There was a moment on Monday where an assistant U.S. attorney needed to ask FTX founder Sam Bankman-Fried if he was the chairman and sole board member of Alameda Research, while showing him a document that he signed, which literally identified him as the chairman and sole board member. And Sam's response was he did not intend to be, which curiously enough, was not the question actually asked.
You’re reading State of Crypto, a CoinDesk newsletter looking at the intersection of cryptocurrency and government. Click here to sign up for future editions.
'I'm not sure how to interpret the metadata'
Sam Bankman-Fried is still in court trying to defend himself against charges he defrauded and conspired to defraud a bunch of people by stealing FTX customer and investor funds and blowing it on frivolous things like private jet rides and luxury apartments. Monday's testimony was especially, I would argue, rough for the defendant. And since I'm still spending every day in court watching the greatest show in crypto, I'm going to ditch whatever I was originally planning to write about and instead invite you inside Monday's performance.
Why it matters
This case is just getting more intriguing, especially now that the defendant himself is testifying.
Breaking it down
You remember those DirecTV Rob Lowe ads? Rob Lowe with DirecTV is a suave dude. Rob Lowe with old-fashioned cable TV is a bit rough to look at. Bankman-Fried's testimony provides a very similar split-screen moment. He did well enough when responding to questions from Mark Cohen, his defense attorney. He provided a compelling explanation of how FTX collapsed – potentially compelling enough to convince a jury of his peers that he didn't defraud all the people he allegedly defrauded. He was the DirecTV version of himself.
And then it was Assistant U.S. Attorney Danielle Sassoon's turn to ask questions. That's when he, in a big way, became the rough, cable-TV version.
Am I insane? Or was the back-and-forth over whether Bankman-Fried was the sole board member of Alameda insane?
Reader, I invite you to judge for yourself:
Sassoon: "Do you see at the top where it says 'Alameda Research, Unanimous Consent of Board of Directors, Stock Transfer'?"
Bankman-Fried: "Yep." [Editor's note: He kept saying "yep" instead of "yes," which shouldn't be a big deal but kind of added to the tonal issues.]
Sassoon: "This is transferring the Robinhood stock to yourself, right?"
Bankman-Fried: "Transferring it from one company that I was a partial owner of to another company I was a partial owner of. Sorry. I'm not sure it says it's transferred to me."
Sassoon: "You owned the company it was transferred to, right?"
Bankman-Fried: "I was one of the owners of both the companies."
… and then later …
Sassoon: "You were the only member of the board?"
Bankman-Fried: "It looks like it."
Sassoon: "Were you in fact the only member of the board?"
Bankman-Fried: "I'm not sure which board this refers to."
Look, this exchange dragged on in this fashion for a while, to the point that Judge Lewis Kaplan stepped in: "You owned 90% of the stock, right? Did you become a director by mistake or accident or something?"
The critical question has always been how the jury views the different witnesses and their testimony. Would the 18 (now 17) randomly selected New Yorkers find the prosecution's parade of people more compelling than Bankman-Fried and his tiny slate of defenders?
The defense walked Bankman-Fried through a series of questions where he subtly contradicted many of the major witnesses called by Department of Justice prosecutors, making this a real question. After Monday's performance, it seems a bit easier to answer.
Bankman-Fried's got two issues, as my colleague Danny Nelson wrote last week: One is that he doesn't have a lot of particularly satisfying responses to some of the DOJ's questions (from a substantive viewpoint). The other is that he doesn't have a lot of particularly satisfying responses to some of the DOJ's questions (from a "words, what do they mean?" viewpoint).
On the second issue first: He really is not coming off as a compelling or truthful witness. He's continuing to provide long-winded and overly hedged responses to some pretty basic responses. Judge Lewis Kaplan had to repeatedly tell him to answer the question that was actually asked, and to use words like "yes" or "no."
Sassoon is drawing out Bankman-Fried's less compelling side. At one point, she pulled up an FTX marketing deck, which included a slide on clawbacks, and asked him to read the first subheading. Bankman-Fried started reading a number of words, before Sassoon interrupted him and asked him to specifically read the subheading.
"The first word is preventing, the second word is clawbacks," he said, sparking disbelieving laughs from the overflow room gallery.
Other notable moments include Sassoon suggesting Bankman-Fried lied under oath before the House Financial Services Committee, and pointing out that he told a lot of people about his efforts to shape his image – even as he claimed he did not remember telling any of the nearly dozen people she pointed to about those efforts.
At one point Sassoon asked how Bankman-Fried got to the Super Bowl, where he snapped a photo with Katy Perry, Orlando Bloom, Kate Hudson and other people. Bankman-Fried said he didn't remember.
"You don't recall flying to the Super Bowl on a private plane?"
And after receiving a negative response: "Is it because you flew on a private plane so frequently?"
On the actual substance, Bankman-Fried again struggled to provide coherent responses. Sassoon asked him repeatedly if he saw a spreadsheet laying out Alameda's balances. Though Bankman-Fried testified Friday that he saw one of the tabs (the one titled "Alt 7"), he hedged – a lot – on Monday. Sassoon asked if he saw the spreadsheet. Bankman-Fried again hedged, leading to Sassoon pulling up the metadata provided by Google showing it had been looked at by Bankman-Fried's Alameda Research email account.
"I'm not sure how to interpret the metadata," Bankman-Fried said, leading to another interjection from the judge:
"You were not asked how to interpret the metadata."
Stories you may have missed
- Do Kwon's Terraform Labs Seeks Early Court Rejection of U.S. SEC Case: Terraform Labs and its co-founder Do Kwon (who's currently in a Montenegrin prison – more on this below) filed for summary judgment in the U.S. Securities and Exchange Commission's case against them.
- Crypto Exchange Linked to 3AC Founders Drops Lawsuit Against Mike Dudas: Headline seems pretty self-explanatory to be honest. OPNX sued Dudas on allegation claims.
- U.K. Publishes Final Proposals for Crypto, Stablecoin Regulation: The U.K. plans to introduce legislation for fiat-backed stablecoins next year, followed by rules for algorithmic stablecoins and other issues.
- 18:00 UTC (2:00 p.m. ET) We'll find out if I have to pay an arm and a leg if I look for a house next year after the FOMC meeting.
- 07:00 UTC (8:00 a.m. BST) We'll find out if people in the U.K. have to pay an arm and a leg if they look for a house next year.
- (Politico) House Financial Services Committee Chair and former Speaker Pro Tempore Patrick McHenry (R-N.C.) felt "pure anger" when former Speaker Kevin McCarthy (R-Calif.) was ousted and he had to take over for three weeks, he told Politico.
- (Wall Street Journal) This is an excellently reported article by the Journal about Terra's Do Kwon and how he landed up in a Montenegrin jail cell.
- (Intelligencer) Let's get a bit meta. Here's where I've been for uh four weeks? This is week five of the trial right? Right.
You can also join the group conversation on Telegram.
See ya’ll next week!
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.