Against the Rules with Michael LewisSBF’s trial has been on for three days, and a lot has happened: jury selection, opening statements, and the first witnesses. Pushkin co-founder Jacob Weisberg sits down with reporter Lidia Jean Kott and Rebecca Mermelstein, a partner at the law firm O’Melveny and Myers, to talk about what’s happened in court so far.
This conversation was recorded on October 5 at 3 pm ET.
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Welcome to Judging Sam The Trial of Sam Bankman Freed. I'm Michael Lewis. Bankman Freed was worth tens of billions of dollars before FTX his cryptocurrency exchange came apart at the scenes, and now he's being tried for financial crimes. They could send him to prison for the rest of his life.
It's Thursday, October fifth, and in the studio this evening we have our reporter Lydia, Jean Cott, and Rebecca Mermelstein, who's a partner at the law firm ol Melvanie and Myers. I'm Jacob Weisberg, the co founder of Pushkin, standing in for Michael Lewis. We're recording this after the third day of Sam bankman Fried's trial, and a lot has happened in three days. We're through the jury selection, the opening statements, and the first witnesses. So LJ, I'm going to turn to you first. You've been getting to the courthouse very early in the morning and lining up with the other reporters. What's the scene there.
Been, Like, it's actually really fun. You know, reporters were all interested in each other, so everyone's kind of chattying and asking each other questions. And yeah, we get there at six am and the doy is usually open at eight, so it's about two hours, so people take turns running to get coffee and bagels. One thing that's funny is it's a lot of crypto reporters and they kind of think that this might be the last big story in crypto, so they're kind of covering their own funeral in a way.
I haven't thought of it that way. That's really interesting. So I read the opening statements, which happened on Wednesday, right after the jury selection, but I know that's not the same as seeing them delivered. How did they sound in the courthouse.
The prosecution was very bombastic, I would say, in the way that they delivered their opening statements. Rebecca and your Bengo card. In a previous episode, you said that they would use the word lies, and they used the word lies a lot, and they hit it. They talked about how Sam led to FTX customers, he lied to investors, he lied to lenders. At some point the prosecutor actually pointed at Sam and he said, this man stole billions of dollars from thousands of people. So I feel like they were trying to use simple sentences, you know, subject verb, and they were trying to say, this is not a complicated case. This is simple. This man lied and he stole.
Rebecca, how was the rest of your Bengo card. I think there was victims, greed, stole, and then defense would use the word complexity a lot. Did that much a matchup? Pretty well?
I did better on the government Bengo card than the defense bingo card. Actually, I think on the lies, the victims, the greed, I got it. On the defense one, I'm not sure I heard as much complexity as I thought I was going to.
I will say just reading it that the prosecution opening statement was very strong and vivid, and I lost the threat a little bit a few times. Reading the defense statement, it was honestly, it read just a little boring.
Exactly I was actually going to say that, and I was like, arguably, you could say maybe confusing, which maybe was actually a strategy. And as opposed to the prosecution, the defense lawyer he was a lot more seft spoken. I think he kind of seemed fatherly. I think I read somewhere that it was kind of like he was we were children and it was story time. Like I did see wonder nodding off, but I think he was kind of trying to tell an opposite story. He kept saying like Sam is not a villain. I think he was saying like, this is not this bombastic, dramatic thing. Actually, like let's be mature here. There's nothing really to see. This is just a young guy, a math nerd, who started this company and it didn't work out.
Basically.
The one metaphor that really stood out to me was how he talked about a whole lot of startups. You're flying a plane as you're building it. That was the thing that I pulled out as to what happened here. And they were moving too fast and they crashed, But no one meant to do anything.
Bad mistakes, not lies and fraud. Rebecca, what surprised you? Were there any obvious mistakes or any wins in the opening statements and the first witnesses.
I think the thing that surprised me the most about the defense opening is that he didn't call the cooperators liars. And that's interesting because there's a lot of cooperators. I had anticipated you'd get a defense opening that called them liars and talked about why they were lying. This was a little softer than that. Subtly so, I think because Defense counsel did say that the cooperators were motivated by needing to say what the government wanted to hear, but he didn't go that far, to go all the way to lies. And he talked about the fact that hindsight is twenty twenty, which I think is going to be a defense theme here, and that the cooperators were viewing statements with that hindsight, that they were interpreting ambiguous statements in light of what the government wanted to hear and so there's an effort, it seems to me so far could change strategies as the trial unfolds to thread a needle, which is, you don't have to think these cooperators are lying under oath to think they're wrong. They could be mistaken, they could be reading too much into things, and it gives you a little daylight where you can say, these four people may be telling the truth as they believe it, but they're wrong. And we'll see whether or not that strategy stays true throughout the whole trial.
So that's a defense strategy. What would you say about prosecution strategy so far?
I think it's pretty as expected. I would say the opening had the same structure you always see in government openings, what we would call the grab, that kind of early and initial description of things, then a narrative about what happened here, and ending with a description of how the government is going to prove its case, what kind of witnesses, what kind of evidence, even the point as I think prosecutors would call it that Lydia Jean referred to very traditional for a government prosecutor to during the opening point with an extended dramatic point at a defendant, look at the defendant. It's really a way of signaling to a jury that you're going to ask to convict someone and send them to jail for a long time, that you are asking them to do that hard thing of sitting in judgment, and that you yourself are buying into that, that you believe it and they should believe it. So not surprised by any of that couple little, I would say, nuanced points that were made. The government trying to lay a foundation to undermine what it predicts the defense might be without being defensive. Always hard to know exactly what the defense is going to be, so they may or may not be getting it right. A couple of examples. At what point the government said that FTX was not a bank, it was an exchange and so it can't borrow or spend customer money. We know from pre trial briefing that one argument the defense was trying to make is look, your money in your bank account at JP Morgan Chase is in fact being used by the bank for its own purposes, and that's not illegal. It's totally fine, and so it was reasonable for that to be done here. I think that reference by the government was an effort to make sure that if the defense went there, the jury had heard from them first, that's not the same thing. That's not what happened here. And you heard that in a couple of places, a reference that the government puts in there to make sure that if the defense says it, the jury doesn't think, well, wait a minute, that's new information. You say, oh, yeah, right, I sort of heard something about that. So a couple other examples, you heard reference to the fact that FTX had a program by which customers could lend out their cryptocurrency to other people. I think that's that same foundation if there's going to be a defense that this was fine, and people lend each other things all the time, and he was just borrowing. The government preemptively said that program existed, that's not what happened here. Another kind of flip of a fact that was interesting is the government described Sam Bankman Freed's charitable giving as self promotional, that he did it to boost his own image as a way to gain access to look good. And the same with the story about the cover up. They talked about how in advance, in a very nefarious and intentional way, the government says he was already laying the foundation of his defense, for example, by acting like he wasn't in charge of Alameda when he was, by backdating contracts, by forcing people to communicate over encrypted apps so that communications wouldn't exist anymore, and they specifically said that as part of that cover up, he tried to point to the terms of service as justifying what happened here, and in fact, his lawyer did do that in his opening he put up the terms of service and said we're going to talk more about this. But he was allowed to do it. So not a surprise, I think, but certainly an indication of what the government thought the defense was going to be.
We'll be back after the break to talk about the witness testimony. We're back, and I want to hear both of your thoughts about the witness testimony. We've heard so far. The prosecutors have started calling their witnesses. The first was a French commodity trader who lost a lot of money on FPX. So I guess, LJ. How French was he and why not an American victim?
I would say he seemed quite French, but he does live in London now, And you know, people did we did wonder why he was the victim that was chosen, because he wasn't necessarily the most sympathetic victim. As you know, a commodities trader who lives in London. He did lose a lot of money on FTX, and he had screenshots to show how he put money in the account. He showed how his money was there, and he talked about how he thought it was safe and how the reason he invested in FTX was because he believed that his customer deposits would be safe there. But you know, Rebecca, in our last conversation, you talked about how a victim would be you know, we should expect to hear from victims, and you mentioned a grandmother in Topeka, and I just kept thinking that this French commodities trader living in London is no grandmother in Topeka.
They of course, will have spoken to many many victims, both as part of their own infration gathering and frankly, to find one who's going to be a good witness. So it's interesting because I think LG is right, not the little old lady in Topeka that you might have guessed would come forward, but I do think someone like this witness satisfies a couple of requirements that the grandmother from Topeka maybe doesn't. First of all, you need someone or you want someone who's not just going to say I invested in FTX and I lost money, so I am a victim and there are real victims here. You also want someone who's going to be able to say I was paying attention. It mattered to me what Sam Bankman Freed said. I listened to him, I read the documents that were provided before I invested. I followed what he said publicly about the safety of my investments. I used the app that showed where my assets were and what I had. So someone who wasn't as conscientious of an investor isn't as good of a witness that purpose, because you're not going to be able to show through them that these laws matter and that people relied on them.
LJ the jurors. And you also heard from a college friend of Sam Bankman Fried who said he quit when he didn't like what was going on there. And from Gary Wang, who was described by Michael Lewis in Going Infinite is a famously silent chief technology officer. What were all those witnesses.
Like, Yeah, so Adam Adda, who was Sam's friend in college who worked at both Alameda and FTX. I thought he was a very compelling witness. He was very fourthright, he was an engineer. He seemed very precise in everything that he said.
Well, there was this exchange I read about on a paddle tennis court. Why were they doing business there? It sounds very Bahamas.
Yeah, So what happened was that Adam became aware that Alameda had eight billion dollars worth of fti X customer money, and he was worried about Alameda being able to pay back that money to FTX customers, because eight billion dollars is a lot of money. And he talked about how he told Sam he was worried, and he asked Sam if it was a problem, and he recounted Sam saying to him, quote, we were a bulletproof last year. I'm not sure if we're bulletproof this year. And he asked Sam how long until we're bulletproof again? And Sam said six months to three years. And this was just a few months before FTX filed for bankruptcy.
So that's a damaging bit. And how about this Gary Wang, what was he like?
It was a really huge deal. When he entered the courtroom, everyone's been really excited to hear from him, in part because he's along with Sam the founder of FTX and Alameda, and also he has a reputation for never speaking. Michael talked about how he wasn't able to interview him because he didn't say anything at all. I read like his high school did a story about him, you know, when all of this came out and they interviewed his teachers, and there just weren't very many people who had really remembered or could say that much about him, because he's known for being really, really quiet. But it was interesting when he took the stand because he actually had a lot to say. He spoke really fast. The judge and the prosecutor told them to slow down, and the rest of Friday is going to be dedicated to his testimony. He you know, pled guilty to financial crimes and specifically he said, quote, we gave Alameda special privileges to withdraw an unlimited amount of funds and lied about it to the public. I should say that we can't bring electronics in the courtroom, so this is based on my notes, but he said something like that, and the prosecution asked him at whose direction did he act, and he said SAMs.
So, Rebecca, the burden of proof, it's, of course on the prosecution. Do you think at this point, after day three, they're getting what they need from the witnesses to prove their case.
That's a hard question to answer from this distance. I would say it sounds like it's going very well for the government so far, but really too soon to say where it's going. I think it's important to recognize that in America generally prosecutors win almost all the time, prosecutors in the Southern District of New York, I would guess more so even than average. So even if you didn't know anything about the case from the get go, the odds are always stacked pretty heavily against a defendant, even with the presumption of innocence, And the proof here does seem like it's going to be very strong.
Rebecca, I actually have a question for you. Like in court, the defense lawyers keep making objections that get overruled, and when they're doing cross the prosecution makes a lot of objections that are sustained. A lot of times the judge has called out the defense lawyers, he's brought them to side panels like it feels like the defense is having a really hard time and they're always in trouble, And is that normal? Is that usually how it feels or is that of no?
I don't know that there's a normal. Different judges have different practices about objections. Different judges give more leeway or enforce the rules of evidence more strictly, So it really is case by case and judge by judge. I do think one thing to keep in mind about the optics of that whole dynamic, or a few things. The first is that the defense has an incentive sometimes to object even when they don't actually think they're going to win. They already know this judge doesn't agree with them because they are preserving the record for appeal. They if Sam Bankminfried gets convicted, we'll obviously bring this case to the Second Circuit and they'll say the judge made legal mistakes. He let things in he shouldn't have, he kept things out he shouldn't have, and that prejudiced our case so badly that we need to do over. There is no appeal from an acquittal for the government. If he's found not guilty, then double jeopardy attaches and that's the end of the road. So the government doesn't have really any interest in preserving its record in that way because it doesn't really matter for academic purposes. So that's number one. Number two is that I think by and large, defense layers try to get away with a little bit more in the courtroom than government lawyers do, and so it's not uncommon for the defense to always be trying to push the envelope sneak something in, and so not necessarily that surprising to me that you're going to see more objections being sustained on the government's side. I think Judge Kaplan is also a little bit government friendly and strict about the rules of evidence. So again not that surprising to me, but interesting to hear what your perception is, because of course juries get told all the time, and Judge Kaplan told this jury, my job is to just rule on these things. You shouldn't read anything into it. I'm not on any side, but of course common sense tells you the jurors are paying very close attention to what the judge does, and it does affect people's opinions.
Rebecca, I know this is a ridiculous question. We're three days in, but based on what you know so far, who's winning.
Look, I think what you have so far is a compelling government presentation, that the defense tried to poke some holes in raise some questions, and they're opening that things are more complicated than the government has suggested. That there are explanations, but so far we haven't heard any of them. Part of that is that because there's a burden of proof, the government goes first, so they're going to present all their evidence. The defense may not present any, of course, that they will see what they do. But not surprising that the government seems like it's ahead at this stage of things. But I do think this is a very hard battle for Sam Bankman freed because you have someone like the second witness, his friend. That person didn't admit to any wrongdoing, He hasn't pled guilty at any crimes. He doesn't have the same kind of incentive as cooperators maybe do. And what he says is, look, I believed in this, and then I found out this really terrible thing that Sam Bankman Freed knew, and it was so obvious to me that this was a problem I left my job. Really raises questions about how Sam Bankman Freed can say that he didn't know that, or he didn't appreciate it, or wasn't obvious to him. Not good for him, I would say, if I had to bet at this very early stage, I think I think the government's probably pretty.
Far out ahead. Rebecca and LJ, thank you both so much. We'll be back after the break with one last thing. We're back with one last thing, so LJ give us some of the color. How weird is it.
There in the courtroom.
Yeah, there's a lot of things that are weird. One thing that's weird is it's a space where no one has any electronics and everyone has notebooks and their writing, and it kind of feels like being back in I don't know, middle school, pre everyone having a cell phone, and you know, we're checking in with each other and making sure that we wrote down the right thing. And I even saw one journalist who said that they saw Sam Megmanfreed's parents taking notes, sharing a legal pad and taking notes as things were happening. So everyone's writing furiously and no one's checking their phones. So that's one thing that's different.
Why is that whether you're in in the courtroom, I understand no cameras in the courtroom. But why can't you be recording it or taking notes electronically.
I have no idea. Just when you go into the courtroom you have to give up I guess maybe it's just to make sure that no one records sneaks a phone in, so when you enter the courthouse you have to go through security. And Judge Coplin is famously particularly strict about electronics. There's that's kind of something that he's known for. He doesn't even have an email address.
Really yeah, well that's probably yeah, Like.
He doesn't compline listed on his website. And when I asked what the best way is to reach him directly, I was told to write a letter.
Which will which he will answer after the trial's over. And you know, Michael Lewis's name keeps coming up. I mean in the jury selection they asked of the juris had seen it sixty minutes appearance, and you know, it feels he's on trial too, in a funny way, or he's in the middle of it.
Yeah, for sure. I've seen three copies of Going Infinite in the courtroom and things. You know. Adam Yadida, one of the witnesses, was in Michael's book and afterwards, there are a report is going through trying to look out what Michael said he said versus what was said in the testimony. So people have the book, people are reading it literally in the courtroom during short breaks.
The jurors have to have to reach a verdict so they can read it.
Yeah, exactly, and yeah. And then the other thing that's weird about the courtroom is, you know, the lawyers sometimes talked to the judge and the jurors aren't supposed to hear it, and they have these speakers that just this white noise comes out of and it's really jarring when it first happens, but it's actually pretty effective. I have no idea what they're saying in the side panels.
Well, thank you so much, and judging. Sam will be back in your feet on Monday morning with a week one recap from Michael Lewis himself.
All week I've been checking in with Michael Lewis after the trial and updating him on what's been going on in court. I saw Sam in real life and the court artist said that it was much more fun to draw his hair before he got his haircuts.
Drawing is so weird. Doesn't look like him.
Yeah, I agree, it doesn't. I feel like he has like an impish quality that none of the photos capture.
Yeah, nothing, It's funny. It's a very good point, like since then the pictures all make him look like Richard the Third, like dark villain.
On our next episode, Michael and I sit down and make sense of this crazy week.
Lvia Gencott is our court reporter. Katherine Girardeau and Nisha Venken produced this show. Sophie Crane is our editor. Our music was composed by Matthias Bossi and John Evans of stell Wagon's Symphonette. Judging Sam is a production of Pushkin Industries. Got a question or comment for me? There's a website for that atr podcast dot com. That's atr podcast dot com. To find more Pushkin podcasts, listen on the iHeartRadio app, Apple Podcasts, or wherever you listen to your podcasts. If you'd like to access bonus episodes and listen ad free, don't forget to sign up for a Pushkin Plus subscription at pushkin dot m FM, slash plus. We're on our Apple show page.
