Ep. 98: SBF Trial Briefing, October 31. The defense rests.

[00:00] I feel like I could cut a lot of this and just talk about like funny shitcoin stuff, but I don't know. What do you think? [00:30] Hi. [00:46] Hey, here we are. Day two of week five of SBF's trial and we're getting to the bitter end here. We're wrapping things up. We're wrapping things up. What happened today is the cross-examination of SBF finished. The defense rested. They're at rest now. They may rest. How did the cross-examination finish out? [01:16] yesterday's vibe was. We started around 9:30, 9:40. We're getting in there and Danielle Sassoon [01:24] The prosecutor is just right back at it. She's just ready back on the pitch. The tone was the same. Very much like short answers. Wouldn't give a clear answer. Constantly dodging the question. Her basically having to really dig in present evidence to basically get to the point of what she wanted to make or to get him to admit to some version of what he said or what he knew. She asked questions for about an hour and a half.

[01:50] And then the defense could do something called a redirect, which is basically they get to clarify some of the things that Sam said during the cross-examination with the prosecutor. [02:01] Just pause here for a second. One thing I've enjoyed about this the past couple weeks is that I feel like I've taken a civics class. I understand the inner workings of our legal system. Me too. Thanks to your firsthand experience. Oh, thank you. I feel the same. I feel a little silly, but I feel like I've learned so much about our legal system. We're learning in community here. [02:31] the law and for the law a period and then also that this is how we make decisions as a society [02:40] Random people listen to people tell their stories and give their evidence to that story. And then we decide. Yeah. [02:49] And that's kind of crazy that that's how we do it. It's doubt. [02:54] It's Dow adjacent. It's Dow adjacent for sure. So yeah, I can get back. No, it's okay. I weirdly, someone asked me today, like, how have you, how have you been liking it as we're closing in here? And I was like, I feel like I learned a lot, which kind of feels silly, but it's the truth. So she focused on a few key areas. The prosecutor asked him a question about margin trading, because he's kind of been leaning on this defense that funds that were

[03:24] put into FTX could be used as, [03:28] for other things like margin trading on the platform by market makers or other individuals. Like there was some loophole in the terms of service that allowed them to do margin trading with what's essentially customer funds. That's my understanding. Okay. They spent some time talking about his preferential treatment of Bahamian funds. [03:51] customers on FTX and how he prioritized Bahamian individuals to get their funds out of FTX when it imploded and went through evidence of him talking to Bahamian regulators in the time of like November 9th, 10th, 11th, around that time, where there's essentially an email where he told the [04:13] segregate the funds for Bahamian individuals so that they could be prioritized in pulling their funds off of FTX. So she focused on that and basically was like, you were cozying up to Bahamian officials. You had the prime minister come to this event, this dinner, where you had Tony Blair and Bill Clinton and showed a video of him, Bill Clinton and the Bahamian prime minister. She talked about how she was like, didn't you tell the [04:36] prime minister that you would help his son get a job. I think that she's trying to demonstrate that he knew, and I don't know for sure, but he knew that he would have legal issues. And he was trying to safeguard his relationship with the Bohemian government to get preferential treatment in the Bahamas. And if he had been able to keep the case in the Bahamas and not have it brought to the US, then he could have maybe tried to wiggle his way out of it. I see. Okay. We spent

[05:06] that there was an $8 billion hole. There was the whole bug thing, which we've talked about. There was a massive bug, and then they found all this money, and that was when a lot of people claimed that they found out that there was a hole in general. [05:19] she spent a lot of time sort of nailing him on that where she was like your employees told you that there was an eight billion dollar bug and you didn't ask questions about why that bug happened or who was responsible because he was claiming that he still didn't know about the hole until september or october but that he clearly would have known back in june that there was a hole he basically was like yeah someone spent eight billion dollars [05:44] of customer funds. And she was like, you didn't try to figure out who that person was. You didn't fire anybody for spending $8 billion. And he was, [05:52] being all cagey about it and not answering directly and she was like I find it hard to believe that you didn't ask questions about who spent that money and then when he was given an opportunity to explain later he had this like bullshit answer where he was basically like my leadership style is never to try to bill out blame it's more to focus on what we can do moving forward and had like this whole answer for it you're just like this is really cringe another thing that has [06:18] The story has been this position that Alameda Research took on. [06:25] when [06:26] Sam was still CEO of both Alameda and FTX. And I think they've focused on it a lot because it demonstrates him being irresponsible in his decision-making prior to even embezzling customer funds. So this was in 2021 and

[06:43] essentially there was a position that a trader had on two what I believe to be shitcoins, mobile coin and Bitcoin. [06:52] BTMX. Essentially what had happened is a trader had taken a position with these two coins and they were attempting to exploit [07:02] basically a loophole in the FTX system that allowed them to have, I think, like crazy leverage on this trade. And it got completely out of hand. And it had been brought to Sam's attention as, okay, there's something that's happening here that's bizarre. Someone is trying to exploit the system. This needs to be monitored. And basically Sam said, I'll take responsibility for monitoring it manually and not have the system monitor it. This is one of the areas [07:32] - Bad trade, bad trade. - Bad trade. So basically what happens is this position gets totally out of hand and this person like, [07:42] abused the system essentially. Okay. A user of FTX or Sam? A user of FTX. [07:48] was trading on these two tokens and having and it was going crazy and it was going crazy okay and basically instead of utilizing their risk management system and liquidating this individual because it was like a super valuable customer sbf kept him on the platform and then this went crazy and out of control and what has to happen in those situations is essentially that position needs to be made up for with someone else on the platform and no one else was willing to take on the position

[08:18] because it was like a crazy loss. So because he claimed, oh, it was my responsibility because I told I would monitor it, I felt like it was appropriate for Alameda to take on that position and be the back stock liquidity provider for it so that the loss wasn't suffered somewhere else across the platform. And because he was like, I'm the primary owner of Alameda Research, it was my fault. So it makes sense for me to take on that position through Alameda Research. [08:49] And... [08:49] I think it was like an $800 million loss. [08:52] this trade. And so the prosecutor is using that as an example of this guy was making irresponsible decisions all along the way. And this is a great example. And he [09:03] took on that position, not because he believed that it was the most responsible thing to do because he was the business owner, but because if he passed the trade, the bad trade onto Alameda Research, he wouldn't have to inform investors that their risk management system had been exploited and that they had to cover that $800 million loss internally through FTX, which exposed how fragile the whole system was. Slided under the rug. Slided under the rug. And his defense used this example [09:33] trying to do his best with his businesses and he was taking on responsibility where he needed. And also these systems are fragile and it's a volatile industry and things can go crazy. And like, it's [09:43] That's $800 million one day and it's $8 billion the next day. And like using this as an example of how these like financial and technological systems could go crazy out of control. And then it was on Caroline's list of company updates that she did for Sam later in like a retro. And it was listed, which this makes me laugh every single time in her updates to him under this notable and idiosyncratic PNL stuff. And then it was like minus 850 million from BTMX thing,

[10:13] These people. Quirky. Just a quirky little P&L thing. [10:17] Little idiosyncratic P&L. So what was supposed to happen the rest of the day is that there would have been a rebuttal where they brought two other witnesses forward. But they got to the bottom of what they needed to today and basically felt like their argument was strong enough that they didn't. Yeah, exactly. They're like, we're all good. We're good. No problem. And so they're not doing a rebuttal. [10:43] They tell the jury to go home and the defense and the prosecutor and the judge argue about what the charge to the jury will be. And apparently it's like, okay, here are the different charges. Here are how these different charges are defined. Here's how we defined them within this case. And I guess it's like very tedious. [11:04] we want this to say and instead of but or we want this word to be changed to this word or we want this definition to be here because it's basically the document that is then presented to the jury to say this is the framing in which you need to make the decision around whether he's guilty on these charges. [11:19] So they do that all afternoon. [11:21] Tomorrow is going to be closing arguments for both sides. And then the judge will present the charges. He'll charge the jury to charge forward and make a decision. Wow. That's it. I got to say, I have appreciated this ride very much, but I will also be excited to see the back of it. I'm ready for it to wrap up.

[11:51] of it is because they have to present a case. They have to convince... [11:54] the jury that they have evidence to that case. And it ends up just being very repetitive, because you have to, you have to. And I think it's been especially that way because of SPF and his [12:06] demeanor. [12:07] his demeanor and also how the defense has decided to approach the case it's been very very repetitive imagine you get like addicted to court reporting and you're like what's the next going to the public records what's next [12:23] Oh my gosh. But one other funny thing yesterday, she sort of confronted him about the spending around private jets and how he was taking private jets places. And she was sort of using that as evidence to him being irresponsible in his spending. And the cross-examination today was basically wanting to give him an opportunity around the use of private jets. The defense was like, do you think that's an appropriate use of funds for a business expense? And he says, [12:53] Like I lived in the Bahamas. I was trying to get to DC all the time. I wanted to meet with regulators. It was very hard to get there at the right times, blah, blah, blah, blah. And that private jet thing yesterday, I felt like was so stupid. I'm like, if you have a company that's worth tens of billions of dollars, of course, you're going to take a private jet somewhere. To use that as irresponsible spending, like charge it to the game. That is totally fair game. It's not for vacation. Natasha Hoskins, justice for PJs. I was just like, don't do the, don't water down your case with the PJ.

[13:23] interesting if you and i had a company that's valued at 40 billion dollars you better believe i'm taking a private jet to 100 pc our meetings that's the facts my mans so okay [13:35] That's that. That's that. Stay tuned. See you later. [13:39] When you're first getting started with crypto, it can be scary. Am I doing this right? Is this just like my bank or trading app? How is it new and different? Well, that's why we love Kraken. They have a 24-7, 365 customer support team that's there to hold your hand all along the way. This isn't a 9-to-5, Monday-to-Fried-a-Bank. This is crypto. It's all the time. Anyone's welcome. Open-door policy. Come one, come all. Try something new at kraken.com backslash boys club. Not investment advice. Crypto trading involves risk of loss. [14:09] are provided to U.S. and U.S. territory customers by Payward Ventures, Inc. PVI, DBA, Kraken.