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Speaker 1: Pushkin.

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Speaker 2: Hey there, it's Michael Lewis. Before we get to this episode,

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Speaker 2: I want to let you know that you can listen

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Speaker 2: to each episode of Judging Sam The Trial of Sam

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Speaker 2: McCartney A Life and Lyrics, Malcolm Gladwell's revisionist history, The

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Speaker 2: Happiness Lab from Doctor Lorie Santos, and tons of other

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Speaker 2: top shows from Pushkin. Sign up an Apple Podcasts or

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Speaker 2: at Pushkin, dot fm, Slash Plus. Welcome to Judging Sam

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Speaker 2: The Trial of Sam Bankman Freed. I'm Michael Lewis. Bankman

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Speaker 2: Freed was worth tens of billions of dollars before FTX,

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Speaker 2: his cryptocurrency exchange came apart at the seams, and now

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Speaker 2: he's being tried for financial crimes. They could send him

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Speaker 2: to prison for the rest of his life. Jacob Goldstein

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Speaker 2: host today.

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Speaker 1: I'm Jacob Goldstein, sitting in once again for Michael Lewis.

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Speaker 1: I'm an economics reporter. I covered crypto for a long

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Speaker 1: time and I also host a Pushkin show called What's

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Speaker 1: Your Problem, where I once interviewed Sam Bankman Freed. This

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Speaker 1: was back before he got indicted. Earlier this week, I

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Speaker 1: was here on the show talking to our court reporter

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Speaker 1: Lydia Jean Cott about Caroline Ellison's first day in court.

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Speaker 1: Caroline Ellison, as you probably know already, is the former

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Speaker 1: co CEO of Alameda Research. She was one of SBF's

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Speaker 1: key deputies and also his former romantic partner. So I

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Speaker 1: should say we're recording this on the evening of October twelfth,

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Speaker 1: Lydia Jan, since we talked a few days ago, a

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Speaker 1: lot has happened. We've had a couple of days of

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Speaker 1: Caroline Ellison and.

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Speaker 3: More right, yeah, lived a lifetime.

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Speaker 1: And so Lydia Jen, we have this list of things

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Speaker 1: to get through and it's a lot, right, there has

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Speaker 1: been a lifetime of the trial. The list includes, but

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Speaker 1: is not limited to, balance sheets. Of course, very excited

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Speaker 1: about that, an alleged Chinese bribe, utilitarianism, and cross examination.

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Speaker 1: Let's start with the balance sheets.

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Speaker 4: Yes, the balance sheets. So in Caroline's testimony, she talked

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Speaker 4: about how in June twenty twenty two, there were a

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Speaker 4: lot of lenders who wanted to take their money out

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Speaker 4: from Alameda, which is this trading firm which used money

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Speaker 4: from lenders to trade.

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Speaker 1: Okay, and June twenty twenty two, just for context, this

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Speaker 1: is when the crypto market is blowing up, going down,

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Speaker 1: whatever bad things happening metaphor you.

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Speaker 4: Want yes, And she talked about how during this downturn,

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Speaker 4: one of their lenders, Genesis, asked for a balance sheet.

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Speaker 1: When you say asked for a balance sheet, what does

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Speaker 1: that mean?

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Speaker 4: They wanted to know what Alameda's financial situation was.

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Speaker 1: Okay, God, they wanted to see alameda balance sheet, their assets,

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Speaker 1: their liabilities, et.

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Speaker 4: Cetera, a quick and dirty overview of how they're doing. Okay,

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Speaker 4: but they were not doing well because the lenders had

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Speaker 4: withdrawn their money and they also had a lot of

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Speaker 4: debt to FTX, which is the alleged crime here that

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Speaker 4: they had been taking money from FTX customers.

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Speaker 1: Right, So, assuming all that's true, if Alameda showed a

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Speaker 1: real balance sheet to Genesis, that was this lender, that

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Speaker 1: would have been a problem for Alameda exactly.

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Speaker 4: So what Carolyn did is she made one balance sheet,

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Speaker 4: which was an accurate balance sheet that she would normally

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Speaker 4: make and then she made seven options of other ways

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Speaker 4: to present that information, and she shared it with Sam.

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Speaker 3: Okay.

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Speaker 1: And when you say other ways to present that information, like,

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Speaker 1: there's a version of that that is shady or potentially illegal,

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Speaker 1: and another version of that's like no, just accountants can

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Speaker 1: do things different ways. What are we talking about here

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Speaker 1: when you say seven versions, Let me explain.

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Speaker 4: To you the version that they signed, which was version seven.

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Speaker 4: Ok In version seven, the money that Alameda owed to

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Speaker 4: FTX was put in a section called long term loans.

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Speaker 4: That was one of the biggest changes. Okay, and Caroline

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Speaker 4: testified that this was misleading because the customer funds were

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Speaker 4: not long term loans because the customers could withdraw their

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Speaker 4: money at any time, ah, which actually met Alameda was

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Speaker 4: in a riskier position than this balance sheet suggested.

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Speaker 1: Right, So never mind the fact that they weren't mentioning

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Speaker 1: that they're borrowing FTX customer funds. There's just the fundamental

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Speaker 1: sort of liquidity, right, These are essentially overnight loans. They're

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Speaker 1: demand they're not really loans, but it's money that could

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Speaker 1: disappear at any time. So yes, that makes sense. And

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Speaker 1: then what was you know, obviously, Caroline is not on

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Speaker 1: trial here. SBF is on trial here. So what was

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Speaker 1: the SBF piece of this balance sheet testimony?

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Speaker 3: The fact that he.

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Speaker 4: Looked at all of these balance sheets and then told

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Speaker 4: Caroline which one to use is what she testified, and

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Speaker 4: that means that he knew that Alameda was using FTX

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Speaker 4: customer funds because the first real balance sheet showed that,

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Speaker 4: and then he saw seven different versions obfuscating that information

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Speaker 4: and then told her to use number seven.

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Speaker 1: Uh huh seems compelling to me. I mean, did it

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Speaker 1: play as compelling in court? Do you find it compelling?

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Speaker 4: I find it compelling, and I do think it played

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Speaker 4: as compelling in court.

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Speaker 1: Okay, so that's balance sheets. You can check that off

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Speaker 1: our list. Alleged bribe of Chinese officials. Different vibe, kind

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Speaker 1: of international vibe. At least tell me about that one.

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Speaker 1: That one was somewhat new to me. I read about

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Speaker 1: it a little bit this week, but I hadn't read

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Speaker 1: that much about that one before.

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Speaker 4: It's probably new to you because that's not actually a

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Speaker 4: crime that Sam is being charged with this trial. The

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Speaker 4: story that Caroline told is that Alameda had a bank

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Speaker 4: account in China that was frozen because of an investigation

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Speaker 4: that was going on. Basically, Sam Makman, Freed, and other

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Speaker 4: executives at FTX and Alameda were trying to figure out

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Speaker 4: how to get the money out okay, And in the

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Speaker 4: end they decided, after trying various other ways, that the

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Speaker 4: best thing to do would be to bribe a Chinese

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Speaker 4: government official. And in this meeting there was one person

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Speaker 4: who strongly opposed and Caroline said that Sam told her

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Speaker 4: to shut the fuck up.

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Speaker 1: Okay, Wow, that is kind of intense. Let me ask

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Speaker 1: you one question. I mean, I don't recall this being

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Speaker 1: a crime that Sam, or as far as I know,

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Speaker 1: anyone has been charged with, right, So if that's the case,

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Speaker 1: why are prosecutors having Caroline testify about So why is

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Speaker 1: she even allowed to.

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Speaker 3: Talk about it?

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Speaker 4: Yeah, this crime is not part of this specific case,

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Speaker 4: but prosecutors have argued that Caroline should be allowed to

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Speaker 4: talk about it because it shows how close Sam and

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Speaker 4: Caroline were and that Sam trusted Caroline and that here's

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Speaker 4: an example of her being a trusted confidant of his.

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Speaker 4: Part of the things that Sam is being charged with

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Speaker 4: is conspiring with Caroline because in the end, she was

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Speaker 4: the person who wired money to these bank accounts of

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Speaker 4: Chinese officials.

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Speaker 1: Uh huh at his direction, presumably, as she kept saying,

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Speaker 1: presumably at his direction. Okay, next on the list, And

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Speaker 1: I'm excited for this one. Utilitarianism. We talked about this.

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Speaker 1: It actually comes up a ton right with SBF. We

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Speaker 1: talked about it the other day where there was a

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Speaker 1: thing about like he would flip the coin, where if

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Speaker 1: it came up one way, the universe would be twice

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Speaker 1: as good, and if it was the other way, the

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Speaker 1: universe would be destroyed. Right, it's this really central guiding

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Speaker 1: philosophy that he truly seems to have lived by. Right,

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Speaker 1: And is it right that that has come up some

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Speaker 1: more in Caroline's testimony.

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Speaker 5: Yes.

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Speaker 4: She talked about how Sam is a utilitarian, which means

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Speaker 4: that he believes in trying to do the maximum amount

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Speaker 4: of good for the maximum amount of people, but how

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Speaker 4: in this framework other rules that are laws that people

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Speaker 4: live by aren't really as important, laws such as don't

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Speaker 4: lie and don't steal. And she talked about how this

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Speaker 4: affected her and how before she worked at Alameda, she

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Speaker 4: would have been really surprised to hear that one day

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Speaker 4: she would be the sort of person who would make

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Speaker 4: a misleading balance sheet.

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Speaker 3: For example.

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Speaker 1: This is, as we talked about the other day, a

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Speaker 1: pretty high drama situation, right Like Caroline Elison was like

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Speaker 1: very top lieutenant, also romantically involved with Sam. Sam is

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Speaker 1: sitting right there in court. She's talking about their relationship

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Speaker 1: in many different ways, like what has that part of it?

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Speaker 1: This sort of emotional part of it, what has that

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Speaker 1: been like?

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Speaker 4: There was one moment when Caroline teared up, which was

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Speaker 4: when the prosecution asked her about the week that FTX

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Speaker 4: imploded and her reaction to it, how she felt while

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Speaker 4: that was happening, and she said it was the worst

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Speaker 4: week of her life, and then she cried around the

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Speaker 4: time where she was talking about how at the same

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Speaker 4: time though, she also felt a sense of relief because

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Speaker 4: she felt like she finally wouldn't have to lie anymore

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Speaker 4: and she could begin to take responsibility for her actions.

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Speaker 4: And that moment where she was saying that and crying,

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Speaker 4: I was in the overflow room with a lot of reporters,

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Speaker 4: and it just felt like everyone felt for her somehow.

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Speaker 4: It was just it was really hard to watch. It

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Speaker 4: was really hard to watch her breakdown like that, and

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Speaker 4: a court official gave her a Kleenex, and she blew

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Speaker 4: her nose and then moved on.

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Speaker 3: But it was a difficult moment, and.

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Speaker 1: Could you see SBF? Could you see what he was

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Speaker 1: doing or how he was responding At that.

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Speaker 4: Point, I was so focused on Caroline. But I asked

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Speaker 4: other reporters and they said, you know, as I've said earlier,

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Speaker 4: it's really hard to see his face based on how

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Speaker 4: he's sitting. But they said it looked like he was

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Speaker 4: just looking straight ahead at his laptop and continuing to type.

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Speaker 4: But I read afterwards and there was a sidebar which

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Speaker 4: the jury didn't hear, that happened earlier in the day

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Speaker 4: when prosecutors said that Sam had been laughing at things

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Speaker 4: that Caroline said, and they were worried that that was

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Speaker 4: affecting her testimony, and sometimes he was scoffing saw and

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Speaker 4: they asked the judge to tell the defense lawyers to

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Speaker 4: tell him to stop reacting. The defense lawyers disagreed that

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Speaker 4: was happening.

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Speaker 1: So then the prosecution wrapped up their questioning of Caroline

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Speaker 1: and the defense had their turn to cross examine her.

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Speaker 1: Tell me about that part.

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Speaker 4: I think everyone was really curious to see how the

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Speaker 4: defense was going to cross examine Caroline because her testimony

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Speaker 4: was so compelling, but their cross examination ended up being

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Speaker 4: really halting. The judge interrupted them, interrupted the defense lawyer,

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Speaker 4: saying that he was being repetitive. There were numerous side

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Speaker 4: panel conversations during the cross examination. The defense lawyer honestly

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Speaker 4: seemed to be bumbling a little bit. He pronounced the

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Speaker 4: name of Ryan Salem, who was the co CEO of

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Speaker 4: Alameda at some point as Ryan Salom, which just seems

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Speaker 4: like that is a person he should be used to

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Speaker 4: talking about at this point. And it was honestly, we

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Speaker 4: all left the courtroom feeling like, did we miss something?

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Speaker 4: Is this some sort of grand strategy of just seeming

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Speaker 4: like you don't really have a strategy, because nothing really

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Speaker 4: came out that made us think about Caroline's testimony in

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Speaker 4: a different light.

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Speaker 1: Huh, that's really interesting. The last time we talked, you

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Speaker 1: had talked about the cross of the previous witness being

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Speaker 1: really compelling and raising interesting doubts and so sort of

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Speaker 1: surprising that this one seems so weak to you.

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Speaker 4: I wondered if the defense was trying to be more

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Speaker 4: gentle with Caroline, because you know, she had just cried

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Speaker 4: the day before I was wondering about the optics. But

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Speaker 4: the takeaway is that we just ended up feeling confused

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Speaker 4: and not really sure what the defense was.

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Speaker 1: So we've just heard from what seems like the prosecution's

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Speaker 1: star witness. The defenses had its chance to cross examiner.

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Speaker 1: When you sort of look at the picture in total,

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Speaker 1: what do you see?

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Speaker 4: It feels like it couldn't have gone better for the prosecution.

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Speaker 4: When we were walking out of the courtroom after Caroline

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Speaker 4: had testified, I overheard lots of people talking about how

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Speaker 4: Sam reminded them of bad ex boyfriends that they had

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Speaker 4: and how they were surprised by how much they felt

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Speaker 4: for her. So I think the prosecution really did their

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Speaker 4: job here.

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Speaker 1: Okay, we'll be back in a minute with one last thing.

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Speaker 1: And now, as promised, we are back and we have

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Speaker 1: one last thing. I mean, I don't have one last thing.

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Speaker 1: Lyddy Jeene, do you have one last thing?

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Speaker 4: I do have one last thing. And it felt like

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Speaker 4: a real last thing because it seemed like the day

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Speaker 4: in court was winding down. The jury was let out

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Speaker 4: for a short break, and then the defense and prosecution

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Speaker 4: got into this impassioned argument about whether they could play

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Speaker 4: some audio clips in the trial.

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Speaker 1: Ooh, do tell yes.

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Speaker 4: So these audio clips come from a meeting that happened

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Speaker 4: in November twenty twenty two. FTX had basically imploded and

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Speaker 4: Caroline was going to have a meeting for Alameda staff

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Speaker 4: to kind of explain what happened. And they were going

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Speaker 4: back and forth about whether the judge should allowed some

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Speaker 4: audio clips from this recording. And it was very heated

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Speaker 4: and Sam's parents, I noticed, were also really invested. Sam's

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Speaker 4: mom was chewing on her glasses at one point. At

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Speaker 4: another point she was biting her nails, and the lawyers

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Speaker 4: were speaking really fast. It was an intense moment and

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Speaker 4: we were all curious what the judge would decide.

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Speaker 1: And did they play them.

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Speaker 3: Yes. The prosecution brought up a witness.

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Speaker 4: He was an engineer at Alameda and he was at

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Speaker 4: this all hands meeting and he talked a little bit

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Speaker 4: about the recording. He explained that it was secretly recorded

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Speaker 4: by someone who had just been hired three days earlier,

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Speaker 4: which I was thinking is pretty crazy.

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Speaker 3: Imagine the third day of your job.

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Speaker 1: Welcome to Alameda.

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Speaker 4: Yeah, And he set the scene a little bit. He

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Speaker 4: described how Caroline was sitting on a bean bag chair,

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Speaker 4: and she looked shrunken, and other people were kind of

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Speaker 4: sitting around her on sofas, and she basically just explained

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Speaker 4: exactly what happened. She said that Alameda had been using

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Speaker 4: FTIX customer funds they made ill liquid investments. Now FTX

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Speaker 4: customers wanted their money back and they didn't have it,

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Speaker 4: And as you might guess, Alameda employees had a lot

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Speaker 4: of questions about this.

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Speaker 1: I've been to all staff meetings, but I never quite

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Speaker 1: like that.

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Speaker 4: The engineer, for instance, you can hear him on the tape,

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Speaker 4: and he was asking how did this happen? He said,

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Speaker 4: I'm paraphrasing here, I'm assuming you had meetings and that

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Speaker 4: this wasn't just a YOLO thing. And they had a

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Speaker 4: little aside where they explained what yolo stands for once,

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Speaker 4: and Carolyne said that Gary Wong Nishad saying Sam bankmin

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Speaker 4: Freed all knew that this was happening. And in one

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Speaker 4: of the recordings you can hear very faintly, I honestly

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Speaker 4: could just barely hear it someone saying something along the

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Speaker 4: lines of who authorized this commingling of funds? And then

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Speaker 4: you hear Caroline saying Sam, I guess and then she

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Speaker 4: let out a little giggle.

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Speaker 5: Uh huh.

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Speaker 1: So that's the moment, rights the that's it.

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Speaker 4: And this is a big moment because this is her

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Speaker 4: on tape saying that Sam had authorized this, and this

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Speaker 4: is before there was an investigation into FTX. She was

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Speaker 4: not a cooperating witness. She hasn't been charged with anything,

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Speaker 4: so she doesn't have as much motivation as she did

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Speaker 4: during her earlier testimony to be pointing the finger at Sam.

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Speaker 1: So, Caroline Ellison already a lot of drama and then

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Speaker 1: we have a secret recording drama on top of drama.

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Speaker 1: Thanks LYDIGI, thank you.

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Speaker 3: So much, Jacob.

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Speaker 4: On our next episode, I check in again with Michael Lewis.

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Speaker 5: I'm here and so I'm in the rain in London

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Speaker 5: on the street. But it's killing me that I can't

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Speaker 5: see this. What I'm find is, generally is that the

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Speaker 5: things are coming up that I just left out of

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Speaker 5: the book because I thought they were sort of less

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Speaker 5: important and they didn't really tell the story. And there

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Speaker 5: are things that are interesting but sort of fit with

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Speaker 5: the characters. My little private goal is for the characters

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Speaker 5: who emerge in the trial. It's not that every detail

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Speaker 5: is going to be the same as the book because

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Speaker 5: I don't know everything, but it's that you say, oh, yes,

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Speaker 5: that's what that character does and that there isn't a

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Speaker 5: violation of that, and we'll talk Carter like linked.

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Speaker 3: Sam as I'm talking he is.

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Speaker 2: This episode of Judging Sam was hosted by Jacob Goldstein.

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Speaker 2: Lydia Gencott is our court reporter. Katherine Girardeau and Nisha

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Speaker 2: Venken produced this show. Sophie Crane is our editor. Our

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Speaker 2: music was composed by Matthias Bossi and John Evans of

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Speaker 2: stell Wagons Symphonette. Judging Sam is a production of Pushkin Industries.

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Speaker 2: Got a question or comment for me, There's a website

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Speaker 2: for that atr podcast dot com. That's at r podcast

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Speaker 2: dot com. To find more Pushkin podcasts, listen on the

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