, because of the 2B1.1(b)(1) dollar loss chart.
Elizabth Holmes committed fraud, endangered lives, and harassed whistle blowers (one spent over $400,000 in legal fees fighting with Theranos). She only got 11 years and 3 months. I would not be surprised if Sam Bankman-Fried also got a fairly short sentence.
It's worth noting that the mechanism is still different. In this case, "the upper end of the range when you math out the sentencing guidelines" and "the amount you get if you take all the base charges and add them up and assume they're sequential" start to blend together because of the sheer scale.
But it's not like when the scale gets big enough, the whale sushi hypothetical math starts becoming the real way we calculate sentences. It's just that the guidelines really do try to account for super villain levels of crime.
Another thing that makes this case difficult is that SBF kind of breaks the sentencing guidelines. He starts at the highest possible base offense level for fraud, so he's in a position where every point haggled over is worth years of sentence time. And this also means statutory maximum sentences come into effect, and I personally don't know how that interacts when you've got multiple charges.
I believe the statutory maximum for fraud is 20 years, and so I suspect that's the minimum that he's going to be in prison for.
In some ways I can understand white collar criminals being "more evil" than murderers. As I understand it, murderers are often acting out of desperation, poverty, etc. On the other hand, it seems like a lot of white collar criminals who have everything but feel entitled to take from people who already have less than them. Although clearly the murderers did the more heinous crime.
Not trying to say that this is something I'd build a moral or legal system around. Just that emotionally I can kind of see it.
White collar criminals can also ruin multiple lives. Victims of such fraud have even been driven to suicide before. In those cases, at least, I find it hard to say it isn't roughly approximate to murder.
I like to think that I want to know what SBF's circle of friends and family had to think about this fraud, as it was going on, but I'm probably better off not knowing.
Yeah, I’ve heard that a bunch - about the press being uninformed or lazy. I’d offer that they are neither, but if they are restricting themselves to reporting facts and not prognostications and opinions, the statutory maximum is a reasonable thing to report.
I think this is likely the case. It's the only number they could have that doesn't involve a judgement call. Also, usually when I see things like that reported, they mention that most people don't get the maximum.
But in some cases, especially novel cases where they want to set an example, they can/will actually throw the book at you.
At this point, I wouldn't be surprised if they do. To deter potential future-SBFs. I mean, the whole cryptocurrency space is filled to the brim with scammers, many will never face anything at all. But when you've nailed the biggest of them all, might as well set an example.
EDIT: I do not believe he will serve 110, or 50, or 20 years. But hopefully they will dole out the maximum of a realistic sentencing.
A couple of year behind the bars would be a complete joke. From all I've seen, I have zero faith that SBF will be "rehabilitated" by a year or two in prison.
I'm studying for my CFE (Certified Fraud Examiner) and can shed some light on this.
As others mentioned, unexplainable business models or money coming out of nowhere are major red flags. A few others to look out for if you are applying for a job:
1. Few or no internal controls. A medium-size or larger company not having a CFO is particularly questionable.
2. People in high positions, including the CEO, lack qualifications or experience. Often the CEO will hire inexperienced or incompetent people for high-level positions because they a) won't figure out what is going on or b) can figure it out, but are too grateful for the position to say anything. Or maybe the CEO never finished college in a field where everyone has a PhD (think Elizabeth Holmes).
3. History of experienced / qualified people joining the company and leaving soon after
4. Seemingly unexplained success.
5. Extravagant spending and inappropriate workplace behavior.
6. Cult of loyalty to the CEO and/or a "circle" around this person, including close interpersonal relationships.
I think a big one is if nobody can explain you where the money is supposed to come from. If it is all hand-wavy and nobody can explain what that company is doing get out. In the best case it was legal, but they are incompetent morons.
Worldcom acquired the company I worked for. I saw their culture featured all manner of players, hustlers, empire builders, untouchable princes, etc. battling for turf. Lords and serfs. The stock was supposed to always go up. "Genius" businessmen somehow figured out how to print money where others had not. The company had a mutual fund that only held Worldcom stock in the 401(k) retirement plan. That was a huge red flag for me and it resulted in many of my colleagues losing their retirement savings. I was far from the levers of power but I had a really bad feeling about the leadership and left before the crash. Since then I have always instantly liquidated all options and stock grants and put them in safer investments. That can be a hard decision to make when you see many people getting rich (perhaps temporarily, perhaps not) betting on the equity to keep improving. But I kept expenses low, saved a lot, and still retired at 49 so I'm happy with how it turned out even if I passed on some big gains.
I think the hard part of this for naive young people is that you have to actually do some investigation. This should be front-and-center during your interview process. When they get around to asking if you have any questions for them, you should take that opportunity to see if this is a serious place.
1. When you cannot explain how, mechanically the business works
2. Management is elusive, opaque
3. Employees are lax about controls, compliance, even morality
If your gut says they might be criminals, they are probably criminals.
Far reaching stories of how money is made and the numbers don't actually make any sense. Or it is all financialization. Also unrealistic profits. Without known number of paying customers and known spending.
Worked in crypto and I got that vibe so left. Regret it. For every SBF there are hundreds who get away with it. Tons of talentless crypto millionaires still roaming free. Look at the Axie Infinite guys plundering a whole country. Token could collapse, but there’ll be no justice and they’re sitting on at least 8 figures individually
Lots of comments below criticising this post for "regretting not being a fraud" or some such. Be charitable... the sentence parses just fine as "I regret having worked in crypto".
Worldcom had a business model that was ahead of its time. Show growth, raise stock price, use stock to buy companies, grow, rinse and repeat.
It worked great until regulators disallowed the Sprint purchase because it would have put too much of the long-distance market in one company. (And as we all know, we stress a lot about choosing our long-distance carrier these days.)
Then all of the somewhat shady side-deals became concerning, as WCOM was no longer growing like it was. Then people started looking more closely at the financials. Then it all went kerflooey.
It was ahead of its time because it's not that different from tech companies today, only replace business growth with user growth. Profits? Ha ha ha, don't be silly.
Worldcom was a fraud. I believe they were caught inflating their earnings (i.e. saying they made more money than they really did). This was not a business model “ahead of its time”. It’s a crime.
Sequoia invested $200M in this guy. Has anyone looked at whether SBF could've done as much damage without that investment? Has anyone looked at if Sequoia did their due diligence? Seems like Sequoia could've seen red flags just from knowing Alameda existed. The potential abuse there was completely obvious.
The whole Sequoia thing is so interesting. Here is an excerpt from their (now taken down) profile of SBF, highlighting the moment he convinced them to invest:
> That’s when SBF told Sequoia about the so-called super-app: “I want FTX to be a place where you can do anything you want with your next dollar. You can buy bitcoin. You can send money in whatever currency to any friend anywhere in the world. You can buy a banana. You can do anything you want with your money from inside FTX.”
> Suddenly, the chat window on Sequoia’s side of the Zoom lights up with partners freaking out.
> “I LOVE THIS FOUNDER,” typed one partner.
> “I am a 10 out of 10,” pinged another.
> “YES!!!” exclaimed a third
Like, he’s rambling about how you should buy bananas with Bitcoin. How was this compelling to people who control serious money?
It always struck me as the opposite. If someone running a crypto futures exchange said they wanted people to buy bananas and groceries on their platform that’s be a signal to pass, right?
I think the practical business/technical goals are almost irrelevant. It's not that SBF had a brilliant business model in mind. It's that he fit the "look" of a founder that those VCs expected. He was one of them, with the right pedigree and right connections. It's affinity fraud [1].
You gotta remember, what's being sold in this kind of pitch is not a business model. They're looking for unicorns. What's being sold is the maximum possible size of the market you can extract value from.
I'm no VC, but I feel like if I am and you're telling me that _all_ consumer transactions of any kind are going to flow through a portal _you_ own, it doesn't get much bigger than that. The odds of success don't have to be that high, and in principle you just factor the possibility that the founder's full of crap into those odds; you don't have the time to understand every possible market and every person pitching you in the depth necessary to make that determination, right?
the line between "crazy, brilliant founders who will build world changing companies" and "crazy, lunatic founders who will lie and cheat and be awful" is very hard to distinguish, especially at the series seed/series A level.
It can lead to false positives and false negatives all the time.
I don't know. To the extent that Musk had a plan at all with his $44B Twitter purchase, a big part of his idea seems to be that he wants X to be the next banking app/Venmo.
Venmo is valuated at something like 40 billion dollars, and a huge amount of its use is people making $10 payments to each other.
I'd hate to live in a world where I conducted all my business on FTX, but you can see why it might be appealing to investors.
> How was this compelling to people who control serious money?
Access to money, and intelligence, are not positively correlated. Jury is out on whether there is no correlation, or if there is negative correlation. Given the braindead antics of the wealthy over the past 10 years, I'm leaning towards the latter.
This whole exchange made me think that there must have been a family or friend connection back to Sequoia.
As a humble poor, if I were running the show over at Sequoia I would have these people out on their asses, but again, I also don't have buckets of money clouding my judgement.
This just goes to show all the critiques of this kind of investing were very true. FTX and Theranos are examples of how this can all go very wrong.
I've gotten in a number arguments with people who don't understand white collar crime, think these guys are "smart", and are so surprised by how basic their scheme is, and how they thought they'd get away with it.
These people aren't smart, any more than your local gang banger, or small time fraudster... the stories are remarkably similar.
There's lots of white collar criminals that have cloaked their schemes as part of "altruism". This isn't even new.
What else should investors do in the time of ZIRP? This looked like a potentially crazy return, right? That's point of investing like this, right? Pour money into a "winner" and ride the crypto-future-promise-delusion-wave...
It's pretty wild how unhinged they became about pretty much rambling...
> If someone running a crypto futures exchange said they wanted people to buy bananas and groceries on their platform that’s be a signal to pass, right?
Not if you're so silly as to think you can replace the currency people use, plus control completely its medium of exchange, plus be able to trade against those same exchange's participants. It boils down to people trying to rebrand casinos as markets.
Wow wow wow. He's talking about inserting a business in the normal person's payment path. It's certainly ambitious and could be profitable if you could get on that trajectory. The question would be whether there is a credible path from crypto futures exchange to that, technical, financial or marketing-wise - but that's a different question.
I think that idea in particular is quite good actually ^_^
I mean, I'm not imagining that they have groceries listings on the app, but that the app allows you to transfer money directly to someone from your crypto wallet. Like a venmo payment but with crypto.
I think it's a good reminder that large investors are human and don't possess any special knowledge or magical foresight. Consequently, everything they say about the future of technology and society should be taken with a large grain of salt - not treated like god's honest truth.
As I mentioned in another comment, I think it's not accidental that SBF was pumped full of delusions of being a boy genius.
This worked great as a marketing gimmick for sure, as people love the mythos of a revolutionary company run by a tech prodigy.
But it also works when everything falls apart because SBF's delusion driven ego sucked up every morsel of attention and responsibility.
I also wouldn't be surprised if, through various means, many of his investors ultimately walked away with far more money than they started. And nobody bothers asking questions about that because SBF does such a great job of drawing all the attention.
This does not sound plausible because the investors will almost certainly not get anything out of the bankruptcy. Also there is no evidence any investor secretly profited from FTX and it is hard to believe any VC put millions in and some how got them out. They put money in and FTX lost it.
Baffling. When I hear SBF speak and I analyze his system all I can see is a thoroughly medicore JAG hyping up a bad product that was a spit-and-a-prayer. And yet he was raking it in...I can still remember investors and the general public being appalled at facebook being valued at 11 billion in 2008, after they'd destroyed their competition and taken over "social networking". Something changed in the collective consciousness.
Silicon valley investors always jump on hype, just remember the dot-com bubble and yea crypto was and still is very hypey although AI, LLMs and generative AI are now taking over the hype. To the next hype train we go.
It was fast because the US Government did a fantastic job of prosecuting him, and his defense team had an awful client. Basically, it was obvious he was guilty, and there was almost no chance his lawyers could show there was a reasonable doubt that he had not committed the crimes he was accused of.
Also because he broke the terms of his pretrial release, and so was forced to await the trial in jail. That made the idea of delaying the start of the trial for as long as possible less appealing.
Yeah the defense had no alternative story to offer. Before the trial they sort of hinted that Caroline Ellison was responsible for all the fraud, but they never really made that case in court, presumably because the facts didn't exist.
So it was three co-conspirators testifying and a lot of hard evidence vs SBF saying that he remembered some conversations differently, and being incredibly evasive on cross-examination. They had nothing.
Appealing a criminal conviction is quite hard. It's certainly his right to file an appeal, but he's likely going to be detained for the duration of the appeals, and the likelihood of being successful seems pretty low to me.
Appeals are expensive and risky. He may appeal but I doubt he has the money to. Also, he probably has no grounds for appeal because he really did commit fraud, the government has a lot of evidence that he is a criminal, and the government did not violate his rights.
Of course he'll appeal. I mean, this is an ass clown that would YOLO it all on a coin flip. Offhand, the Judge ruled he couldn't ~~lie~~ testify about lawyers approving fraud and I think there were some defense witnesses that weren't allowed. Anytime a lawyer objects and the judge has to make a decision, that's a potential grounds for an appeal. In 4 weeks of trial I bet there were a lot of objections! Plus there are a lot of decisions before the trial (excluding/including witnesses, testimony, evidence, etc)
yes, seemed quick for all the reasons sibling posts mention.
appeals aside, it's not over... We've had first trial, yes, but what about second trial?
Four charges had been separated out into a second trial for March 11 of next year. Same judge, different jury? May have been due to logistical reasons or discussions with the Bahamanian government around extradition. It sounds like the government has the option of dropping these over the next months as well.
Sentencing for this one (or both but that seems extremely quick) was just scheduled for March 28 2024.
Anyone know where to get good details? Specifically: do they know where the money went? If not, how did they prove intent (I assume they proved intent)?
Edit: another thing I'm wondering is about jurisdiction, since most of this occurred offshore and didn't involve US customers.
Not all of it (at least, not for the trial). They showed significant components of it as part of the trial, but they don't need to show a super detailed breakdown of every single dollar as part of the trial, so I don't think we got that.
> If not, how did they prove intent (I assume they proved intent)?
Circumstantial evidence and witness testimony mostly. Including a cross-examination of Sam that thoroughly undermined his credibility.
RE: Where the money went - The customer's money was used for the following purposes:
1. To pay for Alameda's (Sam Bankman Fried's hedge fund) and FTX's loses
2. Invest in venture capital and make acquisitions
3. Political donations
4. Charitable donations
5. Luxury real-estate, boats, etc.
6. "loans" (i.e. transfer of stolen funds) to FTX's top executives
RE: Intent - Intent was easy to prove. All of Sam Bankman-Fried's fellow executives testified against him. In addition, Sam Bankman-Fried gave several interviews after FTX's collapse where he basically admitted he lied, fucked up, etc. Also, there was a lot of documents proving Sam Bankman-Fried lied. A good example is him saying FTX was fine on Twitter (X) and then it collapsed a few days later.
Molly White had excellent writeups for the entire trial. She even did excellent multi-hour livestreams going over her notes for the portion of the trial where she was physically present at the courtroom.
The FTX bankruptcy case is tracking down where all the money went. SBF's criminal trial was more concerned with proving a small number of crimes with overwhelming evidence.
There have been tons of articles, podcasts, videos, and tweets about the trial. Evidence was mostly chat logs of SBF ordering crimes and testimony from Caroline, Gary, and Nishad that he ordered them to do crimes.
The intent is that it was customer money. There is a fiduciary duty. They have separate custodial accounts for customer funds. They did not separate funds. It was clear as day.
> another thing I'm wondering is about jurisdiction, since most of this occurred offshore and didn't involve US customers
This is complicated, but often it's possible to try someone in a single country, especially if it's their home country. In CSAM cases this often happens, the facts might happen in Asia, but someone is tried in their home country. I know the law in my country has provisions specifically for this and murder cases among others.
Readit News
https://www.nytimes.com/live/2023/11/02/business/sam-bankman...
At the end of the day, the defense had an unwinnable case. Their defendent is an idiot, and all of his co-conspirators plead guilty to all charges.
But two points remain. 1. Had they been able to sustain this Ponzi scheme to IPO, he would be celebrated as a tech-god, as opposed to facing hard time. 2. The VCs aren't required to disclose their sales of crypto. My guess is they made money of this clown, directly at the expense of all the FTC users he fleeced. As long as that keeps happening, this sort of thing will never stop.
> Several of Bankman-Fried's previous defense teams quit on him
I remember SBF told someone at some point during his ill-advised media tour post-collapse, that his lawyers could "go fuck themselves".
But I was wondering what happened then with said lawyer... Is there a list somewhere of the teams that quit?
I feel like even very, very long into his prison sentence he's still going to try to talk your head off insisting it was all a big misunderstanding. And he's going to be denied parole because he's going to try the same thing with the parole board every time.
Caroline Ellison pleaded to two counts of wire fraud, two counts of conspiracy to commit wire fraud, conspiracy to commit commodities fraud, conspiracy to commit securities fraud and conspiracy to commit money laundering.
Looking at the Federal Sentencing Guidelines[1], even accepting for her being a cooperating witness, she's very likely going to prison too for a fair amount of time. Just for (probably much) less time than SBF.
[1] Run your own calculations: https://www.sentencing.us
The fall guy? Come on.
Some low-level bank executive commits fraud and this place calls for the CEO's head. SBF was in charge an knew everything that was happening. IT sounds like he orchestrated most of it. There was zero element of rogue employees, or anything of the sort.
their POV is that this is net good for society. outcome we want = no crime
how to deter? 1/ big punishment for main actor 2/ get complicit actors to cooperate
and so by giving plea deals the gov shows that cooperation can save you
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To be fair to SBF's lawyers, you're going to have a hard time coming up with a good defence when your defendant is bang to rights.
Take from Tiffany Fong who was at the trial: https://youtu.be/wpKQWJFA3aw?t=850
I’d guess that the defence team knew they’d loose and this was in some way the start of their sentencing reduction plan: “the money was stolen to cover mostly business losses and to keep FTX going rather than for personal gain”.
Fact is, this could have helped him and his company, eventually.
Another two or three years of very sympathetic (bought) politicians on his side and his business could have become legit as a result of those politicians forcing the liquidation/closure of almost all SBF's competitors (certainly Binance would have become bust), and the US "standing behind" FTX as a beloved crypto assed in the fight against China. I.e. very, very similar to what's happening now with AI and with people like Sam Altman.
Which is to say that I'm surprised to see that the defence hasn't pushed more on that "SBF was just a pawn in the hands of very corrupt politicians"-card, that could have worked given a politically divided jury.
SBF is a dumb criminal, who then screwed over everyone he abused into creating this theft. I honestly can't imagine many easier setups, less sympathetic defendants, or parades of pissed off co-workers willing to put the knife in him before he got it in them.
> SBF did not have any intention of committing a crime.
His fraud started early on, and he used the same tactic over and over again. He lied to his customers about how their funds were held, then abused them whenever any problem involving money came up in his life. Least self aware villan ever created.
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So... money laundering?
One question for legal people—why is there such a long gap between conviction and sentencing? In this case, the sentence won't be set until March of next year.
The guidelines calculations, contrary to public belief, are pretty easy! You will have a pretty good success rate just carefully reading the charged statutes in the indictment and then following the instructions in the guidelines. But the PSR, prosecution, and defense filings all take a bunch of time, and involve "reporting" or "research" or whatever you'd want to call it.
That process ostensibly can't even start until everyone knows what the precise convictions were.
For what it's worth, I think there's a very good chance he just gets the statutory maximum penalties here, because the dollar loss and victim count numbers max out the 2B1.1 guidelines (which, for instance, cap out at $10MM in dollar losses). Attributing specific dollar losses and victim counts is ostensibly one of the things that makes sentencing take so long, but as long as it takes I think the outcome is a foregone conclusion.
† Later: they're definitely not public; there's a whole victims rights thing about getting victims partial access to PSRs so they can be heard in the sentencing process. I guess I can stop looking for them.
But the number of victims and the hardship element probably means he's looking at life.
Follow up - is there any kind of correlation in the gap length, between sentencing and PSR ?
I could see a situation where the gap is longer than a sentence, and that would be pretty sad for the prosecuted...
It is not often that I get to say this lately, but the jury restored some of my tired faith in the system in US.
I believe that's what you're supposed to do, as implied by "beyond a reasonable doubt" -- so good job!
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I was on the jury of a federal fraud trial with 2 defendants with 15 charges, ~30 million in losses.
We were thorough and went through each count separately, including reviewing some of the evidence, and were done in maybe 8 hours spread across 2 days.
We ended up with a mixed verdict: one count not guilty for both, another not guilty for one. I fully believe they were aware and committed fraud for the not guilty counts, but the prosecutor wasn’t able to cross the “reasonable doubt” threshold in our minds for those specific instances.
Only thing we weren’t super careful about was the first requirement for Mail/Wire fraud, which is “Mail and wires” were used.
It was amusing that the prosecutors brought in a bank IT guy to explain that “the internet uses wires”, but not really something we questioned.
I wonder if they did that to avoid having to explain to the jury that wire fraud does not actually require the use of wires...
‘That is correct.’
At the end of the day he deserves everything he's getting
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First thing we all agreed we would not be coming back on Monday…
But, frankly, if I were on trial by a jury of my peers, I’d appreciate it if people took their time.
Kind of scary that this is the rigor our justice system hinges on.
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He could have chartered a boat to Venezuela and taken a few hundred million with him.
Of course, all the people he defrauded might follow him.
https://www.popehat.com/2013/02/05/crime-whale-sushi-sentenc...
A takeaway:
"1. Maximum sentences have very little relation to actual sentences in federal law. When the government quotes the maximum sentence, they are trying to scare you. When the press quotes it, they are uninformed or lazy. Exercise skepticism. Resist emotional appeals to "how is this sentence reasonable when murderers get less?"
The whale sushi article is excellent and is a good intuition for most white collar crimes. You run into the big exception in these ultra-high-dollar cases like Theranos and FTX, because of the 2B1.1(b)(1) dollar loss chart.
But it's not like when the scale gets big enough, the whale sushi hypothetical math starts becoming the real way we calculate sentences. It's just that the guidelines really do try to account for super villain levels of crime.
I believe the statutory maximum for fraud is 20 years, and so I suspect that's the minimum that he's going to be in prison for.
I don't think you're right, but in any case, even if he receives the statutory max, it's unlikely he'll do it and stay in jail for 115 years.
Not trying to say that this is something I'd build a moral or legal system around. Just that emotionally I can kind of see it.
This isn't the place to be sticking up for journalism. They really are both uninformed and lazy.
At this point, I wouldn't be surprised if they do. To deter potential future-SBFs. I mean, the whole cryptocurrency space is filled to the brim with scammers, many will never face anything at all. But when you've nailed the biggest of them all, might as well set an example.
EDIT: I do not believe he will serve 110, or 50, or 20 years. But hopefully they will dole out the maximum of a realistic sentencing.
A couple of year behind the bars would be a complete joke. From all I've seen, I have zero faith that SBF will be "rehabilitated" by a year or two in prison.
So it's not the case that when one person is responsible, someone else has to be irresponsible to balance things out?
As others mentioned, unexplainable business models or money coming out of nowhere are major red flags. A few others to look out for if you are applying for a job:
1. Few or no internal controls. A medium-size or larger company not having a CFO is particularly questionable.
2. People in high positions, including the CEO, lack qualifications or experience. Often the CEO will hire inexperienced or incompetent people for high-level positions because they a) won't figure out what is going on or b) can figure it out, but are too grateful for the position to say anything. Or maybe the CEO never finished college in a field where everyone has a PhD (think Elizabeth Holmes).
3. History of experienced / qualified people joining the company and leaving soon after
4. Seemingly unexplained success.
5. Extravagant spending and inappropriate workplace behavior.
6. Cult of loyalty to the CEO and/or a "circle" around this person, including close interpersonal relationships.
But really, anything to do with crypto or NFTs should be a red flag at this point.
If your gut says they might be criminals, they are probably criminals.
It worked great until regulators disallowed the Sprint purchase because it would have put too much of the long-distance market in one company. (And as we all know, we stress a lot about choosing our long-distance carrier these days.)
Then all of the somewhat shady side-deals became concerning, as WCOM was no longer growing like it was. Then people started looking more closely at the financials. Then it all went kerflooey.
It was ahead of its time because it's not that different from tech companies today, only replace business growth with user growth. Profits? Ha ha ha, don't be silly.
> That’s when SBF told Sequoia about the so-called super-app: “I want FTX to be a place where you can do anything you want with your next dollar. You can buy bitcoin. You can send money in whatever currency to any friend anywhere in the world. You can buy a banana. You can do anything you want with your money from inside FTX.”
> Suddenly, the chat window on Sequoia’s side of the Zoom lights up with partners freaking out.
> “I LOVE THIS FOUNDER,” typed one partner.
> “I am a 10 out of 10,” pinged another.
> “YES!!!” exclaimed a third
Like, he’s rambling about how you should buy bananas with Bitcoin. How was this compelling to people who control serious money?
It always struck me as the opposite. If someone running a crypto futures exchange said they wanted people to buy bananas and groceries on their platform that’s be a signal to pass, right?
[1] https://en.wikipedia.org/wiki/Affinity_fraud
I'm no VC, but I feel like if I am and you're telling me that _all_ consumer transactions of any kind are going to flow through a portal _you_ own, it doesn't get much bigger than that. The odds of success don't have to be that high, and in principle you just factor the possibility that the founder's full of crap into those odds; you don't have the time to understand every possible market and every person pitching you in the depth necessary to make that determination, right?
the line between "crazy, brilliant founders who will build world changing companies" and "crazy, lunatic founders who will lie and cheat and be awful" is very hard to distinguish, especially at the series seed/series A level.
It can lead to false positives and false negatives all the time.
Venmo is valuated at something like 40 billion dollars, and a huge amount of its use is people making $10 payments to each other.
I'd hate to live in a world where I conducted all my business on FTX, but you can see why it might be appealing to investors.
Access to money, and intelligence, are not positively correlated. Jury is out on whether there is no correlation, or if there is negative correlation. Given the braindead antics of the wealthy over the past 10 years, I'm leaning towards the latter.
As a humble poor, if I were running the show over at Sequoia I would have these people out on their asses, but again, I also don't have buckets of money clouding my judgement.
I've gotten in a number arguments with people who don't understand white collar crime, think these guys are "smart", and are so surprised by how basic their scheme is, and how they thought they'd get away with it.
These people aren't smart, any more than your local gang banger, or small time fraudster... the stories are remarkably similar.
There's lots of white collar criminals that have cloaked their schemes as part of "altruism". This isn't even new.
Holders of serious money often put them into decidedly unserious things. Somebody once put together $44bn cash financing for Twitter dot com.
It's pretty wild how unhinged they became about pretty much rambling...
Not if you're so silly as to think you can replace the currency people use, plus control completely its medium of exchange, plus be able to trade against those same exchange's participants. It boils down to people trying to rebrand casinos as markets.
Everyone and their dog was looking for an actually credible, mass-market compatible usage scenario for Bitcoin beyond buying drugs on Silk Road.
I mean, I'm not imagining that they have groceries listings on the app, but that the app allows you to transfer money directly to someone from your crypto wallet. Like a venmo payment but with crypto.
This worked great as a marketing gimmick for sure, as people love the mythos of a revolutionary company run by a tech prodigy.
But it also works when everything falls apart because SBF's delusion driven ego sucked up every morsel of attention and responsibility.
I also wouldn't be surprised if, through various means, many of his investors ultimately walked away with far more money than they started. And nobody bothers asking questions about that because SBF does such a great job of drawing all the attention.
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So it was three co-conspirators testifying and a lot of hard evidence vs SBF saying that he remembered some conversations differently, and being incredibly evasive on cross-examination. They had nothing.
"Dad, why is the American government the best government?
"Because of our endless appeals system"
Thank You for Smoking
Look, ignoring obvious problems in the syntax..."
Beyond underrated (the book / movie)
appeals aside, it's not over... We've had first trial, yes, but what about second trial?
Four charges had been separated out into a second trial for March 11 of next year. Same judge, different jury? May have been due to logistical reasons or discussions with the Bahamanian government around extradition. It sounds like the government has the option of dropping these over the next months as well.
Sentencing for this one (or both but that seems extremely quick) was just scheduled for March 28 2024.
Edit: another thing I'm wondering is about jurisdiction, since most of this occurred offshore and didn't involve US customers.
If you want a really detailed overview of his testimony and cross-examination: https://www.youtube.com/@molly0xfff/streams
> do they know where the money went
Not all of it (at least, not for the trial). They showed significant components of it as part of the trial, but they don't need to show a super detailed breakdown of every single dollar as part of the trial, so I don't think we got that.
> If not, how did they prove intent (I assume they proved intent)?
Circumstantial evidence and witness testimony mostly. Including a cross-examination of Sam that thoroughly undermined his credibility.
https://www.youtube.com/@overpricedjpegs
Extremely informative and fun to watch (if you can get past the "sponsor breaks" for NFT platforms and the like).
1. To pay for Alameda's (Sam Bankman Fried's hedge fund) and FTX's loses
2. Invest in venture capital and make acquisitions
3. Political donations
4. Charitable donations
5. Luxury real-estate, boats, etc.
6. "loans" (i.e. transfer of stolen funds) to FTX's top executives
RE: Intent - Intent was easy to prove. All of Sam Bankman-Fried's fellow executives testified against him. In addition, Sam Bankman-Fried gave several interviews after FTX's collapse where he basically admitted he lied, fucked up, etc. Also, there was a lot of documents proving Sam Bankman-Fried lied. A good example is him saying FTX was fine on Twitter (X) and then it collapsed a few days later.
Here are some good FTX resources:
https://newsletter.mollywhite.net/s/the-ftx-files - Molley White did a good job covering the trial.
https://www.justice.gov/usao-sdny/pr/united-states-attorney-... - This site contains the government's indictment against Sam Bankman-Fried.
https://restructuring.ra.kroll.com/FTX/Home-Index - A lot of the FTX bankruptcy documents are on this website.
https://newsletter.mollywhite.net/s/the-ftx-files
There have been tons of articles, podcasts, videos, and tweets about the trial. Evidence was mostly chat logs of SBF ordering crimes and testimony from Caroline, Gary, and Nishad that he ordered them to do crimes.
This is complicated, but often it's possible to try someone in a single country, especially if it's their home country. In CSAM cases this often happens, the facts might happen in Asia, but someone is tried in their home country. I know the law in my country has provisions specifically for this and murder cases among others.