Over the previous three weeks, the prosecution in Sam Bankman-Frieds trial has known as a sequence of witnesses and displayed dozens of items of proof to make the case that the founding father of the failed cryptocurrency trade FTX knowingly took buyer cash and lied about it publicly. Bankman-Fried has been charged with seven counts, together with wire fraud and conspiracy to commit cash laundering. Throughout the trial, three of his closest colleagues delivered stinging testimonies towards him, attacking his character and accusing him of directing them to commit crimes.
The trial is approaching halftime and the courtroom will break for a full six days, at which level Bankman-Frieds protection staff is predicted to current their case beginning Oct. 26. Many media shops have criticized their technique to date, and authorized specialists instructed TIME that Bankman-Frieds staff faces a formidable uphill battle. Right here have been probably the most damning items of proof introduced by the prosecution, and the way Bankman-Frieds legal professionals would possibly method their protection going ahead.
The credibility of Caroline Ellison
The primary main impediment that the protection must surmount is the testimony of Caroline Ellison, the previous CEO of Alameda Analysis. The crypto buying and selling agency was principally owned by Bankman-Fried and positioned bets value billions of {dollars} on numerous elements of the crypto ecosystem utilizing FTX buyer cash. Ellison was additionally Bankman-Frieds on-and-off girlfriend, and her proximity to him has made her a vital a part of each the protection and the prosecutions narratives.
Bankman-Frieds legal professionals, of their opening statements, tried guilty Ellison for the companys collapse, arguing that Bankman-Fried relied on her, and that she made poor monetary choices. The prosecution, then again, portrayed her as a keen and realizing confederate who dedicated monetary crimes on the route of Bankman-Fried.
On Oct. 10, Ellison took the stand as a cooperating witness. (She has pleaded responsible to fraud and conspiracy.) Over three days on the stand, she unequivocally blamed Bankman-Fried for Alamadas borrowing of billions in FTX buyer funds, and walked the jury by way of proof that appeared to point out that each she and Bankman-Fried knew concerning the scenario and have been involved about it for months earlier than the collapse.
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[Bankman-Fried] stated that FTX can be a very good supply of capital, and he arrange the system that allowed Alameda to borrow from FTX, Ellison stated on the stand.
Learn Extra: Caroline Ellison Blames Sam Bankman-Fried for Crimes
To reveal Bankman-Frieds data of the borrowing of buyer funds and its potential dangers, Ellison introduced a number of spreadsheets that she had created over the course of 2021 and 2022, which confirmed Alamedas huge debt to FTX clients. Ellison wrote in one of many spreadsheets {that a} crypto crash would cripple Alameda, given their already shaky monetary scenario. Bankman-Fried replied in a remark: yup & might additionally worsen.
Of their opening assertion, Bankman-Frieds protection attorneys contended that he was largely disconnected from Ellisons actions. However Ellison was capable of present by way of textual content threads that she sought Bankman-Frieds approval and steerage on main choices.
The protection legal professionals additionally recommended of their cross-examination of Ellison that she had been coached by prosecutors, and that her story had inconsistencies. However the model of occasions that Ellison instructed on the stand largely lined up with the narrative she instructed Alameda workers within the midst of the collapse final November, which was earlier than prosecutors had gotten concerned. (Clips of that assembly have been revealed as a part of the prosecutions trove of proof.)
She got here throughout as a reputable witness, says Ari Redbord, the top of authorized and authorities affairs at TRM Labs, a cryptocurrency regulatory startup and a former prosecutor, who has adopted the case carefully. I believed there was good corroborating proof: The spreadsheets have been very highly effective.
Redbord additionally believes that jurors doubtless observed the distinction between the defenses aggressive opening language in the direction of Ellison and their muted cross-examination of her. You had the protection counsel promise that you will hear how Caroline Ellison, the CEO of Alameda, basically was liable for a lot of what went on right here. After which to not in any respect put that into proof is a big fail, says Redbord. One of many type of cardinal sins of trial work is you by no means need to promise one thing in your opening assertion that you do not ship on in the midst of the trial.
Contradictory statements
Bankman-Frieds legal professionals even have stated they’ll show that he was appearing in good religion, and fairly believed that he was appearing in the most effective pursuits of his clients and buyers. The prosecution tried to undermine this by exhibiting how Bankman-Fried appeared to have engaged in misleading enterprise practices and made public statements that diverged from his non-public actions.
As an illustration, Ellison stated that Bankman-Fried directed her to supply phony steadiness sheets for lenders that hid Alamedas money owed. Nishad Singh, FTXs head of engineering, stated that Bankman-Fried instructed him to backdate transactions in an effort to make FTXs income look larger.
Bankman-Fried tweeted on July 31, 2019 that Alamedas crypto account on FTX was identical to everybody elses. However FTX co-founder Gary Wang testified that on that very day, Bankman-Fried had directed him to make Alameda the one account on FTX that would have a unfavourable steadiness, i.e., to borrow from different clients.
And on Nov. 7, 2022, as FTX was collapsing, Bankman-Fried tweeted FTX has sufficient to cowl all shopper holdings. However that day, he despatched a textual content to Ellison and others which acknowledged an $8.1 billion shortfall in buyer funds.
Discrediting the witnesses
However this case is way from over. Bankman-Fried is harmless till confirmed responsible, and the jury must unanimously select to convict him. The defenses method to cross-examination supplied clues about among the methods they could take subsequent week, suggesting they’ll doubtless try to discredit the three key witnesses, and insinuate that they have been coached by the federal government.
Throughout their cross-examinations of Wang and Singh, for instance, Bankman-Frieds attorneys tried to point out how the 2 FTX executives tales had shifted over the course of months of assembly with prosecutors. Any inconsistencies they elicited may very well be used as a springboard to solid doubt upon the pairs complete narratives, says Tim Howard, a companion on the legislation agency Freshfields and a former federal prosecutor. So long as they’re laying the inspiration on the bias questions, they will later flip again and hit them exhausting for closing arguments, he says. They simply need to ensure that the report is there.
Actually, Howard says that there may need been strategic causes the protection attorneys selected to not take an excessively aggressive method whereas questioning witnesses throughout cross examinations. Generally there is a danger that should you go too exhausting, particularly towards, shall we say, Caroline Ellison, it would invoke some juror sympathy, he says.
Whereas Bankman-Frieds attorneys principally shunned attacking Ellison, they went exhausting after Singh, in an try to cloud the picture he painted of himself as a type of ethical compass of the corporate. Singh testified that upon studying that Alameda was taking buyer funds, he felt actually betrayed, that 5 years of blood, sweat, and tears from me and so many workers, driving in the direction of one thing that I believed was a lovely power for good, had turned out to be so evil.
However in his cross-examination, protection legal professional Mark Cohen identified that after Singh had professed to have that realization, he took out a mortgage that doubtless consisted of FTX buyer funds to purchase a $3.7 million home in Orcas Island, Washington, for himself and his pals. A chastened Singh responded that his spending on the home was egregious, pointless and egocentric.
Hail Mary time
The most important query of the trial that is still: Will Sam Bankman-Fried testify voluntarily? Bankman-Fried has been about as lively as attainable within the courtroom with out uttering a phrase: Hes jumped as much as whisper in his legal professionals ear throughout cross-examinations, handed them notes, and was even accused by prosecutors of scoffing, laughing and shaking his head at Ellison throughout her testimony.
Redbord and Howard say that the query of whether or not Bankman-Fried ought to testify raises potential dangers and rewards. Usually talking, should you’re a protection lawyer and the case will not be coming in effectively, you are nearly at all times higher off counting on the federal government hasn’t met their burden protection, Howard says. However when youve bought intent as a component of the offense, he can rise up there and look them within the eyes and say, I didn’t intend to commit fraud.
Within the overwhelming majority of circumstances, your protection legal professional will counsel you towards testifying, says Redbord. Usually, the adage is that there is little or no good that would come from testifying, and there is numerous dangerous. However that is Hail Mary time.