<\/p>\n
FTX co-founder Sam Bankman-Fried faces seven federal charges in a criminal trial taking place in Manhattan. The former crypto exchange exec is accused of misappropriating billions of dollars of customer funds for real estate, donations, political contributions and investments.\u00a0<\/em><\/p>\n The current state of play: The prosecution is expected to wrap up their case this morning. They\u2019ll end by putting an FBI agent on the stand. Then it\u2019s on to the defense\u2019s case, with Sam Bankman-Fried testifying. His testimony is expected to last most of the day and into Friday. <\/em>Read more here<\/em><\/a>.<\/em><\/p>\n Bankman-Fried did indeed take the stand today, but things went down a little differently than previously anticipated.\u00a0<\/p>\n Instead of the normal direct and cross-examination we\u2019ve come to expect, Judge Kaplan excused the jurors and had SBF take the stand to testify in a hearing. He was still sworn in, but what he said Thursday might not make it to the jury.\u00a0<\/p>\n The idea behind the hearing was to work out the several parts of SBF\u2019s testimony that the prosecution already objected to, but the defense still wants to include.<\/p>\n Kaplan will make his final ruling tomorrow morning on what the jury is allowed to hear.\u00a0<\/p>\n SBF faced his own lawyers first, with the majority of the questioning focusing on a mysterious document retention policy. Mysterious, because despite discussing its contents for almost an hour, the policy itself is nowhere to be found.<\/p>\n Read more:<\/strong> Sam Bankman-Fried\u2019s defense seems to hinge on a document his team can\u2019t find<\/a><\/p>\n After Bankman-Fried\u2019s mock testimony concluded, Cohen explained that Fenwick and West (the law firm that worked on the policy) rejected their subpoena to send it over.\u00a0<\/p>\n Boiled down, a document that is key to the defense\u2019s case is not in evidence.<\/p>\n The next topic was North Dimension and what SBF\u2019s understanding of the firm was.\u00a0<\/p>\n Bankman-Fried clarified, when asked by Cohen, that North Dimension was a part of Alameda and was created by Dan Friedberg. Friedberg, if the name strikes a bell for you, is SBF\u2019s alleged \u201cfixer,\u201d though Bankman-Fried is painting a different picture than the one created by the FTX estate.<\/p>\n Friedberg was in charge of the North Dimension bank account forms and passed them to SBF for signing.\u00a0<\/p>\n \u201cI briefly reviewed them,\u201d SBF said.<\/p>\n Friedberg was also in charge of the agreement for FTX customer deposits.<\/p>\n SBF then faced US prosecutor Danielle Sassoon, who had a different approach to his testimony.<\/p>\n More generally during Sassoon\u2019s questioning, Bankman-Fried had a habit of apologizing if he didn\u2019t \u201cunderstand\u201d or wasn\u2019t responding to the \u201ccorrect\u201d question posed. Also when asked about what his understanding was of something \u2014 a document or a conversation \u2014 he\u2019d repeatedly use the word \u201ccontemporaneously\u201d to qualify his eventual answer.\u00a0<\/p>\n Sassoon interrupted Bankman-Fried on a few occasions, only to tell him to answer her actual question. One example was when she repeatedly asked about the purpose of the North Dimension bank account and whose decision it was for it to accept customer deposits.\u00a0<\/p>\n Bankman-Fried kept falling back on elaborating on a payment agent agreement between Alameda and FTX that he signed.<\/p>\n Sassoon also asked about the auto-delete feature of some Signal chats \u2014 a feature discussed in testimony earlier Thursday.<\/p>\n Specifically, Sassoon asked about the $13 billion hole and whether or not Bankman-Fried or ex-Alameda CEO Caroline Ellison discussed it on Signal.<\/p>\n \u201cProbably,\u201d Bankman-Fried answered, adding that he wasn\u2019t sure.<\/p>\n SBF also doesn\u2019t \u201crecall\u201d allegedly telling ex-engineering head Nishad Singh that preserving messages was \u201call downside.\u201d<\/p>\n Sasoon specifically asked if Bankman-Fried had any paper communications with attorneys to which SBF said, \u201cI believe we have requested some of those but have not been given them.\u201d<\/p>\n An interesting answer given the fact that the Bankman-Fried trial is roughly four weeks underway.<\/p>\n Judge Kaplan, in response to Bankman-Fried\u2019s answers, told him to, \u201clisten to the question and answer the question directly.\u201d<\/p>\n \u201cYep,\u201d SBF responded. His tone remained even throughout the cross-examination by the prosecution, staying on par with the vibe he gave the defense.<\/p>\n A highlight of Sassoon\u2019s time with Bankman-Fried was when she asked him if his understanding of safeguarding customer assets included not embezzling those funds.\u00a0<\/p>\n Out came an immediate objection from Cohen and a sustain from Kaplan. Despite this, Bankman-Fried said yes.<\/p>\n Cohen laughed and told his client that when the judge sustains, he doesn\u2019t have to answer.<\/p>\n \u201cHaven\u2019t you been sitting here for four weeks?\u201d Cohen asked him.\u00a0<\/p>\n \u201cI felt the need to answer that one,\u201d Bankman-Fried said.<\/p>\n The continued questioning by Sassoon led to Cohen objecting many, many more times.<\/p>\n \u201cThis is beyond scope, this is a deposition now,\u201d he remarked after Sassoon questioned his client on the \u201callow negative\u201d feature.<\/p>\n Kaplan said he would allow the questioning to continue.\u00a0<\/p>\n \u201cThe witness has what I\u2019ll simply call an interesting way of answering questions,\u201d Kaplan said. \u201cIf you want to push ahead, it\u2019s through this hearing if at all.\u201d<\/p>\n SBF\u2019s testimony, which began around 2 pm ET, wrapped at 5 pm ET. On Friday, Bankman-Fried is expected to take the stand in front of the jury.<\/p>\n Live from the courtroom: <\/em>Michael Lewis. Yep, the author of \u201cGoing Infinite\u201d <\/em>is in the overflow room of the courthouse. In addition to a leatherbound case for his notebook, the author brought along \u201cthe largest paper clips I\u2019ve ever seen in my life,\u201d according to Blockworks opinion editor Molly Jane Zuckerman.<\/p>\n ICYMI:<\/strong> \u200b\u200bNew Sam Bankman-Fried book \u2018Going Infinite\u2019 goes absolutely nowhere<\/a><\/p>\n SBF is set to take the stand when the court resumes after lunch, at 2 pm ET.<\/p>\n As mentioned in the previous update, Krystal Rolle was the first to take the stand.<\/p>\n She confirmed previous testimony from FTX co-founder Gary Wang that Bankman-Fried\u2019s father, Joseph Bankman, was present at the Nov. 12, 2022 meeting with the Bahamian regulators.\u00a0<\/p>\n The provisional liquidator of FTX Digital Markets, the Bahamian subsidiary, was also present, Rolle added.\u00a0<\/p>\n The three-hour meeting was part of an investigation the regulators were carrying out into the collapse of FTX, Rolle said.\u00a0<\/p>\n After the meeting, the entire group \u2014 including the regulators and Bankman-Fried accompanied by Rolle \u2014 went to FTX\u2019s offices. There, SBF transferred digital assets from FTX Digital Markets Ltd. to the Securities Commission of the Bahamas, after getting a court order to do so.<\/p>\n Bankman-Fried was required to turn over all the assets of FTX Digital Markets to the SCB, a process that lasted well until the early hours of the following morning, according to Rolle.<\/p>\n SBF and Wang surrendered their passports to the Bahamas Royal Police as a sign of good faith, with Bankman-Fried also agreeing to later interviews with the officers.<\/p>\n On cross, Roos established that Rolle, in her own words, \u201cwas not even familiar with FTX\u201d and had nothing to do with how the customer funds were appropriated. This is central to the government\u2019s case.\u00a0<\/p>\n Joseph Pimbley, a consultant on financial issues and an expert on computer coding, then took the stand.<\/p>\n Fun fact: Pimbley\u2019s going rate is $720 an hour and has worked more than 70 hours on the case for Bankman-Fried\u2019s team. That comes out to more than $50,000. *insert swirly-eyed emoji here.*<\/p>\n SBF\u2019s defense team tasked Pimbley with determining how much of its $67 billion line of credit Alameda actually used and figuring out the total balances of all user accounts, excluding those of Alameda and FTX itself.\u00a0<\/p>\n From October 2021 to November 2022, Alameda consistently used more than $1 billion of its credit line. Nearing the collapse in November, Alameda\u2019s usage surged to more than $5 billion, according to Pimbley\u2019s research.\u00a0<\/p>\n SBF lawyer Everdell then showed graphics detailing the total balances on customers\u2019 accounts. With all tokens included, the November balance was $8.9 billion. The graphic showed that over 75% of that balance was held by customers who had engaged in spot margin trading, margin lending or futures trading at any point.\u00a0<\/p>\n This is a cornerstone of the defense\u2019s case. They appear to be trying to prove that the vast majority of FTX customers were engaged in programs that were inherently risky. And in some cases, these users agreed to lend their money to other users.\u00a0<\/p>\n While the defense didn\u2019t come out and say this was the reason for money on FTX vanishing for users, this can be interpreted as a strategy to create doubt in the jurors\u2019 minds.<\/p>\n Thane Rehn led the cross-examination of Pimbley, and for a while, all was well for Rehn. He got Pimbley to admit that he didn\u2019t look at FTX or Alameda bank statements. Pimbley also didn\u2019t look at discrepancies between Alameda bank accounts or FTX hot wallets and what was owed to customers on the exchange.\u00a0<\/p>\n Rehn ran into trouble when he started asking Pimbley about things that weren\u2019t part of his analysis.\u00a0<\/p>\n \u201cHe has told you\u201d what he\u2019s done, Judge Kaplan told Rehn.\u00a0<\/p>\n Rehn\u2019s questioning transitioned to mostly asking Pimbley about what was written on the various graphics he\u2019d prepared for the defense.\u00a0<\/p>\n Rehn riled up the judge when he persistently pursued a line of questioning to clarify that Pimbley only analyzed FTX database information, and could not speak to any information regarding Alameda and FTX\u2019s bank accounts or holdings.\u00a0<\/p>\n Judge Kaplan erupted at what he viewed as a directionless series of questions that were out of scope, according to the defense.\u00a0<\/p>\n Using an analogy about working in his father\u2019s deli, Kaplan noted that when his father asked him how much smoked fish they had on hand, it was more than evident that he didn\u2019t need to count the pastrami. Or the macaroni salad.<\/p>\n The courtroom shook with laughter, with even Bankman-Fried giggling. Rehn quickly moved on.<\/p>\n The court broke for lunch and will resume with Bankman-Fried taking the stand at 2 pm.<\/p>\n FBI agent Marc Troiano took the stand for a brief testimony about the whopping 325 Signal group chats that Bankman-Fried was a member of in his capacity as an executive at FTX and Alameda.\u00a0<\/p>\n Fun fact: 288 of the 325 group chats had auto-delete turned on.<\/p>\n The information about the Signal chats was obtained by the FBI from Caroline Ellison\u2019s iPhone and Gary Wang\u2019s laptop on Nov. 16 and 17 of last year.\u00a0<\/p>\n The government mainly wanted to establish the sheer volume of these chats that Bankman-Fried was a part of, ending the direct examination of the FBI agent quickly.<\/p>\n Subsequently, SBF\u2019s defense attorney, Christian Everdell, cross-examined the agent, repeatedly requesting him to read specific sections of the chart that displayed the Signal chats.<\/p>\n Judge Kaplan didn\u2019t let this go on for long.\u00a0<\/p>\n \u201cThis is not an exam for new eyeglasses. I assume [Troiano] can read just as well as anyone else,\u201d Kaplan said. \u201cThis is not helpful.\u201d<\/p>\n When Everdell left the lectern, the prosecution rested its case. Now it\u2019s the defense\u2019s turn to bring a case, which they confirmed they will (and we already knew thanks to the Wednesday phone call).\u00a0<\/p>\n Before that can commence though, there was a bit of legal back and forth between the prosecution and the defense.<\/p>\n SBF\u2019s lawyers attempted to invoke a rule 29 motion, arguing that the government had not put forth enough of a case to warrant a wire fraud charge or the money laundering charge.<\/p>\n Under rule 29, the defendant\u2019s counsel can enter a judgment of acquittal basically arguing that there was not enough evidence shown to warrant a conviction on the charge.\u00a0<\/p>\n The government opposed the defense\u2019s rule 29. Judge Kaplan sided with the prosecution and denied the motion.<\/p>\n Krystal Rolle and Joseph Pimbley will take the stand ahead of Bankman-Fried. Rolle represented SBF back in the Bahamas and Pimbley \u2014 as we covered below \u2014 will speak on the exciting topic of data.<\/p>\n Rolle will provide a first-hand account of the meeting that took place between Bankman-Fried and the Securities Commission of the Bahamas on Nov. 12, 2022, to which Gary Wang testified<\/a>.\u00a0<\/p>\n Both testimonies are expected to last roughly 15 minutes, and then they\u2019ll face a cross-examination by the prosecution. During the phone conference on Wednesday, the prosecution assured Judge Kaplan that they don\u2019t plan to take too long on their cross-examination of either witness.<\/p>\n It\u2019s been about a week since SBF\u2019s trial adjourned, and it\u2019s getting close to the end. So close that we\u2019re in the final stretch.\u00a0<\/p>\n On Wednesday, Judge Lewis Kaplan held a phone conference with the prosecution and defense which was, shall we say, revealing.\u00a0<\/p>\n Despite not even being certain that the defense would put on a case last week, Bankman-Fried\u2019s team said yesterday that they will put on a case.\u00a0<\/p>\n Oh, and SBF will take the stand<\/a>.<\/p>\n The defense expects Bankman-Fried\u2019s testimony to \u201ctake a good part\u201d or \u201cmaybe all of Thursday.\u201d Then, with cross-examination by the prosecution, that would take them into Friday.<\/p>\n SBF isn\u2019t the only witness the defense plans to call. They\u2019re going to bring up an attorney from the Bahamas, Krystal Rolle, Joseph Pimbley (more on him in a moment) and an unnamed records custodian.<\/p>\n If you\u2019ve been following the SBF case, then Pimbley\u2019s name may ring a bell. Pimbley is a database expert, and the defense wants to put him on the stand to \u201ctestify about a data pull that he did; not any analysis of the data but just simply pulling data relating to letter of credit balances that come off the AWS database and a chart of those balances,\u201d according to defense attorney Mark Cohen.<\/p>\n Earlier this year, the prosecution filed a motion to block multiple witnesses<\/a> from testifying on the defense\u2019s behalf.\u00a0<\/p>\n Kaplan sided with the prosecution on the motion<\/a>, with a caveat. The defense had to file a motion \u2014 which it did \u2014 to prove that the witness could rebuke testimony from a witness from the prosecution. The government is allowed to object to the filing though. Isn\u2019t the legal system fun?<\/p>\n Prosecutor Thane Rehn told the defense and Kaplan on Wednesday that the government \u201cwon\u2019t object to the authenticity of the data\u201d and will proceed with a cross-examination.<\/p>\n Putting aside the expected witnesses, the final days of the trial \u2014 mind you, the jury may still take a while to decide whether or not SBF is guilty \u2014\u00a0 may happen Monday or Tuesday, according to the conversation Wednesday.<\/p>\n Kaplan told the prosecutors and Cohen, \u201cwe\u2019ll just have to see how it goes.\u201d<\/p>\n He\u2019s slightly more concerned about the \u201cdeforestation\u201d of America following the multitude of letter motions filed during the trial\u2019s break \u2014 and the letters he expects to receive after the conference.\u00a0<\/p>\n \u201cAmong other things, I have to cope with the deforestation of America by virtue of the manufacture of the papers you have all submitted on the charge,\u201d he snarkily told lawyers yesterday.<\/p>\n Don\u2019t miss the next big story \u2013 join our\u00a0free daily newsletter<\/a>.<\/strong><\/p>\n
\n6:15 pm ET: Sam Bankman-Fried is on the stand\u2026 with no jury<\/h2>\n
1:55 pm ET: Kaplan strikes at the prosecution<\/h2>\n
10:55 am ET: Kaplan strikes down the defense\u2019s attempt to invoke rule 29<\/h2>\n
9:45 am ET: Sam Bankman-Fried takes the stand<\/h2>\n
\n