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Speaker 1: to Judging Sam The Trial of Sam Bankman Freed. I'm
Speaker 1: Michael Lewis, and we're recording this on October seventeenth today
Speaker 1: on the show Matt Levine. Matt's a business columnist at
Speaker 1: Bloomberg News, where he writes the terrific newsletter Money Stuff.
Speaker 1: He's covered SPF and FTX closely, and he knows more
Speaker 1: about how crypto markets work than just about anybody else.
Speaker 1: I wanted to talk to him about a lot of things,
Speaker 1: among them how his early conversations with Sam might have
Speaker 1: foreshadowed the FTX collapsed and where are the eight billion
Speaker 1: dollars this whole trial is about actually went And I
Speaker 1: also wanted to talk to him about how is reading
Speaker 1: of the portrait I painted of Sam in my book
Speaker 1: has changed now that Sam's on trial. I have a
Speaker 1: question to you. I don't want to forget you were
Speaker 1: bewildered by the response to the book, like it was
Speaker 1: just weird the initial response to the book. Am I
Speaker 1: misquoting you?
Speaker 2: I don't know, Like the days lying after the trial,
Speaker 2: I think there was like a desire for people to
Speaker 2: either be pro or anti SPF. And to be clear,
Speaker 2: everyone in the world except for like his parents, is
Speaker 2: anti SPF, and so it was sort of convenient for
Speaker 2: you to be the pro SPF guy, even if he
Speaker 2: were being like, yeah, I think this guy's innocently like,
Speaker 2: is not that necessary to get mad at that, Like
Speaker 2: it's okay, everyone thinks he guilty, but people were about it.
Speaker 2: You for like kind of defending him.
Speaker 1: But you said something interesting to me when I sent
Speaker 1: you this note asking you to come on. You said
Speaker 1: that when you finished the book, just on the basis
Speaker 1: of the facts in the book, you thought, I don't
Speaker 1: want to put words in your mouth, but it actually
Speaker 1: sort of like convinced you even more of his guilt,
Speaker 1: maybe slightly changed the way you felt about what he'd done.
Speaker 2: I feel like there have been two narratives of this,
Speaker 2: which are one his narrative, which is, I like made
Speaker 2: a series of understandable mistakes and lost all that money,
Speaker 2: and then everyone else's narrative, which is he's an evil
Speaker 2: genius who stole all this money to spend on political
Speaker 2: donations and Bahama's real estate and like, you know, cackled
Speaker 2: gleefully as he stole the money. And neither of those
Speaker 2: is that compelling. And like between those two his like, ah,
Speaker 2: I'm just an innocent guy, you know, had had some legs.
Speaker 2: But I think that like what came clear came clear
Speaker 2: to me in the book, and like the somethings that
Speaker 2: I should have known this already. He's sort of a
Speaker 2: classic scammer figure in the sense of, like the core
Speaker 2: thing he did was take ridiculous risks with his investors,
Speaker 2: with his customers money while saying and probably believing himself
Speaker 2: that he wasn't right. Like part of the problem is
Speaker 2: that the guy loves taking risks, but part of the
Speaker 2: problem is that like he can sort of like sit
Speaker 2: down and look at you in the eye and say, oh, no,
Speaker 2: I'm not taking risk. This was all totally safe and
Speaker 2: like kind of believe it himself. And I think that's
Speaker 2: like the what I got from the book is like
Speaker 2: a real portrait of a guy who is like that,
Speaker 2: who is a wild risk taker who sort of doesn't
Speaker 2: perceive it that way. And like that's like a really
Speaker 2: classic profile of someone doing a financial fraud, right, Like
Speaker 2: that's that's kind of how everyone does it. And so
Speaker 2: to me, reading the book like like sort of made
Speaker 2: sense of what happened in a way that is like
Speaker 2: less bad than like the worst story people tell about
Speaker 2: Sam bekmunfreed, but also in a way that is like
Speaker 2: fully sufficient to convict him of fraud, like and like
Speaker 2: and is in fact the normal way forra it happens.
Speaker 1: What was the emotional takeaway when you when you look
Speaker 1: at what's happening now and you look at the likely
Speaker 1: that he's going to go to jail for forty years
Speaker 1: or whatever, how do you feel about it?
Speaker 2: Look, I feel bad for everyone to whom bad things happen,
Speaker 2: which includes you know, the people who lost money on
Speaker 2: ft X and also him and his parents. You know,
Speaker 2: like I think that, don't you know, it's it's sad
Speaker 2: for anyone to go to prison. But that said, I
Speaker 2: mean like it did like make like a little bit
Speaker 2: make me a share in like the outrage that people
Speaker 2: have at him, because like, you really can't do that.
Speaker 2: You're not supposed to do that. You know. I've talked
Speaker 2: to him, you know, not like this week, but in
Speaker 2: the past, and I think that he he does like
Speaker 2: really coherently and convincingly present this picture of like, oh no,
Speaker 2: it all made sense. And I think that like having
Speaker 2: the fuller portrait of like what he thought all made
Speaker 2: sense makes me kind of mad and like, you know,
Speaker 2: it didn't make sense. You just were you know, you
Speaker 2: just you had like a blind spot in your mind
Speaker 2: about like the risks you were taking and like and
Speaker 2: like your own sort of status is a charmed person
Speaker 2: who would definitely get all the money back and it
Speaker 2: was no problem. I mean, the story in your book
Speaker 2: that is so damning, I think is the thing about
Speaker 2: the very early days of Alameda where they like, thank
Speaker 2: he just placed some money, and he's like, oh, it's
Speaker 2: like an eighty percent chance we'll get it back. It's
Speaker 2: no problem. We don't have to tell you about it.
Speaker 2: And then like they get it back and he's like,
Speaker 2: ah see, I'm always right, and like that's like that's
Speaker 2: like the worst possible lesson for him to learn, right,
Speaker 2: Like had like had they never gotten the money back,
Speaker 2: and like, had he been fired, that would have been it.
Speaker 2: He would be like, go be a trader at Jane
Speaker 2: Street orriever, right, Like he'd been fine, right, But instead
Speaker 2: he's like, I can never mess up. And then he
Speaker 2: lost like eight billion dollars instead of four million dollars,
Speaker 2: and now he's like gonna go to job forever.
Speaker 1: So I think that's exactly right. When people ask me
Speaker 1: what chapter to if they're going to excerpt a chapter
Speaker 1: or read a chapter, you get a feel I say
Speaker 1: that chapter because that's the foreshadowing of what's going to happen.
Speaker 1: And what also happened in that moment was, you know,
Speaker 1: he had this pool of twenty effective altrus who were
Speaker 1: working with him. Half of them decide he's like a
Speaker 1: criminal or are so catastrophically sloppy that he might as
Speaker 1: well be a criminal. But the half who stay in,
Speaker 1: you know, including Caroline and his shot and Gary, they
Speaker 1: become convinced to the narrative that like Sam's right all
Speaker 1: the time, that becomes the new rule. So that that
Speaker 1: creates kind of the psychology of FTX that it's it's
Speaker 1: sort of like that Sam is beyond questioning, and that
Speaker 1: obviously that leads to what it leads to. Anyway, you mentioned,
Speaker 1: I want to talk about your interactions with Sam bankman
Speaker 1: Free for a bit. One of your actual interactions with
Speaker 1: Sam Bcmanfree has become evidence in the trial. Can you
Speaker 1: explain this interaction and can you explain how the prosecutors
Speaker 1: have used it.
Speaker 2: So I've done two Bloomberg podcasts with him, and the
Speaker 2: first of them it was like maybe a little early
Speaker 2: in his celebrity. I was twenty twenty one, I want
Speaker 2: to say, and we just like we just have like
Speaker 2: a very geeky conversation about crypto market structure, just like
Speaker 2: how do these exchanges work? And I didn't really know anything,
Speaker 2: but like I come from a sort of you know,
Speaker 2: traditional finance equity market structure background, so we could have it.
Speaker 2: And you know he does too, right, he came from
Speaker 2: Chan Street, so we could have an interesting conversation about like,
Speaker 2: you know, pre funding trades on exchanges, and like, you know,
Speaker 2: one thing we talked about a lot was there had
Speaker 2: been this epidemic of crypto exchanges blowing up, and like
Speaker 2: one thing that FCX was promising is we have a
Speaker 2: better sort of risk management system. And he, in his
Speaker 2: role as sort of like an elder statesman of crypto,
Speaker 2: like walked through all the bad ways that all the
Speaker 2: other exchanges did it, which is basically like they didn't
Speaker 2: have any system. They like blew people out of trades
Speaker 2: sloppily and then lost a lot of money. They didn't
Speaker 2: have any sort of insurance fund, and so they had
Speaker 2: to like basically haircut winning traders in order to you know,
Speaker 2: make up for losses by losing traders. And he was like,
Speaker 2: and we have a different system. We have an intelligence
Speaker 2: system for blowing people out. We don't just like put
Speaker 2: in market orders to sell stuff on the exchange. We
Speaker 2: like have liquidity providers who like step in, and we
Speaker 2: have an insurance fund too, but we never really had
Speaker 2: to draw on that. And so the interaction that gets
Speaker 2: played at the trial is him saying we've never really
Speaker 2: essentially says, we've never really had losses in a day,
Speaker 2: like we've always been able to stop losing trades before
Speaker 2: they cause any material loss to FTX, And what prosecutors
Speaker 2: say is that that's not true, and they had a
Speaker 2: big loss early on that sort of like ate away
Speaker 2: at their entire insurance fund. This is in the context
Speaker 2: of like also Gary Wan testifying that the insurance fund
Speaker 2: was essentially a fake and that they like displayed on
Speaker 2: their web page a fake number that was generated by
Speaker 2: a random number generator to say, this is how much
Speaker 2: money we have backing FTX trades. So the thing that
Speaker 2: he told me about like ftx's risk management was in
Speaker 2: the prosecution story essentially false, and it's like, you know,
Speaker 2: that's like sort of the heart of the fraud is
Speaker 2: that he was telling everyone not only are we like
Speaker 2: not stealing the money, but we're like doing an extra
Speaker 2: good job of risk management to make sure that your
Speaker 2: money doesn't get lost. And in fact, it turns out
Speaker 2: they were doing kind of an extra bad job.
Speaker 1: You had this other interaction with it than that. It
Speaker 1: gets repeated over and over and I think slightly misconstrued,
Speaker 1: but maybe I'm wrong. Like our listeners if they if
Speaker 1: they're loitering in the vicinity of this subject for very long?
Speaker 1: Are going to run across this thing that you did
Speaker 1: with him all night? It must have been the second
Speaker 1: podcast interview you did, Yeah, exactly, and it was on
Speaker 1: the odd Lots podcast, the Bloomberg on Lots podcast. Can
Speaker 1: you explain what you were talking about and what he
Speaker 1: said and how it's been misconstrued?
Speaker 2: We had him on odd loads repeatedly because he would
Speaker 2: just sort of like talk about whatever you wanted to
Speaker 2: in like the crypto world, in a way that seemed
Speaker 2: very like open and candidate and not always in his
Speaker 2: best interests. Yes, in hindsight, it was not as open
Speaker 2: and candidate as I thought, but it was even more
Speaker 2: not in his best interest to me. I don't remember
Speaker 2: what the topic of this. It was just like we
Speaker 2: were like, hey, let's like, you know, talk about crypto stuff.
Speaker 2: And so one thing that was on my mind at
Speaker 2: the time was like a corner of decentralized finance called
Speaker 2: yield farming, which is basically I mean, you can read
Speaker 2: his explanation because it's famous now, but I was like,
Speaker 2: explain to me yield farming, and he was like, well,
Speaker 2: it's like you have a box and you have you
Speaker 2: put some token, you get some money in the box.
Speaker 2: Then you're just some tokens, and you say the box
Speaker 2: is like the greatest thing in the world and it's
Speaker 2: going to replace all banks. And then you sell the
Speaker 2: tokens for a lot of money and you can put
Speaker 2: more money in the box, and then like the tokens
Speaker 2: go up and people are like, oh, I should buy
Speaker 2: some more of this, and like that's the sort of
Speaker 2: explanation of yield farming. And if you're like, that doesn't
Speaker 2: make any sense, like that's what I said, and that's
Speaker 2: what everyone said. I said to him something like you
Speaker 2: just said I'm in the ponzi business and it's pretty good,
Speaker 2: and he was like, yeah, I kind of what I
Speaker 2: think that, Like people misinterpreted from that is like, if
Speaker 2: you take that out of context, it sounds like I'm
Speaker 2: saying to him, your business is a ponzi And he's like, yeah,
Speaker 2: but that's not true at all. What he was saying
Speaker 2: is that a lot of this, like yield farming, like
Speaker 2: token stuff in crypto in like decentralized finance, is pretty
Speaker 2: ponzi ish. Yeah, And when I said it sounds like
Speaker 2: you're in the ponzi business, I just meant like he was,
Speaker 2: you know, running in exchange where you could train those tokens.
Speaker 2: But I think that at the time, when people listen
Speaker 2: to this, when people who like are involved in crypto
Speaker 2: listen to this, what they what they took away was
Speaker 2: Sam Bankman Fried is trash talking his competition, right, Like
Speaker 2: his competition in some sense is decentralized finance. Right, Like
Speaker 2: he runs one of the biggest at the time centralized exchanges.
Speaker 2: He wants people to trade with him rather than on
Speaker 2: the blockchain and decentralized finance exchanges, which like at the
Speaker 2: time seemed like a real competitor to the more traditional
Speaker 2: financial system that he was kind of imitating at FDx.
Speaker 2: And so he's saying all that stuff is like Ponzi stuff,
Speaker 2: and I'll trade the tokens. But like, I don't, you know,
Speaker 2: like he was not he was not putting it in
Speaker 2: its best light. And I think people he wasn't confessing
Speaker 2: to run now, he wasn't confessing, and he was being
Speaker 2: very cynical about crypto, right, he was being cynical about
Speaker 2: narrowly DeFi but more broadly like the philosophy of crypto
Speaker 2: that made people in crypto mad but it all so
Speaker 2: like it sort of explains why people like me found
Speaker 2: him interesting, because he just never seemed like a crypto
Speaker 2: true believer. He seemed like a guy from traditional finance
Speaker 2: who's like, Wow, here's this huge pot of money that
Speaker 2: I can make. He didn't like he was like, oh, yeah,
Speaker 2: crypto is gonna change the world. He's like, yeah, it's
Speaker 2: a box. You put money in the box. It's fine.
Speaker 2: So I think that, Like it seemed at the time
Speaker 2: like he had a sort of like charming and refreshing
Speaker 2: level of cynicism, but then of course, in hindsight, like
Speaker 2: not only did he have much more centicism, but also
Speaker 2: like the trade he described, he ends up by being like,
Speaker 2: you can put all that you can, like say, this
Speaker 2: box has like a huge market value, and then you
Speaker 2: can borrow against it, and then when you borrow against it,
Speaker 2: you never have to pay the money back, and like
Speaker 2: when the market value collapses, you have all the money
Speaker 2: and someone else has left with the losses. And he
Speaker 2: was like describing like a hypothetical trade and decentralized finance.
Speaker 2: But of course he was also like precisely describing what
Speaker 2: FTX and olimedia ended up doing, and so it is
Speaker 2: in that sense, you know it was foreshadowing.
Speaker 1: We'll be right back. Welcome back to judging Sam the
Speaker 1: trial of Sam Bankman freed. So you've taken I think
Speaker 1: more of an interest in crypto finance as serious than
Speaker 1: anybody in the world. You've described it better than anybody
Speaker 1: in the world. You've written really well about crypto. You've
Speaker 1: written sometimes kind of cynically about crypto. I'm curious when
Speaker 1: you make crypto people angry with what you write. Are
Speaker 1: they different from other groups who get angry with what
Speaker 1: you write. Is there a different kind of tone around
Speaker 1: crypto than there is around other parts of finance.
Speaker 2: It's funny. My go to example for years of people
Speaker 2: who get angriest about what I read are the people
Speaker 2: who are mad about high frequency training. That's just true.
Speaker 2: So that's like kind of your fault. It is kind
Speaker 2: of Seriously, people get really mad at me about like
Speaker 2: hiratingryto people. I don't know. I mean, like I definitely
Speaker 2: mute a lot of people on Twitter, right, but like
Speaker 2: I don't I wouldn't say that, like like contrary to stereotypes,
Speaker 2: I would not say that I get a lot of
Speaker 2: like weird or furious reactions When I write cynically about
Speaker 2: critic I think that, you know, it's a big world
Speaker 2: and there are a lot of people with different views.
Speaker 2: But I think that like, broadly speaking, people in crypto
Speaker 2: think of me as being fairly generous to them. Like,
Speaker 2: you know, there's no there's no crypto like mindset, right,
Speaker 2: Like crypto isn't a thing, right, It's just like a
Speaker 2: collection of people, right, And so it is. I think
Speaker 2: it's I think it's like really true and sociologically interesting
Speaker 2: that like the beginning of crypto is really oppositional to
Speaker 2: traditional finance, where like, you know, the openness of the
Speaker 2: blockchain and storing your money yourself rather than at a
Speaker 2: bank that's going to use it to make risky bets.
Speaker 2: Is like those are the obvious appeals of crypto, and
Speaker 2: then over time the numbers keep going up, and so
Speaker 2: all these people flock into speculate and you have people
Speaker 2: like Sam Bankman Freed who are like, I can make
Speaker 2: a fortune arbitraging bitcoin prices between you know, Asia and America.
Speaker 2: And when those people get into it, they just want
Speaker 2: to make money, and they come from in many cases,
Speaker 2: is like in his case, in three hours case, they
Speaker 2: come from traditional financial firms where the way you make
Speaker 2: money is like you spot an arbitrage and you lever
Speaker 2: it up one hundred times, and it just looks exactly
Speaker 2: like the sort of traditional financial system that blew up
Speaker 2: in two thousand and eight, except it's unregulated, it's offshore,
Speaker 2: and you know it's taking money from retail speculators, and
Speaker 2: it's like run by twenty eight year olds, and it
Speaker 2: blows up like as terribly as you could hope for,
Speaker 2: and like everyone goes to jail. Its shape is very
Speaker 2: reminiscent of two thousand and eight.
Speaker 1: Right, I want to swerve for a second and talk
Speaker 1: a bit about your career, if that's all right, Can
Speaker 1: we do that? Sure? I want to know where you
Speaker 1: come from, Like where'd you grow up and how did
Speaker 1: you end up getting into finance and then end up
Speaker 1: writing about finance.
Speaker 2: I grew up on my island. I precociously read Liar's
Speaker 2: Poker as and I was like, this sounds fun. If
Speaker 2: you had found me at some point, like in high school,
Speaker 2: I would have been like Alvia, you know, Salid Brothers,
Speaker 2: Bond Trader or whatever. But then I like got to
Speaker 2: college and very much swerved and I was a classics
Speaker 2: major and I did not take economics. I had friends
Speaker 2: who took like X ten, the big economics class, and
Speaker 2: I would like leave the lunch table when they were
Speaker 2: talking about it was like this is boring, and like
Speaker 2: there was you know, recruiting senior year when it's like, oh, like,
Speaker 2: you go work at an investment bank, and I didn't
Speaker 2: really do it. I graduated with no job. I was like,
Speaker 2: she got a job, and I was able to use
Speaker 2: connections to get a job teaching high school Latin for
Speaker 2: a year. And I did what everyone in that situation
Speaker 2: then does, which is I went to law school. And
Speaker 2: in law school I sort of rediscovered my interest in like,
Speaker 2: you know, financial markets and mergers and acquisitions and stuff.
Speaker 2: And so then I became an M and a lawyer.
Speaker 2: And in two thousand and seven, if you were an
Speaker 2: M and a lawyer, what you wanted to be was
Speaker 2: an investment banker. So then I became an investment banker.
Speaker 2: And then I did that for a while, and then
Speaker 2: I really didn't want to do that anymore, so I
Speaker 2: became a writer on the internet.
Speaker 1: So that transition, Why did you decide?
Speaker 2: So it's not like liar's poker directly sent me to
Speaker 2: investment banking, but like it did, like pave the way
Speaker 2: a little bit, And I know that that's like you
Speaker 2: regret that or whatever, but you know, it's fine.
Speaker 1: Your path resembles my own path, Like I had this
Speaker 1: hostility the economics department when I was in college and
Speaker 1: didn't have a job when I graduated and all that. Anyway,
Speaker 1: it's I'm curious about that transition out of investment banking
Speaker 1: to writing. Why did you decide you didn't want to
Speaker 1: be an investment banker anymore.
Speaker 2: I started as an investment banker as like an associate
Speaker 2: in a weird desk where I was like structuring stuff
Speaker 2: and I was doing interesting stuff involving like math and
Speaker 2: law and like getting into the guts of things. But
Speaker 2: then as you get more senior, you know the job
Speaker 2: is ultimately a sales job, and so I was spending
Speaker 2: less time, you know, learning and understanding things, and more
Speaker 2: time getting on planes to give clients updates. So I
Speaker 2: was getting worse at it. I was enjoying it less,
Speaker 2: and I vaguely imagined being a writer, and so like
Speaker 2: the sort of you know, the lines crossed and it
Speaker 2: became a good time to leave.
Speaker 1: I want to talk to you a bit about there's
Speaker 1: a there's a part of my book. I almost called you.
Speaker 1: I called you. It's just just to clear the air here.
Speaker 1: I thought it was really funny that I was a
Speaker 1: few months into like hanging around with Sam and I
Speaker 1: was questioning whether this was the character I wanted to
Speaker 1: be with. And I thought, I'll call Matt Levine and
Speaker 1: ask him for advice. You remember this call, I said,
Speaker 1: I called you, and I said, I said, I said,
Speaker 1: if you were going to put me with any character
Speaker 1: in Crypto, who would it be? And you said, we're
Speaker 1: not even thinking about Sam Bay and Freed. And it
Speaker 1: was one of those little things that gave me confidence
Speaker 1: I was in the right place because I hadn't actually
Speaker 1: been paying all that much attention to Crypto, and I
Speaker 1: thought I was in the right place. But I didn't know.
Speaker 2: And that's why you're giving me ten percent of the
Speaker 2: movie though, right, did you.
Speaker 1: Get the check yet? We'll be right back, welcome back.
Speaker 1: I'm still wrestling with this. When I all blew up
Speaker 1: and all right, there's some pile of money missing, it
Speaker 1: was a little unclear how big that pile of money
Speaker 1: missing was it seems to see it still be a
Speaker 1: little unclear.
Speaker 2: It's completely unclear to me. I have no idea, and.
Speaker 1: So are you even watching if you've noticed that, Like
Speaker 1: the bankruptcy people, the number they keep they say they
Speaker 1: found keeps going up, and the last number was like
Speaker 1: seven point three billion, and the customer deposits missing was
Speaker 1: eight point six billion. What I'm wondering is to what
Speaker 1: extent the money is lost, like lost in a bad trade,
Speaker 1: and to what extent's lost like, oh, it's in some
Speaker 1: exchange in South Korea or some bank they didn't pay
Speaker 1: attention to. And I was just wondering whether you were
Speaker 1: one following that doesn't sound like you're following that.
Speaker 2: My sense is that there was a lot of money
Speaker 2: lost on bad trades. I think that, like.
Speaker 1: It's unclear what it's unclear what those bad trades were.
Speaker 1: That's there.
Speaker 2: I agree. I think that, like there are interesting theories
Speaker 2: that Alameda was sort of a lost leader to get
Speaker 2: people onto FTX, right, there's like a theory that Alameda
Speaker 2: was sort of regularly losing money on trades, either because
Speaker 2: it was a market maker that was not doing a
Speaker 2: very good job of market making and so you would
Speaker 2: always like get a good trade on FTX because Alameda
Speaker 2: was always losing money on the other side, or because
Speaker 2: Alameda was the sort of counterparty for a lot of liquidations,
Speaker 2: and so if you got liquid on FTX, because the
Speaker 2: trade moved against you, Alameda was on buying it, and
Speaker 2: Alameda was constantly losing money by taking position by catching
Speaker 2: falling knives. Basically, I think there's like probably some truth
Speaker 2: to both of those theories, but not that much because
Speaker 2: I don't think by the end when FTX was huge,
Speaker 2: I don't think Alameda was a huge percentage of volume.
Speaker 2: I think like the shape of those answers is probably
Speaker 2: like a little bit true, but it's not, like it
Speaker 2: doesn't really explain where a lot of the money went.
Speaker 1: And in addition, if that were true, the prosecutors would
Speaker 1: have teased us have Caroline.
Speaker 2: Yes and no, because I like, to me that story
Speaker 2: is like that story sounds like a Ponzi scheme, but
Speaker 2: it's not intuitively obvious that it's a Ponzi scheme. Like
Speaker 2: I think, like if you heard that story, you're like, oh,
Speaker 2: like they were they lost money by doing trades that
Speaker 2: were good for clients, and like that was good, and
Speaker 2: like they were just on the losing side of trades
Speaker 2: and that was innocent. Right, It's not that bad a
Speaker 2: story intuitively. It's just like when you sort of trace
Speaker 2: it through, you're like, oh, so it was a Ponzi scheme.
Speaker 2: They were like giving investors money by taking it from
Speaker 2: other investors.
Speaker 1: Are there any other theories bouncing around? Oh?
Speaker 2: I mean, like the standard theory is, like they spend
Speaker 2: a lot of money on political donations, they spend a
Speaker 2: lot of money on real estate. Like part of the answers,
Speaker 2: they spent five hundred million dollars on a stake in
Speaker 2: Anthropic that was like a great bet and it's now
Speaker 2: worth probably billions of dollars, and so like, as like
Speaker 2: a legal matter, you're not supposed to like take your
Speaker 2: customer money and bet it on early stage AI startups,
Speaker 2: but like that might have worked out, right, And like
Speaker 2: the real estate stuff is like I don't really pretend
Speaker 2: to understand the Bahamas real estate market, but presumably they
Speaker 2: can sell those things for you know, like around what
Speaker 2: they paid for. Right, So some of the money is
Speaker 2: not gone in the sense of like flush down the toilet,
Speaker 2: but it.
Speaker 1: Is in the wrong place.
Speaker 2: Yeah, it's like it's like a lot of fraudsters like
Speaker 2: take customer money and buy a mention for themselves and
Speaker 2: then you can sell the mansion and give them money back.
Speaker 2: But like it's still not okay.
Speaker 1: Yeah, no, I get that. So what questions remain in?
Speaker 1: What questions are you still asking about this? Like to
Speaker 1: what extent is your mind not come to rest on
Speaker 1: the FTX story and you think there are things you
Speaker 1: still want to know?
Speaker 2: I I mean, honestly, the main answer is, I assume
Speaker 2: that Sam will testify. I think that, like the public
Speaker 2: perception of him is really down right now for obvious reasons.
Speaker 2: But I do think that like he like made this
Speaker 2: work for a while people were buying what he was selling.
Speaker 2: And I think he was always a good talker, right,
Speaker 2: And he always like gave you the impression of being
Speaker 2: quite candid, right, And he always was, you know, sort
Speaker 2: of like quick witted and like in his weird way personable.
Speaker 2: I assume he will testify. I assume he will tell
Speaker 2: a story that is like internally coherent. I assume that
Speaker 2: when he's asked even moderately challenging questions, he will have
Speaker 2: quick and like at least superficially reasonable sounding answers. Right,
Speaker 2: I'm interested to see like how he frames the story
Speaker 2: and how compelling it is to me and to everyone
Speaker 2: else and to a jury. And the other class of
Speaker 2: assets that we haven't talked about is the Bankercy estate
Speaker 2: is trying to restart FTX. They're like, oh, we're gonna,
Speaker 2: you know, probably rebrand it and start up an exchange
Speaker 2: again and see what happens. You could imagine the government
Speaker 2: saying like, you can never restart this again. All this
Speaker 2: ip has to be thrown into the ocean, never speak
Speaker 2: of FDIX again. But like they're not doing that. There's
Speaker 2: on and so I don't I mean, there's some chance
Speaker 2: that they'll get back more than like a penny, more
Speaker 2: than the deposits. I don't think they'll do that before
Speaker 2: sam sentencing. And I don't think that the you know,
Speaker 2: the legal system sort of frowns upon like talking about that,
Speaker 2: because like it feels like like a coin flip, right,
Speaker 2: it feels like luck. Right, it feels like you did
Speaker 2: the bad thing and you stole the customer money and
Speaker 2: you put some of it into these lottery tickets and
Speaker 2: then you put the rest of it into like private jet.
Speaker 2: It's for yourself, and like the lottery, your tickets won.
Speaker 2: But that's not like your that doesn't like go to
Speaker 2: your moral guilt. It it's just like a you know,
Speaker 2: you have to get lucky. But what's interesting is like,
Speaker 2: you know, after the fact, like Sam was going around
Speaker 2: trying to save the firm, right, He's trying to find
Speaker 2: a buyer, and at the point when he was doing that,
Speaker 2: it was like a little too late, you know, like
Speaker 2: it was like a little you know, too obvious how
Speaker 2: badly things had gone and how much rest of the
Speaker 2: money was missing. And so I think that like one
Speaker 2: story that Sam will tell is like if he had
Speaker 2: only waited twelve hours before signing the bankruptcy papers, he
Speaker 2: could have saved this whole thing, Right, I don't think
Speaker 2: that's true, But if it turns out that the thing
Speaker 2: has positive value, then he probably wouldn't be going to jail,
Speaker 2: And he certainly wouldn't be going to jail for as
Speaker 2: line as he's looking at here. I think that filing
Speaker 2: for bankruptcy and then getting arrested and then getting the
Speaker 2: money back is just like a terrible order of operations
Speaker 2: for him.
Speaker 1: That's right in addition to the story, Sam tells on
Speaker 1: the stand, is there anything else you I'm looking for
Speaker 1: out of this process? So do you feel like you
Speaker 1: now more or less know what happened? And not much
Speaker 1: that comes out is going to cause you to update
Speaker 1: your understanding.
Speaker 2: So I'm always curious, like how many people knew and like,
Speaker 2: to the extent the number is small, how you could
Speaker 2: keep it small? And I think that, Like, I feel
Speaker 2: like I'm kind of getting satisfied with the answers to that, right,
Speaker 2: Like it does seem like all of the inner circle
Speaker 2: are testifying saying, yeah, we knew it was fraud, with
Speaker 2: like Nishad being like I learned late that it.
Speaker 1: Was fraud in September and.
Speaker 2: Yeah, which is weird because he's sort of integral to
Speaker 2: some of the coding of the fraud. But there is
Speaker 2: kind of an explanation for how other people didn't know that, right,
Speaker 2: which is like some combination of Garrio at.
Speaker 1: Most of the code himself in shortand.
Speaker 2: Sam was a weird passive aggressive manager. Yeah, nobody knew anything,
Speaker 2: but it's still weird, right, I mean, it's still weird
Speaker 2: that the accepted narrative is like five people knew it's
Speaker 2: it's still puzzling to me, but I think that like
Speaker 2: for sort of groping towards an answer on it.
Speaker 1: Thank you for coming on. I really appreciate the time
Speaker 1: and see you down the road. All right.
Speaker 2: Thanks.
Speaker 1: We'll be back in your feed soon with more expert
Speaker 1: analysis and news from Sam Bangmanfreed's trial. Thanks for listening.
Speaker 1: Lydia Gencott is our court reporter. Katherine Girardeau and Nisha
Speaker 1: Venken produced this show. Sophie Crane is our editor. Our
Speaker 1: music was composed by Matthias Bossi and John Evans of
Speaker 1: stell Wagons. Symphonet Judging Sam is a production of Pushkin Industries.
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