The Coming Trials of Sam Bankman-Fried

The accused fraudster, already up to his eyeballs in civil litigation, faces a lifetime in prison.

[Screencap of 2021 Congressional testimony via CNBC/YouTube]

The odds for a federal criminal defendant are bleak even if he hasn’t already been culturally anointed as his generation’s greatest – alleged! – fraudster. Former FTX CEO Sam Bankman-Fried – a once-proud adherent of the statistically-minded effective altruism movement, a man whose intellectual, professional, and putative criminal lives have been about understanding the odds and then finding some hidden advantage – is facing seven federal criminal charges, from wire fraud to money laundering. Three former FTX executives have pointed the finger at their toppled leader as the engineer of a multi-billion-dollar fraud and agreed to testify in court next month. In the public consciousness – and going by the numerous entertainment projects already in development – his guilt is a fait accompli.

About 90 percent of people charged with a federal crime plead guilty; 8 percent have the charges dismissed; and the remaining 2 percent go to trial. In 2022, of that small percentage of federal defendants who took their chances before a jury, a mere 290 people were acquitted; 1,379 were convicted.

For some inscrutable combination of reasons, SBF, as he’s widely known, thinks he might be one of this year’s few hundred federal criminal defendants to walk free after a trial. He may expect an acquittal or hope to muddy the waters enough for a mistrial. He claims, like many in his position before, that he did what he thought was right and legal. His defense team has indicated that he may lay some blame at the feet of lawyers – including the law firm Fenwick and West, from which FTX hired two lawyers, most importantly Daniel Friedberg, a compliance expert who did a stint at an online poker company that robbed its customers. SBF hired Friedberg on the advice of his father, Joseph Bankman. Perhaps the frazzled CEO was a victim of bad legal and bad parental advice. (Judge Lewis Kaplan has since limited the extent to which SBF’s team may provide an “advice of counsel” defense.)

There is also one simple, potentially overwhelming source of motivation: SBF is fighting for his life. If convicted, he may never be free again. There might be an effective altruism-approved heuristic for whether it’s worth fighting seven federal criminal charges. But if not, the non-zero chance to escape a life in prison is surely enough. 

The criminal indictment aside, SBF faces enough civil litigation to make millionaires out of a battalion of lawyers. He has complained about conflicts of interest from Sullivan & Cromwell, the powerhouse law firm that did work for FTX while it was thriving and is now, as lead counsel in FTX’s bankruptcy, feasting on its corpse. His grievances aren’t misplaced, but they reflect a system bigger and more voracious than even the accused fraudster’s avaricious appetite. The eye-watering fees earned by white-shoe lawyers sorting through the FTX mess are a constituent part of the corrupt, pay-for-play business milieu in which Sam operated. But they don’t have much to do with the question of his guilt. 

Starting well before his official trial, SBF’s legal defense has been aggressive and full spectrum. After FTX imploded in November 2022, the fallen CEO went on an immediately notorious media tour – from Good Morning America to a livestream at a ticketed New York Times conference – offering solemn apologies for his company’s failure and dissembling about the core question of whether he embezzled billions of dollars in customer funds. Writing long wonky Substack posts, burying his audiences in market minutiae, the defrocked wunderkind seemed to think that if only he could explain this as some horrible, unforeseeable convergence of bad-luck outcomes, all would be forgiven. 

During a December 12 chat on Twitter Spaces, the technology critic Molly White asked SBF if he thought he faced arrest. “I don't believe I would be, but I haven't done a, like deep dive into that at some point,” he said. “That's something I have to think harder about.” 

That evening, Bahamian police arrested him at the luxury compound where he had been living with other company executives. Within days, he was extradited to the United States to face trial for a range of alleged financial crimes. He was soon released on bond and confined to his parents’ home in Palo Alto. There his work continued: as SDNY prosecutors revealed in an August pre-trial hearing, over the course of about 8 months, SBF had conducted about 1,000 phone calls with journalists, including 100 with the New York Times’ David Yaffe-Bellany and 500 with Michael Lewis, who regularly visited the Bankman-Fried home in service of a book being published tomorrow. The records of these calls – the metadata, not content – were recorded in an FBI pen register. There’s no evidence that SBF has secret, unmonitored devices, although he was once rapped for using a VPN on his computer – to watch a football game, he claimed.

While SBF had stopped tweeting, Substacking, and appearing at public events, it appeared he was working vigorously through daily calls with journalists. One of his lawyers admitted as much in court, arguing that while it might not be the wisest strategy, SBF was within his first amendment rights to talk to journalists and try to respond to the tsunami of bad press. The prosecution disagreed, arguing that SBF’s activity had veered into witness tampering and intimidation. Months earlier, he had contacted “Witness 1” – the former legal counsel for FTX.US – on Signal, the secure messaging app whose self-deleting message feature was widely used at FTX. (Prosecutors plan to claim that SBF ordered his employees to use self-deleting messages whenever possible.)

“I would really love to reconnect and see if there’s a way for us to have a constructive relationship, use each other as resources when possible, or at least vet things with each other,” wrote SBF. 

“It appears to have been an effort to have both the defendant and Witness 1 sing out of the same hymn book,” said Judge Lewis Kaplan at the time. But the judge’s lyric warning didn’t deter SBF.

On July 20, the Times published an article that quoted from private writings of Caroline Ellison, the former CEO of Alameda, SBF’s trading firm, and a key witness for the upcoming trial. SBF, who had dated Ellison, maintained access to a diary-like Google doc in which she had written about their relationship, life stresses, and insecurities about her work as an executive. During an in-person meeting at his parents’ home, SBF showed some of the writings to the Times’ Yaffe-Bellany, who quoted from them in an article. 

SBF’s intention may have been to embarrass or intimidate Ellison, and to warn other potential witnesses that he might similarly go after them in the press. But the resulting article painted Ellison as relatively sympathetic, in over her head and beholden to some reckless ideas about investing and risk. Crucially, she has already acknowledged her guilt, copping a plea and agreeing to testify. Her former friend, lover, and boss, on the other hand, was acting like a low-grade mafioso. He was trying to trash the reputation of an ex-employee who had confessed some of her closely held insecurities to him. But as a witness, she was a threat. 

(In a stark indicator that gender-pay inequities extend even to the criminal realm, Ellison apparently received about $6 million in compensation. Colleagues like Gary Wang, Ryan Salame, Nishad Singh, and SBF received hundreds of millions or even billions.)

In a summer hearing, the prosecution argued that SBF had done more than offer a defensive counter-narrative in the press. He had broken the law. Judge Kaplan agreed, finding probable cause for felony witness tampering in two instances. The defendant “had shown a willingness and desire to risk crossing the line... wherever the line is,” the judge said. No more.

Judge Kaplan ordered SBF remanded into custody. Surely aware of the possibility that this might happen, SBF still looked stunned, his face drawn, as two large federal marshals told him to take off his tie, empty his pockets, and remove his shoelaces. A court security officer warned his crying mother, Barbara Fried, to stay back from the partition separating the galley from the defendant. Eventually, he was led away, sent to Brooklyn’s MDC jail, a grim facility three thousand miles from the childhood bedroom where he had spent hundreds of hours working the phones, leaking information, trying to use the media’s hunger for access and scoops to his advantage, only for it all to blow back on him.

SBF’s legal team has continued to protest the terms of his confinement and his limited access to case documents and lawyers. The discovery process has been prolific, with millions of pages of documents, and the defense has complained about their client’s ability to access this cornucopia of records. The implication is that somewhere in this vast cache of AWS databases, messy spreadsheets, blockchain transactions, and Google docs is proof of innocence. SBF needs better facilities – and better WiFi – to sort through it all. 

“They gotta argue something!” a former New York securities prosecutor said. “I mean, they have him truly dead to rights. So they have to argue process essentially.”

It’s hard to see the path to daylight for SBF. Three top FTX executives have pleaded guilty to a range of charges and agreed to testify against him. A fourth pleaded guilty and did not agree to testify, but his plea agreement implicates SBF. Pre-trial filings suggest an ample evidentiary record, from bank records to Signal chats to emails to the ex-mogul’s own public statements. Investors and everyday retail customers will also be summoned to testify that they thought their funds were being adequately segregated and protected, but that FTX’s CEO apparently lied.

However baroque or data-laden SBF’s arguments in his defense, the criminal conduct in question centers on a simple premise. Did he divert $8 billion or more of customer funds to his own uses? From all available evidence – including that provided by FTX’s new leadership – it seems he did. 

The prosecution appears eager to get this trial underway expeditiously, filing a superseding indictment in August that removed five of thirteen charges. SBF’s legal team had argued that these charges weren’t covered by the original extradition agreement and that they’d challenge them. To avoid any procedural delays, SDNY prosecutors essentially tabled the five charges for later. There could be a verdict in Sam Bankman-Fried’s case by Thanksgiving. 

But that will only be the end of the beginning. Judge Kaplan scheduled a second trial for March 11, 2024, by which time the picayune extradition issues will likely have been resolved, and the U.S. government can charge SBF for campaign finance crimes, allegedly bribing Chinese officials with $40 million, and whatever other corrupt acts might be unearthed between now and next spring. There’s still a lot we don’t know about how FTX did business and with whom. The company was a global network of more than 140 shell companies, scattered bank accounts, messy accounting, and some murky overseas partners. By next March, more FTX and Alameda employees may find themselves pressured to share what they know. Joseph Bankman and Barbara may also face legal jeopardy beyond the lawsuit filed against them by FTX’s new leadership, which is demanding the return of millions of dollars that their son allegedly transferred to them from a pot that included FTX customer funds.

Some have speculated that SBF could reach a late cooperation agreement with the government, perhaps implicating Tether and Binance, the white whales of illicit crypto finance. But it’s not clear whether SBF has that kind of incriminating information – or whether it exists. 

Damian Williams, the US Attorney for the Southern District of New York, has made a priority of prosecuting financial fraudsters from Wall Street and crypto. As the American face of the crypto collapse – one that victimized millions of everyday people lured into the casino – SBF is an enormous, politically juicy target. He had accomplices and enablers – venture capitalists and celebrities who are now the targets of a growing number of class-action lawsuits and who should be embarrassed for propping him up. But it was ultimately the Sam show. The awkward financial savant with the shambolic appearance was on CNBC, in glossy magazines with Giselle, yucking it up at the Super Bowl, and testifying before Congressional representatives whose pockets he was lining, sometimes in secret. He made himself the face of FTX and of crypto in the English-speaking world. And with his all-too-obvious political-influence campaign on Capitol Hill, he was supposed to be the one to make it safe for American consumers.

It was all a lie – a farrago of reckless self-dealing, amphetamine-fueled greed, and old-fashioned fraud, as SBF’s own colleagues now admit. But SBF claims to genuinely believe in his own innocence. Whether he actually believes that is secondary to whether he can convince a jury of it. This week, Sam Bankman-Fried will get his chance in court. He almost seems eager for it.