Sam Bankman-Fried’s Media Tour Has Come Back to Bite Him
Reading Time: 6 minutesWhat he’s saying now, he said the opposite then. Prosecutors have noticed., Sam Bankman-Fried’s media interviews with the NYT, FT, and others are now being used against him.
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This is how Danielle Sassoon, an assistant U.S. attorney for the Southern District of New York, laid a devious (and for her, probably very easy) trap for Sam Bankman-Fried while cross-examining him on Monday: Sassoon wanted to know about Bankman-Fried’s involvement with Alameda Research, the hedge fund he owned that was central in the collapse of his massive crypto exchange, FTX. Remember that FTX didn’t exactly lose billions of dollars of its customers’ money; it lent it to Alameda, which traded on FTX and put much of the money into speculative bets on silly FTX-related crypto projects. When confidence in FTX and thus those crypto projects spiraled, withdrawals rushed in, and Bankman-Fried’s businesses were cooked. Sassoon was curious about Bankman-Fried’s oversight of Alameda specifically.
‘Mr. Bankman-Fried, would you say that you were not involved at all in Alameda trading in 2022?’
‘I was not involved, as a general principle, in day-to-day trading,’ the defendant replied. ‘I had some involvement in some higher-level discussions and hedging-related discussions.’
‘So you would not say,’ Sassoon pressed, ‘that you were not at all involved in Alameda trading?’
‘Depends on how you define trading.’
The prosecutor reminded him that this was a yes-or-no question.
‘I would say I was not involved for the most part. I would not say I was not involved at all in any way.’
A moment later, Sassoon followed up: ‘So you were not walled off from Alameda trading decisions, right?’ The verbiage would become important later, and Bankman-Fried’s defense lawyer, Mark Cohen, seemed to realize at this point that he was about to have a big problem, because he objected to the form of the question. The judge, Lewis Kaplan, overruled him, and Bankman-Fried answered.
‘I was not generally making trading decisions, but I was not walled off from information from Alameda.’
Then Sassoon asked Bankman-Fried a question that nobody ever wants to be asked in a legal setting of any kind: Had he ever participated in an interview on ‘something called Twitter Spaces’? Yes, a couple of them, Bankman-Fried said. And in a Twitter Space in December, Sassoon asked him, did he or didn’t he say that he wasn’t involved at all in Alameda trading and had not been for years?
Bankman-Fried said he did not remember what he’d said.
Which was fine with Sassoon, who simply played an audio recording of Bankman-Fried saying on Twitter Spaces that he had not been involved in Alameda’s trading decisions because that would’ve created a conflict of interest with his management of FTX. Bankman-Fried acknowledged that the voice on the tape was his (‘it sounds like it’). (A denial would’ve been difficult—Bankman-Fried has a pretty distinctive voice.)
You can see how this is not good: telling a prosecutor under oath that you were sort of, kind of involved in something high level, then sitting there as the prosecutor plays a tape of you saying, much more emphatically and in public, that you weren’t doing the thing that you’ve just admitted you did.
Lying on Twitter Spaces is not a federal crime, but this was one of the themes of SBF’s contentious first day of cross-examination: Bankman-Fried’s words being used against him. Not words he said in court but words he did not have to say at all, which he chose to utter into microphones in the fall and winter of 2022, after FTX and Alameda collapsed but before the feds brought charges against him. There was not a podcaster or blogger or reporter Bankman-Fried wouldn’t have talked with in those few weeks. Sassoon asked him, at one point, why he’d spoken to those journalists. ‘I felt like it was the right thing for me to do, to try and talk about what happened,’ he said. Morally? Maybe. It did seem at the time like an emotional salve as much as anything. Legally, though? Bad idea. Bankman-Fried is getting beaten around in a trial that could result in his imprisonment for decades. The government has a number of tools at its disposal to make him seem untrustworthy to the jury. The prosecutors did not need his help but got it anyway.
The prosecutor, Sassoon, was keen to question Bankman-Fried about his view of the media in general. ‘Once you became a high-profile CEO, you understood that people would be watching what you said, correct?’ she asked at one point. Yes, Bankman-Fried said. ‘And you understood that you had to be careful about what you said in public, right?’ Yeah, he replied. Sassoon asked about a few stops on Bankman-Fried’s pre-extradition whistle-stop tour of the blogosphere and podcast world. She mentioned one of his big legacy-media sit-downs, an interview with George Stephanopoulos, seemingly just to establish that Bankman-Fried was making the rounds and talking a lot. She also got him to confirm that when he had been FTX’s CEO, he often ran his words by public-relations professionals. The impression Sassoon seemed to be trying to get across was that SBF doesn’t spout off willy-nilly, but speaks intentionally.
It’s SBF’s statements about his oversight of Alameda, the hedge fund, that the prosecutors seem most interested in digging up. But Sassoon’s purpose wasn’t just to show that Bankman-Fried had been dishonest about his own involvement with Alameda. She also wanted to nail him to the wall on a different inconsistency—specifically the idea, pushed by Bankman-Fried, that Alameda was a normal customer of FTX with an account like anyone else’s. In fact, the hedge fund had special privileges that allowed it to make huge and reckless bets to an extent that typical exchange customers could not. (Prosecutors don’t have just copious testimony from Bankman-Fried’s former brain trust to this effect, but also lines of code that show that Alameda, unlike a typical FTX trader, was allowed to maintain a negative account balance.)
Bankman-Fried in 2019 tweeted about Alameda’s supposedly normal privileges. But in 2022 the Financial Times reported what witnesses for the prosecution have since said in their testimony: that Alameda did have a special account and Bankman-Fried knew about it. ‘He admitted that Alameda had been allowed to exceed normal borrowing limits on the FTX exchange since its early days,’ wrote the FT, a line that Sassoon read aloud verbatim to the courtroom. It’s not a direct quote from Bankman-Fried, but it’s a reputable news outlet claiming he’d said something clear-cut. Sassoon asked Bankman-Fried if he’d said it, and he replied, ‘I don’t think I would have said it in that way. I am not sure exactly what that is referring to.’
But, Sassoon reminded him, he’d been making a lot of public statements around this time. Did he put out any kind of statement disputing the article? Bankman-Fried said he didn’t remember, but added, ‘I disagreed with nearly every article written about me then.’ The prosecutor asked if he’d been misquoted. Again, Bankman-Fried didn’t have a firm answer and said, ‘I’m not sure.’ There’s no indication that Bankman-Fried or his lawyers have ever challenged the accuracy of the report beyond that.
Bankman-Fried’s conversations with Joshua Oliver, an FT reporter, caused him more difficulty on the stand. Oliver also wrote that Bankman-Fried ‘insisted that he had walled himself off from trading and risk management.’ There were those words again—walled off—just like Sassoon had asked Bankman-Fried about. The phrase was a reporter’s description, but again: Bankman-Fried hadn’t objected to that characterization. He simply offered a different one when he was in the witness box.
Sassoon pressed Bankman-Fried on his statements to parties other than the news media. She wanted to know about his depiction of FTX as an especially ethical, regulated, and on-the-up-and-up crypto exchange. She wanted to know about conversations he’d had with lenders, and with employees, and with all kinds of stakeholders who found themselves in his orbit. Bankman-Fried’s undoing, if he goes off for many years to prison, will have more to do with what he told those people. His fraud charges are for defrauding customers and lenders, after all. If he lied, he cost them money. The journalists Bankman-Fried chose to talk with in 2022 understood, on the other hand, that they were getting a gift: a high-profile financial defendant-in-waiting baring his soul, out in the open, for all to read or hear. It’s still not clear, nearly a year later, what the man saying all those words got out of the exercise.
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