Sam and some of these other people should never have been in charge of a company like this and should never have been given all this money. That is obviously not a legal determination, but like that does speak to this culture and the milieu in which they come from and the way these businesses work and the deeply interconnected network of effective altruists and kind of libertarian Silicon Valley types and just greedy crypto investors and stuff like that who enabled him. It is disturbing and that these types and that milieu and that a big sector of our economy is dominated and controlled by a lot of these kinds of people.
SPEAKER_01Jacob is a journalist, co-author of Easy Money, Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud, and the host of The Naked Emperor on CBC Podcast, where I believe he's been doing some recent episodes around the Sam Bankman-Fried trial. And, you know, of course, we're back from the Elon Musk series now. I really hope that you enjoyed it. I will say there was so much work that went into putting that series together. And you can probably see that with each passing episode, they got longer and longer as I was trying to kind of get more information in there. And I could have kept the series going probably for another four episodes. Um, but I felt that I had to end it there, and the amount of work that went into actually putting it together was just so enormous that if I kept uh, you know, doing it for another four episodes, I probably would have like had a breakdown or something. I do also want to say, you know, a special shout out to Eric Wickham, you know, the producer of the show, who put in some really late nights with me to put the show together, you know, and he was really just essential to getting that show together, to getting it out to you, and to putting it together in the fantastic way that it was. So I hope that you really enjoyed it. You know, even though it was a lot of work, I did really enjoy putting it together. I hope that the kind of narrative that it wove about Elon Musk helped you to learn a bit more about him, maybe to see him in a different light. I know obviously if you're listening to this podcast, you know, you're probably agreeing with a lot of what I'm saying anyway in the series, but maybe, you know, gave you some further insights into his history, into the way that he is, and into, you know, kind of the consequences of the power that has been able to accumulate over the past number of years, right? So, yeah, thank you so much. Obviously, the series was made possible by listeners like you, particularly those who support the show on patreon.com. And so, you know, if you did enjoy the series, if you do enjoy the podcast as a whole, if you feel like you learn from the work that I do in putting it together, you know, I would just make the usual ask that, you know, you consider going over to patreon.com slash techwon'save us and becoming a supporter to help make sure that we can keep doing this thing. But anyway, back to Jacob Silverman, who is my guest today. Obviously, you know, I'm sure you're aware, Sam Bankman Fried has been found guilty quite recently. Before the Elon Musk series, Jacob was on to talk about the trial kind of heading into it. And I figure that now that we have the verdict where Sam Bankman Freed has been found guilty, it was time to get Jacob back on to talk about the trial, to talk about what we learned from it, to talk about, you know, what this is going to mean for Sam Bankman-Fried, for the other people who are at FTX, but also, you know, the kind of the bigger consequences of this, right? Where we have this industry, not just this company, that has a lot of ties to money laundering and financial crimes, and what it might mean, you know, going forward that we have this man who has been found guilty of these major financial crimes, and not just, as Jacob says, not just crypto crimes, and whether that sets a precedent for further kind of prosecutions down the line. So I feel like I don't really need to set up this episode very much for you. You know, if you're a regular listener, you're familiar with Jacob, you know that we always have fantastic conversations that dig deep into kind of the politics of these issues, not just kind of what happens on the surface. It's always great to have Jacob on the show, and this is just another one of these stellar conversations with him. So yeah, I hope you enjoy it. And if you do, make sure to leave a five-star view on the podcast app of your choice. You can share the show on social media or with any friends or colleagues who you think would learn from it. And of course, as I said, if you want to support the work that goes into making this show every week so we can keep holding the tech industry to account and having these critical conversations, you can join supporters like Guy Incognito from Finland, Dominique Martinez from the US, Ryan Cunningham from Pontiac, Michigan, Ryan Bittner in Tennessee, Ben in Dublin, Quinn's from Brighton in the UK, and Courtney from Atlanta, Georgia by going to patreon.com slash tech won't save us, where you can become a supporter as well. Thanks so much and enjoy this week's conversation. Jacob, welcome back to Tech Won't Save Us.
SPEAKER_00Thanks for having me.
SPEAKER_01Always great to have you on the show. I'm sure the number of appearances you have now is really starting to like stack up your getting up into the uh like the leaderboard.
SPEAKER_00When do I get residuals?
SPEAKER_01Yeah. I'll need to check on that. You and Brian Merchant can start collectively bargaining with me. So, you know, obviously, you know, you were on the show recently to talk about the Sam Bankman-Fried trial, which was kind of just kicking off as we were talking. You know, obviously we have the verdict on that now. And so I wanted to have you back on to talk about what we learned through this whole process and where things kind of go from here. But, you know, the first reaction has to be, of course, you know, you have been covering crypto and Sam Bankman-Fried for a long time, you know, quite in depth. You've even had direct contact with him uh in a way that most people haven't. How did you feel kind of seeing the verdict delivered, you know, that he was guilty on seven charges?
SPEAKER_00By then I wasn't surprised because just by normal kind of prosecutorial standards, as a slightly informed observer, it seemed like the prosecution had done a good job and the defense had done a very bad one. I, you know, sometimes I try to think of it from the mind of a juror who may not, you know, really know much about this guy or this industry, probably to their good fortune. And it was hard to think that people would come out of there finding him not guilty. On the other hand, of course, to actually sort of see it blaring across Twitter and other headlines, there is something very strange about that. And then I think it just a little bit personally, it hit me this week when actually yesterday I was going through some of the exhibits from the trial, and there's that tweet that he sent exactly a year ago. So we're recording this on the 8th. This was on November 7th, 2022, where he says, you know, a competitor, Binance, is trying to go after us with false rumors. FTX is fine, assets are fine. And the version I saw was a screenshot of that tweet stamped with government exhibit number whatever. And, you know, a year later, he was bankrupt, convicted of seven serious charges, and that tweet was evidence in convicting him. So that that was was rather striking. And, you know, we could talk about how it went very quickly and things like that. But yeah, it's hard not to take it all in with the real speed and drama of it.
SPEAKER_01Yeah, you know, and you talk about how quick it did go. Like, was it surprising to you that the jury took so little time to render its verdict? Or, you know, as you say, where the prosecution, you know, you felt did such a good job, it was not really much of a surprise.
SPEAKER_00I think uh a few days, maybe just is is what I might have uh expected, and maybe in the longer term, or you know, it seemed unlikely that there'd be one person holding up the whole thing, um, but it can't happen because it has to be unanimous. But you know, I I I probably didn't think it was gonna be four to five hours wit counting the a pizza dinner or whatever they had in that jury room. But again, that you know, that just shows that real people, I think, understand when the information is presented to them, um, uh a cross-section of humanity understands that when they see this stuff and it's presented to them in a pretty uh direct way, I think, and relatively simple way without the mystification of crypto and tech, that it's just fraud and other forms of financial malfeasance, and that the story that was told by the prosecution was pretty convincing that you had three co-conspirators who had already pleaded guilty who frankly expressed some remorse, but also were very clear in their testimony. Sam told me to do this when we were in his apartment on this date or around this time. And there were documents to back all this stuff up in general, and some things very specific. Sometimes they would say, Oh, you know, we know that Sam Bankman-Free looked at this fake spreadsheet, this uh cooked balance sheet that they then sent out to lenders because there's metadata that shows that. You know, we got that from Google, things like that. And people get that. Whereas the defense was really, it never told a clear counter-narrative. That's what I've been telling people, is that it is sort of an object in storytelling, certainly in suasion and trying to convince the jury. And I would talk to other journalists and and other observers in the in these overflow rooms where I was at the courthouse, because there were also, again, everyday people who would come in. Anyone could view the trial, and there were also crypto people and other folks, lawyers who would come in. And you'd ask some of them, like, what are they trying to say here? And you you get, well, they're trying to move you the wires a bit, or say that Sam didn't really know what was going on, or that maybe some of the stuff was done without him, or you know, you have him saying during his testimony, I do not recall some 140 times. But there's no real master narrative or just like, no, you know, Caroline Ellison did it with the others and Sam was out to lunch. Nothing like that. And that's what you need to do, I think, if you want to convince a jury, convince part of a jury that you're innocent.
SPEAKER_01Yeah, and I remember when we were speaking kind of before the trial was kicking off, or kind of, you know, last time we spoke, that we discussed how the prosecution reportedly was planning to, you know, kind of not get into the real kind of weeds on crypto and felt that that would kind of distract from the case that they were making. Is that ultimately how they approached it? Just kind of gave the raw facts instead of trying to detail like how cryptocurrency works and all that kind of stuff.
SPEAKER_00I think there wasn't a heavy emphasis on on just sort of the mechanics of crypto, but there was certainly was some. Like I sometimes you're just thinking that this is a little boring, or why are they doing this? And again, that it might be a little bit of a distraction. There were uh you know objections throughout this thing, and many of them sustained against the defense, or against specifically Sam Bankman Fried when he testified. He would often slip into these long monologues, often in response to yes or no questions. And there'd this be these objections either he wasn't answering the yes or no question, or there's something called narrative, which I was always amused by, which means the guy was telling a story. He was just rambling. And there were times when the prosecution would object and say, the question was about you know FTT as collateral, and he's talking about hanging out with Anthony Scaramucci in the Middle East or something like that. It was just a little ridiculous at times, like how far on tangents he would go.
SPEAKER_01As as I was saying, you know, Sam McMahon Fried has been found guilty on seven charges. Can you give us kind of the lowdown on what those are and and you know what he's been found guilty of?
SPEAKER_00So yeah, there was certainly a fair amount of like, you know, they made this token FTT, and this is sort of how it worked. And and there would be times where I think both sides even were kind of overdoing it in terms of trying to explain the basic mechanics. But the charges themselves, I kind of joke that he didn't break crypto law, um, which doesn't really exist, I guess, but he broke basic financial laws which happened to cover crypto or could if we had broader enforcement or regulatory clarity as the industry asked for. So there were things like commodities fraud, securities fraud, money laundering, or conspiracy to commit these things because he was working with other people. Again, there are three co-conspirators. That was former CEO of Alameda Research, Caroline Ellison, that's the trading firm if people are just tuning in, and also Sam Bakeman-Fried's ex-girlfriend, uh Nishad Singh, who I believe was chief product officer, but one of the top executives there, and a friend of his younger brother, Gay Bakeman-Fried. And then you had Gary Wong, who was the only other co-owner of Alameda Research and co-founder of Alameda, co-founder of FTX. Sam knew him from Math Camp and MIT. And um, there were other you know, minority owners, investors in FTX, but you know, he was kind of right there with Sam the whole way. And these are the three people who before the trial even began had pleaded guilty to basically the same crimes and sometimes one or two other charges, like um campaign finance charges. So I think that helps too, in a way, to reiterate some of the early stuff, which is that these are understandable crimes. Like if you divert $9 billion, even this kind of covert or supposedly technically sophisticated or crypto-shrouded way, you're still stealing $9 billion and using it for purposes you're not supposed to. Or, you know, one of the main things that Sam McMahon freak did was besides selling sort of unregistered securities, he was lying to investors. That's you know, defrauding investors, he was lying to customers and and doing different things in practice. So you say things like, I'm not gonna move investor funds and then use it to buy a billion-dollar crypto mine in Kazakhstan. And then you do that, then you're arguably committing fraud. And so it's just these kinds of repeated actions, but it really revolves around the central deception and crime of shifting more than $9 billion, but really that was the final hole that should have just remained in FTX customer accounts, but was given, it was sort of funneled through Alameda Research, the trading firm that then became this sort of ad hoc VC firm, which is this whole other thing, and committed acts of money laundering and stuff like that. And Sam was in charge of it all. And that it was seven counts, and he could, you know, if they do the big showy sentencing, if people have been saying, oh, he could face 110 years in prison, I've been saying that too. But I think he will get a significant sentence.
SPEAKER_01Yeah, um, you know, hopefully.
SPEAKER_00If anyone deserves it, I think he does. And I haven't uh been shy about that because there's the Michael Lewis take or some of these kind of frankly lighter approaches towards Sam McMahon-Fried. But like, yeah, there's a lot that's stupid here, a lot that's goofy, or but real people did get hurt. Like uh a lot of very rich people who will be fine got hurt, of course. But everyday people who are convinced to put some money in FTX, or you know, frankly, I do feel some sympathy for lower-level FTX employees who had their money there, who just a coder grunt or someone who bought in and it's like, yeah, I'll go work in the Bahamas for the this crypto casino. Some people have greater degrees of sort of culpability than others, I think. And and there were millions of everyday people, and I've kind of given the spiel a lot before, but I think most people in the end deserve some sympathy for gambling on crypto and losing. And I don't begrudge them that. So, and then when you look at the larger picture of who this guy did business with and where he did business sometimes, and the larger acts of money laundering, apparently, like this was a major financial criminal. And so if you believe in that kind of enforcement and also stopping political corruption, which he clearly was fueling, then you should probably be glad that he was prosecuted pretty effectively.
SPEAKER_01Yeah, like I remember when he was romantic into custody, you know, kind of during the pretrial period, because he was messing with witnesses and a ton of stuff. You know, there was kind of a discussion about how the criminal justice system isn't very fair because, you know, once he was kind of put in there, and I was like, yeah, I think you can make your criticisms of the criminal justice system and how it works in the United States, but at the same time, like this is clearly someone who has had a really negative impact on a lot of people. And I feel like, you know, especially because in the tech industry, so many people have been able to get away with, you know, deceptions and I would argue frauds as well that they have not been charged with or held to account for. And, you know, certainly we saw Elizabeth Holmes going to prison earlier this year, I believe it finally was. We've had some other kind of smaller people who people don't know as much being charged. But I do think it's important that people like Sam Bankman-Fried are held to account for what happens and that you can show that, you know, if you are doing things, you can be held to account. And I would hope that, you know, it it further sets a precedent after the Elizabeth Holmes trial, you know, to show that this enforcement can happen in the tech industry as well, in a way that it hasn't for quite a long time.
SPEAKER_00Yeah, I think that's very well said, and I agree because we certainly saw a lot of cynicism. I mean, some of that is sort of pre-trial cynicism or even before his arrest, and some of that's deserved because, as you indicated, like, I mean, the criminal justice system in the US is a disaster and a very racist and unequal one. But occasionally things might work out, or at least be one would hope, an effective example of enforcement and applying the law to a really bad actor who broke a lot of laws and hurt some people, and might you know have a deterrent effect or and also be a precedent to prosecute more people, because there are a lot of people in tech in the corporate world who have broken laws and exploited others. You know, I think also you saw some on the right and on sort of the tech right um saying, like, oh, well, he gave all this money and he's he, you know, he's gonna walk away and even spreading sort of some disinformation to that effect. For example, because we had a couple of these superseding indictments and they they drop charges, but really they moved them, some of them or delayed them, kicked them down the road to this second trial that's gonna be next March. We'll have a better idea when that trial approaches exactly what those charges will be, but they'll probably be around the bribery of a of some Chinese officials for $150 million, which is pretty nuts, and perhaps some of the political stuff. But something did work here, the system to some mostly positive end, one could say. And you know, you can talk about also the SDNY here in New York and the U.S. attorney Damian Williams, whose office has prosecuted a fair number of major white-collar cases so far, including some people on Wall Street. And so I don't know, I would hesitate before saying this is like a one-off, or even that like people in crypto want to say like this one bad apple has been dealt with, stuff like that. Like, we don't want to put in too tidy a box or anything like that, but it did seem to be rather an effective demonstration of holding this kind of tech finance figure to account. And perhaps, like we just said, foreshadows more of this because that is one way to rein in the power of these industries and their corrupting influence.
SPEAKER_01Absolutely. You know, I'm all down for uh abolishing the prisons or reforming the criminal justice system, but I don't think it should start with the Sam Bankman Freeds of the world. They can get their long sentences and serve their time for what they did.
SPEAKER_00Yeah. Yeah.
SPEAKER_01Basically, this trial went on for, I believe it was six weeks. Obviously, there was a lot of testimony and and information that came out from the trial. What were some of the most shocking details to you of the things that you learned as you kind of watched, you know, what was being said and what was being presented during the trial?
SPEAKER_00I think just overall the sheer sloppiness of the operation. And when John J. Ray III, this sort of central casting white shoe lawyer guy, took over FTX when it filed for bankruptcy a year ago, he was a Sullivan Cromwell lawyer, probably one of the top law firms in the U.S. And for CIA buffs, it's like practically the feeding ground the early years. He took it over and he had done Enron and Nortel and stuff like that, and he had said, like, this is the worst I've ever seen. And you're sort of like, oh, okay, sure, whatever. Like, yeah, you came in after these really immature but adult, like 20-somethings who were so spoiled and then kept no records and stuff like that. But you can understand now, I think, a little bit better where he might have been coming from, especially after we see some of some of the evidence, the actual conversations over Signal. I mean, they're despite the fact that Sam seemed to direct people to use disappearing messages, there are a lot of screenshots, especially from the last days of the company. And everything was really sloppy and reckless and slapdash, and like there wasn't really anyone doing accounting. There were some accountants they said, uh, which sounded like just literally a couple people, perhaps. But Caroline Ellison testified in court that, you know, they would ask people to do it, to do some accounting or hire people. And she said people said no or gave up when they basically saw the task at hand. And I think with the implication perhaps being also that some people realized they were being asked to do illegal things like falsify accounting records. So she and other senior executives would just make spreadsheets and try to account for where is all the crypto and the money. And they didn't have so many bank accounts, but they were trading crypto on dozens of exchanges and they had internal systems to keep track of some of the stuff. But you know, they're using Google Docs or Excel spreadsheets to keep track, supposedly, of billions of dollars. Another thing we learned about was that, and this I think in retrospect is pretty dramatic and also says something again about Sam McMahon Fried. There was this bug, and the defense tried to focus on this for a while. In a way, I think it's kind of inconsequential, but but it actually had a big presence of the trial and in the testimony of some of the people. But basically, Alameda was kind of $8 billion or so in the hole for a while over the last year or so to FTX, which is to say that's how much they stole from FTX customers. And they were keeping track of some of this just in some accounts or in a line item in an Excel spreadsheet. But there was a bug in some of the code surrounding that, and that it was actually being overestimated by about $8 billion. It wasn't doubled. It was just another 8 billion. Whatever calculations that Gary Wong or Nisha T Singh, someone senior there at Koedin, were wrong. And when Sam Bankman-Free discovered this or was told about this, he didn't seem bothered. He kind of took it in stride and it wasn't fixed for a long time. At least from the testimony of some of the people close to him, those co-conspirators, and a couple other people, like there was this guy, Adam Yadidia, who's a senior developer there and knew Sam for a long time and seemed to look up to him. Like other people seemed to be freaked out about things that were going wrong. You know, they were displaying human reactions. And maybe this is why Bankman Fried was in charge and why he's somewhat of the mastermind here. But Nishot Singh, when this was falling apart, felt suicidal. Caroline Ellison said she was relieved that it all fell apart. Nishot Singh had been asking Bankman Fried not to spend so much money, it sounded like. He was discouraged from doing that. And every time Bankman Freed would just sort of push it forward and sort of, just as he pushed the envelope when he was on bail and basically harassed witnesses or tried to tamper with witnesses as the judge determined. He called himself risk indifferent, I believe it was, or risk neutral, that's what it was, which is basically indifferent to risk, which, as I said in this piece in the nation, like translates into bad judgment, recklessness, abuse of other people, things like that. Like, I don't think it means that he's more comfortable with risk or kind of aggressive behavior. I think it really means all these things I just said and bad decision making and irresponsibility. It doesn't sort of display some kind of innovator's courage or anything like that. So broadly speaking, that it was worse than we thought. Two other quick things. One is that that bribe we knew about, at least it was in a previous indictment, and it'll probably be in that March trial, which was our schedule, it had previously been reported for $40 million. Caroline Ellison in court said it was for $150 million, probably in crypto. So take that with a grain of salt of the sort of the valuation. But also, you know, paid to Chinese officials, and she kept track of it in a document and she called it the thing. That just whole thing in Manager just tells you a lot. And then in the end, you know, almost a year ago, a year and a week ago, we had this leaked Alameda balance sheet, probably sent to a lender and then leaked to Coindesk, uh, published by Coindesk, and that provoked the fall, but really just helped expose the rot that was there and the fraud that had taken place. And one thing we learned in court was that balance sheet was fake. It was a cooked balance sheet that was supposed to be a rosier view of things. Caroline Ellison had made it at Sandbank and Fried's behest. She had written, she had made seven different ones, and he had looked at it. We knew this from the metadata, um, no matter what confusing stuff he says in court. And they sent that to a lender. Now, maybe it leaked because the lender was like, Are you kidding me? But it was also deemed acceptable enough internally that they could send it to a lender, who then, for whatever reasons, maybe because they thought it was ridiculous, they leaked it. And then Coindesk and the general public, again, if you allow me to like sort of hymn the crowd or speak to the wisdom of everyday people, they're like, holy shit, this is bad. And so I do really think that that division and perception kind of matters too, and matters for the industry going forward. That like at FDX, this was okay, relatively speaking. But for anyone with a brain, it's like, no way can you prop up a company on your own token that you invented and that you're marking way up in value. You you just can't do that. What are you talking about?
SPEAKER_01Yeah, it was pretty shocking to me to learn that that spreadsheet was actually fake and supposed to be like a rosier version of what was actually going on at the company when it was actually so bad that it caused the company to like totally collapse. I also want to pick up on what you were saying there about the risk like indifference or whatever that Sam Bank Winfried had. And it's a bit of a diversion from the talk about the trial, but I feel like the more and more that I read about these like Silicon Valley billionaires or these people who are successful in the valley, it seems like this trait and these sort of similar traits are common among them where you know it's not just that like they're okay with risk, but they're also okay with the consequences of the risks that they take. And if that hurts people and if that has negative consequences, then that's all accepted and okay because of like whatever mission they've convinced themselves that they are trying to achieve or whatnot, or you know, they're just kind of psychopaths and into greed and whatever. But it does seem like this is like uh kind of a through line there, and it does make you wonder, you know, about the type of people that our society or that this industry is kind of holding up and and kind of putting on a pedestal, you know.
SPEAKER_00Yeah, and I think it would be hard to ignore that there are certain types and characteristics that are common in crypto or tech or some of these industries. And, you know, I'm not speaking of any sort of essentialist stuff. I'm talking about like personality types and behaviors and philosophical and political beliefs that translate into certain ways of doing business and often, you know, an indifference to the law, sociopathy or megalomania. And this stuff is very common, I have to say. Like sometime earlier this year, I was talking to someone I didn't get a chance to write about her situation, but she was in a legal battle with a company she was working for, a crypto company, and she's like, yeah, and also the CEO has embezzled all this money and thinks he's Jesus. I'm like, no, that's nuts. But also, I've heard those kinds of things before. Like, those things aren't uncommon if you scratch on the surface of some of this stuff. And it is shocking and cartoonish and hopefully is adequately represented in the inevitable movies about some of these companies. I'm not saying Sam Bankman Freed is exactly that, but I do think he exhibits like some sociopathic behavior. The Michael Lewis book for which is pretty bad, but otherwise, in that book, he does say, I don't really feel emotions towards other people or certainly not empathy, and he fakes smiles and all this stuff, like and it shows a general indifference to the people around him and their well-being. And you can find that over and over again, and find that in the testimony of those people who worked for him. So this is a certain type and an antisocial harmful one. And one thing I believe I said on Twitter near the end of the trials, like before the verdict, is like if nothing else was clear, like Sam and some of these other people should never have been in charge of a company like this and should never have been given all this money. That is obviously not a legal determination, but like that does speak to this culture and the milieu in which they come from and the way these businesses work and the deeply interconnected network of effective altruists and kind of libertarian Silicon Valley types and just greedy crypto investors and stuff like that who enabled him. It is disturbing and that these types and that milieu and that a big sector of our economy is dominated and controlled by a lot of these kinds of people.
SPEAKER_01Absolutely. You know, I appreciate you having read the Michael Lewis book, so I didn't have to. Um, you know, because I subjected myself to the Walter Isaacson Elon Musk book. And I I would just say that like what you are describing in terms of what Sam Magman Fried says about, you know, this lack of empathy toward other people and all this kind of stuff, like that is repeated in the Walter Isaacson biography of Elon Musk, where it's basically like he cares about humanity, but in the abstract, and he doesn't actually feel much empathy toward actual human beings that he interacts with on a daily basis, the people who work for him, even the people in his family to a certain degree. There's a ton of stories about him like, you know, going to spend time with his family, and he actually just barricades himself in his room and plays video games so he doesn't have to talk to them. And it's like, what are the kinds of people that have the power in our society? And like, how does this shape like the future and and kind of the direction that we're going if we have so many of these like completely unempathetic and uncaring people at the top of making these really key decisions? I don't know, it it does kind of worry you when you really kind of dig into it, right?
SPEAKER_00Yeah, I I think this also speaks to like the right-wing reactionary impulse in a lot of VCs and tech CEOs, Elon Musk and his crew, the wider PayPal mafia. I mean, some of these people are already in practice or in function right wing, but you know, there is this growing reactionary tendency, I think, and also just this palpable unhappiness among some of these folks. Like David Sachs seems unhappy and miserable. Like these people have so much money. Mark Andreessen seems unhappy. I like to joke, like, what mansion is he tweeting from that day? Because he has three mansions in Malibu. But these people who may have been investing freed or other companies, I mean, Andreessen Horowitz was all over the crypto economy, they don't seem to like other people. They don't like cities, they don't like liberal Moors or Democratic small D politicians, which is fine, but it goes beyond that towards, of course, pouring their money and influence into some very unsavory causes. Sam wasn't right wing really in any way, but I mean, of course, he was known as a very as a Democrat-aligned person, but he was funneling money to Republicans. He met with Mitch McConnell. He had this kind of Machiavellian indifference to party or even real belief or policy, I think. You know, he claimed to care about a couple things, but I think he cared a lot about shaping crypto regulation so he could make more money. That was clear. And then he cared a little bit about pandemic stuff, but didn't really even bother to lobby for Medicare for All or something like that, which would do a whole lot for public health in the near and long term. So I think Sam Bankman Fried and even some of his colleagues are part of this broader class, and it's not just, again, right-wing VCs, but also just tech elites and finance elites who are very angry and seem very not content with their lot in life, and are also happy to pour money into politics and corrupt the political process because that's how it works now. So I uh looking at that broader class, I think, is necessary, and hopefully will be my next book. We'll see.
SPEAKER_01Fingers crossed. Um, you know, if if we start to kind of pivot back to the trial itself, you know, talking about Sam Bankman-Fried, and you've kind of touched on it and kind of mentioned it, but you know, he made the decision to actually testify himself, which I as I understand is kind of rare when you have these people who are facing these kinds of trials. And by all accounts, that seems to have gone absolutely terribly. Can you talk to us a bit about his testimony, his defense of himself, and how that kind of unraveled?
SPEAKER_00About halfway through the trial or even a little further in, when the prosecution was getting near to closing its presentation, it wasn't clear if they would provide defense at all. I mean, that happens. Some of his proposed expert witnesses have been denied by the judge. And the general consensus seems to be that in these cases it's a bad idea to testify that, you know, most criminal defendants in these kinds of cases don't or are encouraged not to by their lawyers. I would figure that Sam Edward Fried was encouraged not to by his lawyers. I don't know about his parents. I mean, they are lawyers, but they also seem to think that he can do no wrong and he's perfect. So maybe not. Anyway, it was a bad decision. I think it's easy to say that. I wouldn't say it was decisive, just because there was so much before he even took the stand. Again, like this methodically told story through rhetoric and argument at the beginning and the opening statement, but then backed up by clear evidence that the jury could go over these messages and documents and a pretty clear testimony from not just the three co-conspirators, but a number of insiders. And then finally there was this forensic accountant, there was an FBI agent, other people like that who kind of just provide some, go through some of the evidence. So a forensic accountant basically, uh I believe he teaches at Notre Dame, uh, kind of big figure in that in that world. You know, he had charts. Here's how the money moved. And that's the basic crime is this money moved from here to from FTX to Alamina through these bank accounts and then was eventually used for this investment. He wasn't allowed to do that. And that's kind of it. Or when Gary Wong says, I signed loans in my name, I didn't know what they were for. Sam took the money and I think made investments with them, he told me to do this. Well, if you believe the guy, there you go. So by the time you get to Sam, he's giving very evasive answers. Of course, uh as I said before, he's answering yes or no questions with long monologues. This was actually, there was some stuff that you may have heard from there. Was an initial sort of mini hearing without the jury where Sam, that was when he first took the stand. And that was one of the worst portions for him, but but was the jury didn't hear this. This was to determine whether some evidence was admissible. And that day, at least, he would interrupt almost the prosecutor, and then he responded a couple times, like, Oh, I think you're trying to ask about this, so I'm gonna say this. This is not a discussion, man. I don't know why people do this, or you can psychologize it if you want. I mean, Trump was actually rather like this in court this week, where he's just, you know, he's a diva and he just goes off with, this is unfair, it's a witch hunt, blah, blah, blah. It's like, I'm sorry, but you kind of have to abide by the parameters of testifying in a U.S. criminal court, which is you answer the question. And if you don't do that, the judge is gonna admonish you, you're gonna get shouted down and overruled, and the jury is gonna think that you're unreliable and lying. The Trump case is just in front of a judge, no jury. But anyway, that covers a lot of it. And so he didn't show a lot of emotion. At times there's a little bit of sort of annoyance or or different kinds of responses, but you know, he would say yep a lot when he was, he would either give these extended stem winders of a response, or he'd go, yup, which he's known for, and which is kind of annoying to be honest. But hey, at least he's has every right to do that. And that covers a lot of it. I mean, the prosecutor back into these corners, and he would not only just say he didn't remember, he would sort of try to define what memory was. This isn't philosophy class. And I don't know what else you can really do or say about that, other than like you need to provide something for your lawyers to hang on and for the jury to really hang on to and say, or for frankly, for one or two jurors to say, well, what about this? You know, he said he did this instead of that. But you there was never anything that discreet. It was just always flitting between these kind of possible excuses, none of them adequately exculpatory, because we knew from the evidence from the articles about the company, from Sam being in all these commercials that he was FTX, he owned the majority share of both companies, and he was giving all the orders, and that is pretty much that. Unless you you you are really a partisan or just don't believe the evidence in front of your eyes or don't really understand it, I don't think you could come to another conclusion.
SPEAKER_01Yeah. Can I can I ask you about uh Carolyn Ellison and these other co-conspirators who have already pleaded guilty to charges? You know, what were they like on the stand? What kind of detail did they give about the company and did they feel like kind of credible and remorseful? Like, what was your kind of observation on the approach that they had? And and can you tell us like, do we know how long they'll be spending in prison or anything like that?
SPEAKER_00We don't know their sentences yet. They haven't been sentenced. You know, one thing that the prosecutor does somewhat to preempt the cross-examination from the defense is they, you know, everything's very walkthrough methodically, or at least that's how it's kind of supposed to work. So they say, like, you pleaded guilty, yes. What crimes did you plead guilty to? I committed these crimes. Who did you commit those crimes with? Sam Bankman-Fried. Do you see Sam Bankman-Fried in the courtroom? And they point to them in a couple instances, Caroline and I believe it was Gary Wong, they took a while to point to Sam Bankman-Fried. I don't really understand why, or is that a bit of performativity? Is that genuine confusion or nerves? I don't know, but that happened. There are vastly different estimates because this stuff isn't recorded with a video of how long it took her to point, but it was noticeable. But yeah, in short, these seem like real people. And I'm not trying to discriminate against people who are on some emotional spectrum or something like that, but they showed remorse, they expressed it. Caroline Ellison did break down briefly and sort of and seemed tearful. Gary Wong is more quiet and reserved, but all three of these folks, and Adam Yudidia, who was uh had an immunity agreement, one of the early things they walk them through is that you know that they all have these immunity agreements or non prosecution or they've all already pled guilty. And and the prosecutor brings that up to say, like, you know, you're expected to testify truthfully if you uh write, and it and the witness says, if I don't, I may go to prison or may go to prison for longer, and I'm hoping to get a reduced sentence. Like it's all very acknowledged up front so that the defense can't just say, well, you know, you're a rat, blah, blah, blah. So that kind of stuff is very much acknowledged going in. And these people may go to prison. I think it will be short, though. I mean, a few years at most. It's not pleasant in federal prison, but you know, they may go to prison or have a few years and then be paroled pretty early. I don't know. I mean, it's something that, of course, especially the United States, marks someone for life. But on the other hand, we've seen a lot of people already move on without facing any legal sanction who were very high level at this company and even named in court many times, seemingly being complicit in stuff. I mean, people who are looking for a long jail term for Caroline Ellison or some of these other people, it will probably won't happen. I think Bankman Fried will get a lengthy sentence, perhaps 20 plus years, but we won't know until March, and I can't guarantee that. But for example, Elizabeth Holmes, who is a probably a pretty good reference, got more than 11 years and is in is in prison now.
SPEAKER_01I want to kind of expand it beyond, you know, the specific people who were in the trial. Sam Bankman Freed's parents, of course, were very important to this whole story. There's been a lot of reporting done on them, kind of the money that they received from the company, the influence that they had over Sam Bankman-Fried, you know, as he was kind of running this company as well. You know, there was like a Verge article last week that was kind of like, oh, his poor parents. But I don't know if I kind of buy that kind of take on it. What have been the consequences for his parents? And does it look like they might face any kind of legal consequences as well for their participation?
SPEAKER_00I think they could. I certainly think if you believe in law in enforcing the law with some equal distribution and holding wealthy, powerful people to account, I think they probably should. I mean, there seems to be evidence there. So a couple specific things. One, there has been some good reporting. There was a great article in Bloomberg by Max Chafkin and some others, even some kind of unintentionally useful stuff. Like I don't think that article about the parents in the New Yorker was very good, but it said some revealing things. I guess in its sort of moral judgment of them and approach, because it does seem the parents were along for the ride, at the very least, and that they held a lot of influence over Sam and they received money from him and real estate, tens of millions of dollars. And they were as part of decision making. So uh the specific things I was about to refer to, they're in this lawsuit from the new leadership at FTX against the parents that came out before the trial started. There's is, I believe it was an email from uh Barbara Freed to Nishot Singh and others, and Sam is probably on it. Um I don't recall offhand, but it's instructing him how to make a straw donation of a large amount of money to her political organization. That is illegal, and she is giving him instructions on how to do it, and he pled guilty to campaign finance violations, Nishod Singh did. So I don't know what else you really need there, but again, I'm not a prosecutor. The father was there a lot and was consulting on a lot of things and traveled with Sam. Actually, in some of the government exhibits, for example, I posted one on my Substack yesterday. There's a text message, for example, he Sam had numerous signal groups, hundreds of signal groups, a lot of them with disappearing messages turned on, but was very sort of compartmentalized this way and talking to a lot of different people, but you know, often they would have the same people or different circles of people he trusted for different issues. And there was one called, I think it was small group chat, and his father was in that. And in the waning days of FTX, he had a few top lawyers, the other people who fled guilty already or testified against him now. And it's like eight people, including his father, and plotting what to do, whether to stop withdrawals. This is a year ago, pretty much this week, whether to give all customers a haircut, basically, and cut the value of their assets, things like that. And Joseph Bankman was part of this, and he was taking a salary from FTX. So I that these are all things that have really come to light uh more since FTX collapse, of course, but in the last year. But war also emphasized in some ways at trial, I think, or if not by the prosecution, but just to any observer would see that in court, that you know, his father was there, and his mother and father signed for a $16 million apartment in the Bahamas. They claim that uh they thought that FTX was the beneficiary owner and they were just sort of occupying it. But come on. And the last thing I'd say, which I think says something about human nature, is and that's might be worth acknowledging, is that greed is fairly universal. And you can uphold yourself as an ethical person, as a scholar of legal ethics, but when Unlimited money falls in your lap or in your son's lap, it can be pretty tempting. And people should know by now that the Sam Eggman-Fried image of sort of an ascetic workaholic who sleeps on a beanbag is wrong, or at least a constructed persona. One thing we learned in court was that he traded down from a luxury car to a Toyota Corolla intentionally and told Caroline Ellison to do the same. I mean, of course, a lot of the stuff was an affectation, the way he dressed and the hair, of course. He told Caroline in his typical, like pompous boyfriend way that he thought his hair got him more money at Jane Street and was significant to his image. And so when the parents see their son getting all this money, well, there are ways they can benefit from money. They're human. So there's an email, uh, I believe, or a message that's in that FTX lawsuit against the parents, where Joseph Bankman says the $10 million you gave us will help your mom retire. Who wouldn't want to retire? Why not? I'm sure she has her interests in her human comforts or material comforts. So I don't know. I mean, I think this kind of stuff comes naturally maybe to you and me and your audience, but there are a lot of people out there who still remain shocked that pillars of American elite, you know, Stanford law professors and their good son could do such bad things or kind of break bad. But no, we shouldn't be surprised. And of course, people from these kinds of backgrounds often do commit crimes because there's a sense of impunity and there's access to opportunity and resources. You know, means and opportunity are very important in committing crime. So that's sort of the last thing I think I would say about the parents. They're in trouble. Their lives, frankly, are probably unraveling in some ways because they're spending a lot of money too. And and the money is being clawed back. We should also say that the $10 million odd dollars that they were given by Sam McMahon-Fried by their son being clawed back by FTX, but they probably spent a lot of it on legal fees and they're gonna spend more.
SPEAKER_01Yeah, no, I I think it's really important context to have. And of course, it's no surprise that, you know, if if they have access to cash, they're gonna try to grab it right. You know, in a piece that you wrote for the nation, you talked about kind of the bigger picture of this as well, right? You know, obviously we talked about a certain part of FTX with regard to the trial, and you know, because it's focused on Sam Bankman Freed and these kind of top people who are next to him, but you talked about how you know there were a lot of kind of transactions that he did that are still kind of shady, including with venture capitalists, and that you know, there are other people who are at FTX who, you know, were also kind of higher up there, not just kind of the rank and file kind of code grunt people, you know, who who have moved on to other careers where they're doing just fine and aren't kind of facing the backlash of being involved with this company. Can you talk to us a bit about you know what you see as the bigger picture of what has gone on there?
SPEAKER_00This is another necessary counter towards the kind of cynical argument that this might not matter, or that what's the point crypto is collapsing anyway, or that this is somehow one-off, or anything like that. Kind of, frankly, a little bit of moral laziness. I think we need to understand that one, he did this with other people. Some of them pleaded guilty, some of them may still be yet to be indicted. He defrauded a lot of people and worked with some very unsavory people. And there's a lot that's still unexplained. So at the company, for example, one of the people mentioned in court a lot who Sam, again, sort of tried to throw blame at the feet of Dan Friedberg, one of his top lawyers and compliance people, but didn't go so far as to say this guy told me to do this, or it was more sort of like he kind of gave me bad advice or or signed off on something. Again, uh Sam McMahon Free leaned towards pursuing this defense of counsel or advice of counsel defense, but ultimately wasn't allowed to really officially pursue it. This is a little bit of legalese or whatever. But anyway, Dan Freeberg was a top lawyer there. Famously or now infamously, some folks know he worked for an online poker company that basically had a God mode where select insiders could see the other customers' cards, including some very wealthy professional poker players, and of course steal from them or beat them. And there are some recordings and actual recordings online and other reporting that indicates he helped sort of cover this up. His colleague in that was Stuart Hoogner, who's now the top lawyer at Tether. I mean, it's important to know where some of these people come from, what they've done, and what they continue to possibly do, and who they associate with. And that's what I try to sort of get at in this nation piece, which is that there's a broader network here of financial criminals and potential money launderers, and people who just operate on the fringes and do stuff that requires, I think, some explanation, if not legal action. I mean, after Alameda left Berkeley, so basically Sam McGuri started Alameda in Berkeley, his trading firm, then he moved it to Hong Kong the next year in 2018, I believe. And it was because he went to this conference and was charmed by all he saw and the people he met and saw a lot of opportunity. I think that's right. But it's also because Hong Kong is this nexus of capital flight, there are a lot of wealthy people there. There are a lot of wealthy people there trying to move their money outside of Chinese control. And there's also a lot of illegal financial activity coursing through there, as there is through any financial center. And there was a lot of crypto there too, and he was early to something. So he invested in this company called Genesis Block, like a lot of investments that Alamita made. And then he eventually started FTX in 2019. But Genesis Block and FTX, which is to say with Alamina, shared office space. There's a lot of overlap between these companies. It wasn't just an investment for them. There seemingly was a high degree of control or more than one might expect, even a kind of integration or interoperability. Genesis Block, by their own admission, they had a lot of kind of gray market activities, like they had a network of what they called satellite bank accounts. They ran these storefronts where people could come in and buy or sell crypto for cash. I mean, that is a big deal. And they could do it from my understanding at least, without much KYC, know your customer AML, anti-monony laundering provisions. These kinds of shops do exist. And you periodically on Twitter in Hong Kong, periodically on Twitter, you'll see someone tweet a photo of one where you can basically go in and give them dollars and get tether or Bitcoin. That's what it's most useful for for some people. But people would also sell to them if they wanted to sell crypto for cash. And when you mix all this together, and when you add in stuff like they were talking about they they went to the mainland and move money back and forth, Genesis block, or they went to Cambodia and trade in peer-to-peer markets, what you get an image of is a larger money laundering operation and capital flight and all these sorts of things. And you can have perhaps some sympathy of someone who is trying to get out of authoritarian China or something like that. But of course, you know, this does feed into a lot of very unsavory stuff. And that's what Alameda was doing and FDX was doing when they were in Hong Kong. They were doing a lot of recognizable financial crimes. And so when something happens like Sequoia Capital, top BC firm, who wrote an article that they've since tried to disappear from the internet, that Sam McMahon Fried would become the first trillionaire because he was so smart when he was playing video games while pitching them, they invested over $200 million in FTX later through Alameda, which was often, or he was either Alameda or dozens of different shell companies that he would use to funnel his investments in various startups. He also invested in media startups or just gave people money, or in some cases, he would invest in the funds of his own VCs. One of them was Sequoia. Sequoia invested more than $200 million in FTX. Then you see some $200 million going through Alameda into a Sequoia fund. Now perhaps they'll explain and say, well, by then Bankman Freed and FTX and Alameda were doing well. We thought, if you're Sequoia, and he wanted to invest in one of our funds and sort of because our funds are obviously gonna do well. Okay. It just shows sort of the close symbiosis between a lot of stuff and the closely bound networks and connections here. But most people I've talked to think that's weird and think that's unusual. And he did it also with Paradigm. A VC from Paradigm, Matt Huang, testified in court and basically said convincingly that he lied to us. If we had known some of the real financial conditions of his companies, we wouldn't have done XYZ, we wouldn't have given him money if we known that he was going to use the money for some of these things and not for the operation of FTX, we wouldn't have invested in him. I think that's credible. But at the same time, why did Sam Bank McFried then go and invest in a paradigm fund? And this stuff didn't really come up in court, but I think that's strange. And when you extend that to, of course, the giving money to various political organizations, sometimes in the form of dark donations, a lot of this stuff does seem to just sound broadly like money laundering, attempting to evade capital controls, and that kind of dark money and financial crime and influence and corruption, I think it should really be called, that that should be also recognizable and should be considered pretty serious.
SPEAKER_01Yeah, I like I think what you're laying out there is a good picture of how certainly Sam Bankman Freed is responsible for a lot of the stuff that goes on here, but there's also a much larger network that probably deserves not just scrutiny, but probably legal action as well to hold some of these people to account for what has been going on there.
SPEAKER_00Yeah, and just real quick, like some of these people are still missing or just like not really we don't really know where they are. I mean, the government plays some things close to the vest. So, like, where is Sam Drabuco, the the co-CEO of Alameda who left on a boat called Soak My Deck, which we've this is the second time we've talked about this boat on here. People have all kinds of theories about him. The government isn't saying, oh, he's missing or anything like that. So we don't know what the story is. Maybe they've interviewed him, but he could be off in the Caribbean on his boat. Or, I mean, we just don't know. And this is a guy who was mentioned a lot in court and seemed to be involved in this stuff. Or some of these other people we we've already mentioned their names. Like, we know these people's names, and you know, they don't Sam Tribuco doesn't have to tell me or you or the public what he's doing, but I am very curious, and if you care about any kind of accountability, or that some of these people don't continue to go on and work in these industries, which some of them already are, and they're still on Twitter or they pivoted to AI or whatever it is, or they're gone back to being venture capitalists like Amy Wu. I still would like to know more about what they did and what they knew when and these kinds of things. And frankly, I I think it would be reasonable for people not to be mistrustful or to ask questions and to say, like, well, I'm gonna be a little leery of your company or your industry or you personally because you were present at one of the greatest frauds of the century.
SPEAKER_01Absolutely. It's just interesting to think about how these people have pivoted to AI, but also how you know you can be involved in something like this and they just go work for another company that does something really similar.
SPEAKER_00Nuke Goldstein, from who's a who's a cartoonish, one of one of the many sort of absurd characters in this industry, but from Celsius. Celsius did business with FTX, so we can call it relevant. Nuke Goldstein was like the CTO or something like that from Celsius, which famously went bankrupt, uh, was helmed by the most obvious con man in history, Alex Mashinsky, who's being charged with fraud finally. It took a while. Nuke Goldstein hasn't been charged with anything yet, but he already pivoted to AI and blocked me on Twitter when I said something when I joked at him once, but like these people are literally doing the thing that we joke about, and like a lot of them. And it's very shameless. I mean, that's how they got so far in the first place, is that there's a general lack of shame and overweening self-confidence. So they're already doing it.
SPEAKER_01Yeah, no, no surprise. No surprise. Um, so if we cast our our kind of uh you know timeline ahead to March, what are we looking at there in terms of the sentencing, but also the possible second trial?
SPEAKER_00So I believe that the prosecution has to basically let the government know and the court know by February if they're gonna go ahead with the trial. Perhaps uh some experienced legal folks might say there are reasons why they wouldn't. I don't really know uh why they wouldn't. It seems frankly worth doing, or there are crimes there. And again, we're talking about a larger group of conspirators, several of whom have already pleaded guilty, so, or who testify to this behavior in court in the case of the bribe that was discussed significantly in court, even though it wasn't specifically a charge this time around. So it seems kind of necessary from the government's perspective. So I think it'll happen in mid-March. You'll hear about it. And I think it will happen. We're gonna bring the same team back. I think it'll be the same prosecutors and the same judge, and I'll probably be there again. But the sentencing is scheduled basically after that trial is supposed to start, and those might have some influence on one another. Like perhaps if they're thinking they're getting some kind of post-conviction cooperation or something useful even out of him, then they may delay the trial or or focus on the sentencing. One thing worth noting is the government, at least by its own claim in court, did not offer Sam a deal, did not seek to open um any kind of discussions about a deal. And it didn't sound like the Sam Bankman free to ask for one. Certainly the fact that he testified was probably both a Hail Mary, but also kind of an act of egoism and a reflection of the fact that he perhaps thought he could be found not guilty at trial. And I think there is also some question of like what does he really have? Like maybe he could say some things about CZ or Tether or some of his business partners, but he is sort of a big fish in himself, and there's a reason why he was prosecuted so quickly and why I think they want to send him away for a while. So one thing that's uh rather remarkable is that I mean, Alameda existed for less than five years. FTX have existed for less than three or about three. I mean, this is a remarkable speed run through to billionaire and then disgraced convict. And that's worth keeping in mind, but it also just speaks to how fast this happened, the hype, how much evidence there was in the end to convict him. So I think there will be another trial. And, you know, the legal afterlife, though, is gonna be very long. The bankruptcy will take a long time. People will probably get a little bit of money back, but not enough. The one small thing that Sam might have in his favor is when he says or has said in the past, like, well, it's a little kind of unseemly how Sullivan and Cromwell might have a conflict of interest and is getting hundreds of millions or even billions of dollars in legal fees when they worked for FTX when the company was on its way up. I think there is a little bit of something there. I'm not saying Sam is right. I mean, he's certainly he's not the only one that said that. So I think one thing to watch actually is that there's gonna be a lot more litigation. Lots of people have already been sued, but I wouldn't be surprised to see more lawsuits and more even against powerful law firms and stuff like that, because there are people who profited off the company when it was on its way up and who now want to feast on the corpse, and people who haven't really been held accountable. So look, it's really unsavory that it happened that we have this horrible legal system and that you know the money is really gonna accrue and power is gonna accrue to the law firms who are doing all an insane amount of work, but billing $700 an hour for it. And that sucks. But that system precedes Sam Bankman Freed and will certainly follow him.
SPEAKER_01Yeah, absolutely. And you know, there was talk of an appeal. I remember in the Elizabeth Holmes trial, she tried that as well.
SPEAKER_00Yeah, we should mention that. I I would expect probably some appeal. You know, some people are even joking, not entirely, well, not entirely joking with me. Like, was he sort of putting the advice of counsel defense into practice because his lawyers seem so bad and he's gonna actually appeal later and say, I had bad counsel? I mean, it seems a little ridiculous. These are major lawyers, like one of whom defended Gislay Maxwell. And I mean, say what you will about that, but like people I've talked to said he did a decent job. I mean, contextualize that appropriately. But like, these are experienced litigators, but they did seem rather inept. And I don't really, I didn't really understand in some ways, like, why they were so bad at telling a coherent story and some of these basic fundamentals. But I don't think there's much grounds for a real appeal, is what I mean to say. Maybe the lawyers didn't do a good job or certain evidence was introduced that he wanted. I mean, he got the Adderall that he he wanted. Some people are even saying, you know, his prison conditions, but as horrible as prisons are here, it seemed like he was afforded the rights he was allowed and that he wasn't abused in prison and his uh requests were responded to. He also went to prison because he did witness intimidation. So it's hard to see kind of the cracks maybe here, but maybe there will be something on appeal. And and certainly he, or at least for now, he there's some money there to still pay some lawyers. I don't know how long that will last, actually. But it doesn't look good, you know. I think for him, I I think he will go to jail for a long time and his parents may go bankrupt, things like that. Like this is this is gonna be seen through.
SPEAKER_01Yeah, I feel like one big difference between Elizabeth Holmes and Sam Bankmanfried as well is it felt like we were waiting forever for Elizabeth Holmes to finally like report to prison because she was a good thing. Yeah, whereas Sam is already in prison and he's gonna stay in prison until sentencing and and through any further trials and all that, right?
SPEAKER_00Yeah, and some of that might count towards his eventual sentence, but you know, you're talking only like a year or two, like and there are all these procedures that have to be gone through like recommendations and memos made by the Department of Justice and prosecutors and stuff like that, and they're gonna do all that, and but by March, you'll have a sentence, and then he may have his sort of a relatively permanent home determined by you know summer and will then report there eventually. It just doesn't seem like he's gonna be free for a long time.
SPEAKER_01Yeah, no, definitely. Um, so I have one final question to end this off. You know, obviously we've been talking about Sandbank McFried. FTX was a major player in the crypto ecosystem. We've obviously seen that kind of collapse over the past couple of years, and you know, I've been talking to you and other people to kind of you know chronicle that collapse over that period of time. What does this verdict, this finding, mean for what is left of the crypto industry? And in particular, does it have any kind of consequences for Binance and Tether? And are we likely to see any real action against those companies in the future?
SPEAKER_00I think it moves us more in that direction than not, because you know, there's been reported criminal investigations along with civil ones into Binance and Tether. Even the civil settlements that Tether reached with a couple American regulators, I think, reveal some pretty interesting stuff that criminal investigators should be aware of. But anyway, there's supposed to be a uh a bank fraud investigation at the DOJ into Tether. I I think they moved it to a New York office, but I'm not positive about that. And Binance, we know, is being investigated all over. Frankly, the geopolitics are kind of right to prosecute Binance or CZ because look, he is a Canadian citizen. It's not purely a Chinese operation. I don't necessarily even know if it is like a CCP controlled enterprise. I am not a China hawk, but it honestly would not surprise me because they do obfuscate a lot, and not to go off too much on this, but like they do obfuscate a lot their Chinese connections and the fact that they have a lot of people there working for them and they're even obfuscate who the senior leadership is. So yeah, I think there very much could be something. Specifically in the case of CZ, you know, he it probably would be a sealed indictment, and they might wait if there are real criminal charges against him, and they might wait till he steps in a jurisdiction where they think they could get him, like Western Europe or something like that, if he even does that. But they do have an office in France. I don't know if he goes there anymore. I I haven't asked the company lately. So I think it moves us more towards that. The industry itself thinks that um it seems the broader, the sort of widely shared opinions that look, a lot of bad things have happened. Sam Bankman Fried is a con man who swindled a lot of us. Thank goodness he's been convicted or good riddance, mostly good riddance. And some tokens are doing well this year. Bitcoin's doing pretty well lately. Make of that what you will. So they have like a little bit of idea of retrenchment and hey, maybe we are on the upswing and we can move on from this. Specifically, also Coinbase has taken up the lobbying mantle. I think this is worth noting, from FTX is doing a lot of very public lobbying and also some more in private, meeting with going to state houses all over and going to Capitol Hill and really trying to play that role of helping shape a new business-friendly regulatory system for crypto. And the final piece of this is that the customers aren't there. And so you may have still some money in the industry or a or kind of a let's pull up our boots and do this kind of attitude from an industry that still has some true believers and still some money to mess around with. But the customers are mostly gone, the trading volumes are down, a lot of people lost a lot of money, or even people who may have been interested in this stuff, they can't get their money because it's locked on FTX or Celsius or Blockfire or Voyager or Genesis or wherever else. Forgive me if some of those have actually paid back their customers a little bit already. But uh, you know, uh, this has been a widespread devastation. This has kind of swindled a lot of people. And the PR for crypto is obviously not good. And it's also not good when you just sort of mock people or tell them, like, well, you should get aboard because this is the future of money or XYZ. I think looking forward, you're gonna see more litigation, more people kind of getting in trouble in one way or another. The DCG and Gemini thing is pretty juicy with the Winkelvoss twins and Barry Silbert, they're facing all kinds of broad accusations from the government. There's gonna be more, and and I just don't see unless like some new story is told, you know, some new use case really for crypto, why would people want to get back into this? The technological hype is kind of fitted. And that besides speculation, it's sort of like tech futurism or the inevitability argument I think that gets people. If they don't think they're gonna make a lot of money, or if it doesn't really seem to have caught on and you know to a billion users, why are people gonna throw some money in there? I I just don't see it anymore. But I think it will stick around, and it it we've seen how it's useful, frankly. It's useful for illicit finance. And I think there are technological and legal and reasons of that, there are reasons because of who's attracted to the industry, but that's the main use case, and uh it's pretty fair to say.
SPEAKER_01Yeah, and you know, the the investor class has moved on to AI at this point, and I'm sure something else after that, so they're not running back to crypto.
SPEAKER_00Yeah, and in in that broader framework of illicit finance, we could even put securities fraud or something like that. Like Nicholas Weaver likes to joke that A16Z is business model securities fraud, like you know, for a while the bus people were making money also by being insiders like A16Z and buying the tokens at for 10 cents pre-ICO, and then ICO happens and they sell them for 10 bucks or whatever. That's gone too, pretty much. So that's another sort of one of the few kind of ways to extract money from that industry is gone, and they just moved on to AI, so it'll be tough to sort of juice the next crypto boom uh without something like that.
SPEAKER_01Totally. And there's no signs that they are circling back to crypto anytime soon. Um Jacob, always fantastic to speak with you to get your insights on everything crypto and beyond. Thanks so much for coming back to talk about Sam Bankman Freed, and I'm sure we'll probably have to talk again in March when we see uh what's going on there.
SPEAKER_00Yeah, glad to do it. Thank you.
SPEAKER_01Jacob Silverman is a journalist, co-author of Easy Money, and host of the Naked Emperor on CBC Podcasts. Tech Won's Save Us is hosted by me, Paris Marks, production is by Eric Wickham, and transcripts are by Bridget Pauli Fry. Tech Won's Save Us relies on the support of listeners like you to keep providing critical perspectives on the tech industry. You can join hundreds of other supporters by going to patreon.com slash tech won't save us and making a pledge of your own. Thanks for listening and make sure to come back next week.