WEBVTT - Judging Sam: Ellison Testimony Wraps Up

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<v Speaker 1>Pushkin.

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

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<v Speaker 2>at Pushkin, dot fm, Slash Plus. Welcome to Judging Sam

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<v Speaker 2>The Trial of Sam Bankman Freed. I'm Michael Lewis. Bankman

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<v Speaker 2>Freed was worth tens of billions of dollars before FTX,

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<v Speaker 2>his cryptocurrency exchange came apart at the seams, and now

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<v Speaker 2>he's being tried for financial crimes. They could send him

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<v Speaker 2>to prison for the rest of his life. Jacob Goldstein

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<v Speaker 2>host today.

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

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<v Speaker 1>I'm an economics reporter. I covered crypto for a long

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<v Speaker 1>time and I also host a Pushkin show called What's

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<v Speaker 1>Your Problem, where I once interviewed Sam Bankman Freed. This

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<v Speaker 1>was back before he got indicted. Earlier this week, I

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<v Speaker 1>was here on the show talking to our court reporter

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<v Speaker 1>Lydia Jean Cott about Caroline Ellison's first day in court.

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<v Speaker 1>Caroline Ellison, as you probably know already, is the former

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<v Speaker 1>co CEO of Alameda Research. She was one of SBF's

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<v Speaker 1>key deputies and also his former romantic partner. So I

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

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<v Speaker 1>Lydia Jan, since we talked a few days ago, a

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<v Speaker 1>lot has happened. We've had a couple of days of

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<v Speaker 1>Caroline Ellison and.

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<v Speaker 3>More right, yeah, lived a lifetime.

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<v Speaker 1>And so Lydia Jen, we have this list of things

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<v Speaker 1>to get through and it's a lot, right, there has

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<v Speaker 1>been a lifetime of the trial. The list includes, but

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<v Speaker 1>is not limited to, balance sheets. Of course, very excited

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<v Speaker 1>about that, an alleged Chinese bribe, utilitarianism, and cross examination.

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<v Speaker 1>Let's start with the balance sheets.

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

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<v Speaker 4>about how in June twenty twenty two, there were a

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<v Speaker 4>lot of lenders who wanted to take their money out

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<v Speaker 4>from Alameda, which is this trading firm which used money

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<v Speaker 4>from lenders to trade.

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<v Speaker 1>Okay, and June twenty twenty two, just for context, this

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<v Speaker 1>is when the crypto market is blowing up, going down,

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<v Speaker 1>whatever bad things happening metaphor you.

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<v Speaker 4>Want yes, And she talked about how during this downturn,

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<v Speaker 4>one of their lenders, Genesis, asked for a balance sheet.

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<v Speaker 1>When you say asked for a balance sheet, what does

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<v Speaker 1>that mean?

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<v Speaker 4>They wanted to know what Alameda's financial situation was.

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<v Speaker 1>Okay, God, they wanted to see alameda balance sheet, their assets,

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<v Speaker 1>their liabilities, et.

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

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<v Speaker 4>but they were not doing well because the lenders had

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<v Speaker 4>withdrawn their money and they also had a lot of

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<v Speaker 4>debt to FTX, which is the alleged crime here that

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<v Speaker 4>they had been taking money from FTX customers.

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<v Speaker 1>Right, So, assuming all that's true, if Alameda showed a

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<v Speaker 1>real balance sheet to Genesis, that was this lender, that

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<v Speaker 1>would have been a problem for Alameda exactly.

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<v Speaker 4>So what Carolyn did is she made one balance sheet,

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<v Speaker 4>which was an accurate balance sheet that she would normally

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<v Speaker 4>make and then she made seven options of other ways

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<v Speaker 4>to present that information, and she shared it with Sam.

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<v Speaker 3>Okay.

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<v Speaker 1>And when you say other ways to present that information, like,

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<v Speaker 1>there's a version of that that is shady or potentially illegal,

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<v Speaker 1>and another version of that's like no, just accountants can

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<v Speaker 1>do things different ways. What are we talking about here

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<v Speaker 1>when you say seven versions, Let me explain.

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<v Speaker 4>To you the version that they signed, which was version seven.

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<v Speaker 4>Ok In version seven, the money that Alameda owed to

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<v Speaker 4>FTX was put in a section called long term loans.

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<v Speaker 4>That was one of the biggest changes. Okay, and Caroline

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<v Speaker 4>testified that this was misleading because the customer funds were

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<v Speaker 4>not long term loans because the customers could withdraw their

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<v Speaker 4>money at any time, ah, which actually met Alameda was

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<v Speaker 4>in a riskier position than this balance sheet suggested.

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<v Speaker 1>Right, So never mind the fact that they weren't mentioning

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

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

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

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<v Speaker 1>disappear at any time. So yes, that makes sense. And

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<v Speaker 1>then what was you know, obviously, Caroline is not on

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<v Speaker 1>trial here. SBF is on trial here. So what was

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<v Speaker 1>the SBF piece of this balance sheet testimony?

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<v Speaker 3>The fact that he.

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<v Speaker 4>Looked at all of these balance sheets and then told

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<v Speaker 4>Caroline which one to use is what she testified, and

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<v Speaker 4>that means that he knew that Alameda was using FTX

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<v Speaker 4>customer funds because the first real balance sheet showed that,

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<v Speaker 4>and then he saw seven different versions obfuscating that information

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<v Speaker 4>and then told her to use number seven.

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<v Speaker 1>Uh huh seems compelling to me. I mean, did it

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<v Speaker 1>play as compelling in court? Do you find it compelling?

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<v Speaker 4>I find it compelling, and I do think it played

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<v Speaker 4>as compelling in court.

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<v Speaker 1>Okay, so that's balance sheets. You can check that off

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<v Speaker 1>our list. Alleged bribe of Chinese officials. Different vibe, kind

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<v Speaker 1>of international vibe. At least tell me about that one.

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<v Speaker 1>That one was somewhat new to me. I read about

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<v Speaker 1>it a little bit this week, but I hadn't read

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<v Speaker 1>that much about that one before.

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<v Speaker 4>It's probably new to you because that's not actually a

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<v Speaker 4>crime that Sam is being charged with this trial. The

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<v Speaker 4>story that Caroline told is that Alameda had a bank

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<v Speaker 4>account in China that was frozen because of an investigation

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<v Speaker 4>that was going on. Basically, Sam Makman, Freed, and other

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<v Speaker 4>executives at FTX and Alameda were trying to figure out

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<v Speaker 4>how to get the money out okay, And in the

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<v Speaker 4>end they decided, after trying various other ways, that the

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<v Speaker 4>best thing to do would be to bribe a Chinese

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<v Speaker 4>government official. And in this meeting there was one person

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<v Speaker 4>who strongly opposed and Caroline said that Sam told her

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<v Speaker 4>to shut the fuck up.

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<v Speaker 1>Okay, Wow, that is kind of intense. Let me ask

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<v Speaker 1>you one question. I mean, I don't recall this being

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<v Speaker 1>a crime that Sam, or as far as I know,

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

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<v Speaker 1>why are prosecutors having Caroline testify about So why is

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<v Speaker 1>she even allowed to.

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<v Speaker 3>Talk about it?

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<v Speaker 4>Yeah, this crime is not part of this specific case,

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<v Speaker 4>but prosecutors have argued that Caroline should be allowed to

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<v Speaker 4>talk about it because it shows how close Sam and

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<v Speaker 4>Caroline were and that Sam trusted Caroline and that here's

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<v Speaker 4>an example of her being a trusted confidant of his.

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<v Speaker 4>Part of the things that Sam is being charged with

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<v Speaker 4>is conspiring with Caroline because in the end, she was

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<v Speaker 4>the person who wired money to these bank accounts of

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<v Speaker 4>Chinese officials.

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<v Speaker 1>Uh huh at his direction, presumably, as she kept saying,

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<v Speaker 1>presumably at his direction. Okay, next on the list, And

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<v Speaker 1>I'm excited for this one. Utilitarianism. We talked about this.

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<v Speaker 1>It actually comes up a ton right with SBF. We

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<v Speaker 1>talked about it the other day where there was a

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<v Speaker 1>thing about like he would flip the coin, where if

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<v Speaker 1>it came up one way, the universe would be twice

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<v Speaker 1>as good, and if it was the other way, the

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

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<v Speaker 1>philosophy that he truly seems to have lived by. Right,

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<v Speaker 1>And is it right that that has come up some

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<v Speaker 1>more in Caroline's testimony.

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<v Speaker 5>Yes.

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<v Speaker 4>She talked about how Sam is a utilitarian, which means

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<v Speaker 4>that he believes in trying to do the maximum amount

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<v Speaker 4>of good for the maximum amount of people, but how

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<v Speaker 4>in this framework other rules that are laws that people

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<v Speaker 4>live by aren't really as important, laws such as don't

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<v Speaker 4>lie and don't steal. And she talked about how this

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<v Speaker 4>affected her and how before she worked at Alameda, she

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<v Speaker 4>would have been really surprised to hear that one day

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<v Speaker 4>she would be the sort of person who would make

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<v Speaker 4>a misleading balance sheet.

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<v Speaker 3>For example.

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<v Speaker 1>This is, as we talked about the other day, a

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<v Speaker 1>pretty high drama situation, right Like Caroline Elison was like

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<v Speaker 1>very top lieutenant, also romantically involved with Sam. Sam is

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<v Speaker 1>sitting right there in court. She's talking about their relationship

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<v Speaker 1>in many different ways, like what has that part of it?

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<v Speaker 1>This sort of emotional part of it, what has that

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<v Speaker 1>been like?

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<v Speaker 4>There was one moment when Caroline teared up, which was

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<v Speaker 4>when the prosecution asked her about the week that FTX

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<v Speaker 4>imploded and her reaction to it, how she felt while

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<v Speaker 4>that was happening, and she said it was the worst

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<v Speaker 4>week of her life, and then she cried around the

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<v Speaker 4>time where she was talking about how at the same

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<v Speaker 4>time though, she also felt a sense of relief because

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<v Speaker 4>she felt like she finally wouldn't have to lie anymore

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<v Speaker 4>and she could begin to take responsibility for her actions.

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<v Speaker 4>And that moment where she was saying that and crying,

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<v Speaker 4>I was in the overflow room with a lot of reporters,

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<v Speaker 4>and it just felt like everyone felt for her somehow.

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<v Speaker 4>It was just it was really hard to watch. It

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<v Speaker 4>was really hard to watch her breakdown like that, and

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<v Speaker 4>a court official gave her a Kleenex, and she blew

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<v Speaker 4>her nose and then moved on.

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<v Speaker 3>But it was a difficult moment, and.

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<v Speaker 1>Could you see SBF? Could you see what he was

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<v Speaker 1>doing or how he was responding At that.

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<v Speaker 4>Point, I was so focused on Caroline. But I asked

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<v Speaker 4>other reporters and they said, you know, as I've said earlier,

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<v Speaker 4>it's really hard to see his face based on how

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<v Speaker 4>he's sitting. But they said it looked like he was

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<v Speaker 4>just looking straight ahead at his laptop and continuing to type.

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<v Speaker 4>But I read afterwards and there was a sidebar which

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<v Speaker 4>the jury didn't hear, that happened earlier in the day

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<v Speaker 4>when prosecutors said that Sam had been laughing at things

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<v Speaker 4>that Caroline said, and they were worried that that was

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<v Speaker 4>affecting her testimony, and sometimes he was scoffing saw and

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<v Speaker 4>they asked the judge to tell the defense lawyers to

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<v Speaker 4>tell him to stop reacting. The defense lawyers disagreed that

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<v Speaker 4>was happening.

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<v Speaker 1>So then the prosecution wrapped up their questioning of Caroline

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<v Speaker 1>and the defense had their turn to cross examine her.

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<v Speaker 1>Tell me about that part.

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<v Speaker 4>I think everyone was really curious to see how the

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<v Speaker 4>defense was going to cross examine Caroline because her testimony

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<v Speaker 4>was so compelling, but their cross examination ended up being

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<v Speaker 4>really halting. The judge interrupted them, interrupted the defense lawyer,

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<v Speaker 4>saying that he was being repetitive. There were numerous side

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<v Speaker 4>panel conversations during the cross examination. The defense lawyer honestly

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<v Speaker 4>seemed to be bumbling a little bit. He pronounced the

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<v Speaker 4>name of Ryan Salem, who was the co CEO of

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<v Speaker 4>Alameda at some point as Ryan Salom, which just seems

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<v Speaker 4>like that is a person he should be used to

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<v Speaker 4>talking about at this point. And it was honestly, we

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<v Speaker 4>all left the courtroom feeling like, did we miss something?

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<v Speaker 4>Is this some sort of grand strategy of just seeming

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<v Speaker 4>like you don't really have a strategy, because nothing really

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<v Speaker 4>came out that made us think about Caroline's testimony in

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<v Speaker 4>a different light.

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

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<v Speaker 1>had talked about the cross of the previous witness being

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<v Speaker 1>really compelling and raising interesting doubts and so sort of

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<v Speaker 1>surprising that this one seems so weak to you.

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<v Speaker 4>I wondered if the defense was trying to be more

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<v Speaker 4>gentle with Caroline, because you know, she had just cried

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<v Speaker 4>the day before I was wondering about the optics. But

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<v Speaker 4>the takeaway is that we just ended up feeling confused

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<v Speaker 4>and not really sure what the defense was.

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<v Speaker 1>So we've just heard from what seems like the prosecution's

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<v Speaker 1>star witness. The defenses had its chance to cross examiner.

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<v Speaker 1>When you sort of look at the picture in total,

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<v Speaker 1>what do you see?

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

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<v Speaker 4>When we were walking out of the courtroom after Caroline

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<v Speaker 4>had testified, I overheard lots of people talking about how

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<v Speaker 4>Sam reminded them of bad ex boyfriends that they had

0:12:21.956 --> 0:12:24.156
<v Speaker 4>and how they were surprised by how much they felt

0:12:24.196 --> 0:12:28.116
<v Speaker 4>for her. So I think the prosecution really did their

0:12:28.196 --> 0:12:28.716
<v Speaker 4>job here.

0:12:30.436 --> 0:12:33.756
<v Speaker 1>Okay, we'll be back in a minute with one last thing.

0:12:38.716 --> 0:12:41.356
<v Speaker 1>And now, as promised, we are back and we have

0:12:41.476 --> 0:12:44.116
<v Speaker 1>one last thing. I mean, I don't have one last thing.

0:12:44.556 --> 0:12:46.156
<v Speaker 1>Lyddy Jeene, do you have one last thing?

0:12:46.476 --> 0:12:48.796
<v Speaker 4>I do have one last thing. And it felt like

0:12:48.836 --> 0:12:51.996
<v Speaker 4>a real last thing because it seemed like the day

0:12:52.036 --> 0:12:55.236
<v Speaker 4>in court was winding down. The jury was let out

0:12:55.236 --> 0:12:58.676
<v Speaker 4>for a short break, and then the defense and prosecution

0:12:58.796 --> 0:13:02.636
<v Speaker 4>got into this impassioned argument about whether they could play

0:13:02.716 --> 0:13:04.276
<v Speaker 4>some audio clips in the trial.

0:13:04.996 --> 0:13:08.396
<v Speaker 1>Ooh, do tell yes.

0:13:08.796 --> 0:13:11.956
<v Speaker 4>So these audio clips come from a meeting that happened

0:13:11.996 --> 0:13:17.156
<v Speaker 4>in November twenty twenty two. FTX had basically imploded and

0:13:17.876 --> 0:13:21.796
<v Speaker 4>Caroline was going to have a meeting for Alameda staff

0:13:21.956 --> 0:13:25.196
<v Speaker 4>to kind of explain what happened. And they were going

0:13:25.236 --> 0:13:28.356
<v Speaker 4>back and forth about whether the judge should allowed some

0:13:28.396 --> 0:13:31.356
<v Speaker 4>audio clips from this recording. And it was very heated

0:13:31.436 --> 0:13:34.556
<v Speaker 4>and Sam's parents, I noticed, were also really invested. Sam's

0:13:34.596 --> 0:13:37.316
<v Speaker 4>mom was chewing on her glasses at one point. At

0:13:37.316 --> 0:13:40.716
<v Speaker 4>another point she was biting her nails, and the lawyers

0:13:40.756 --> 0:13:43.516
<v Speaker 4>were speaking really fast. It was an intense moment and

0:13:43.516 --> 0:13:45.956
<v Speaker 4>we were all curious what the judge would decide.

0:13:45.676 --> 0:13:46.996
<v Speaker 1>And did they play them.

0:13:47.636 --> 0:13:49.556
<v Speaker 3>Yes. The prosecution brought up a witness.

0:13:50.196 --> 0:13:53.276
<v Speaker 4>He was an engineer at Alameda and he was at

0:13:53.276 --> 0:13:58.316
<v Speaker 4>this all hands meeting and he talked a little bit

0:13:58.316 --> 0:14:02.036
<v Speaker 4>about the recording. He explained that it was secretly recorded

0:14:02.356 --> 0:14:05.276
<v Speaker 4>by someone who had just been hired three days earlier,

0:14:05.956 --> 0:14:07.276
<v Speaker 4>which I was thinking is pretty crazy.

0:14:07.316 --> 0:14:09.276
<v Speaker 3>Imagine the third day of your job.

0:14:09.476 --> 0:14:10.556
<v Speaker 1>Welcome to Alameda.

0:14:10.916 --> 0:14:14.516
<v Speaker 4>Yeah, And he set the scene a little bit. He

0:14:14.596 --> 0:14:18.356
<v Speaker 4>described how Caroline was sitting on a bean bag chair,

0:14:19.036 --> 0:14:22.436
<v Speaker 4>and she looked shrunken, and other people were kind of

0:14:22.476 --> 0:14:27.436
<v Speaker 4>sitting around her on sofas, and she basically just explained

0:14:27.476 --> 0:14:31.516
<v Speaker 4>exactly what happened. She said that Alameda had been using

0:14:31.756 --> 0:14:36.956
<v Speaker 4>FTIX customer funds they made ill liquid investments. Now FTX

0:14:36.996 --> 0:14:39.636
<v Speaker 4>customers wanted their money back and they didn't have it,

0:14:40.996 --> 0:14:44.756
<v Speaker 4>And as you might guess, Alameda employees had a lot

0:14:44.756 --> 0:14:45.676
<v Speaker 4>of questions about this.

0:14:47.396 --> 0:14:49.236
<v Speaker 1>I've been to all staff meetings, but I never quite

0:14:49.356 --> 0:14:49.676
<v Speaker 1>like that.

0:14:50.316 --> 0:14:53.436
<v Speaker 4>The engineer, for instance, you can hear him on the tape,

0:14:53.876 --> 0:14:57.396
<v Speaker 4>and he was asking how did this happen? He said,

0:14:57.476 --> 0:15:00.916
<v Speaker 4>I'm paraphrasing here, I'm assuming you had meetings and that

0:15:00.956 --> 0:15:03.436
<v Speaker 4>this wasn't just a YOLO thing. And they had a

0:15:03.436 --> 0:15:07.156
<v Speaker 4>little aside where they explained what yolo stands for once,

0:15:09.636 --> 0:15:15.116
<v Speaker 4>and Carolyne said that Gary Wong Nishad saying Sam bankmin

0:15:15.156 --> 0:15:18.916
<v Speaker 4>Freed all knew that this was happening. And in one

0:15:18.916 --> 0:15:24.036
<v Speaker 4>of the recordings you can hear very faintly, I honestly

0:15:24.036 --> 0:15:27.116
<v Speaker 4>could just barely hear it someone saying something along the

0:15:27.156 --> 0:15:30.876
<v Speaker 4>lines of who authorized this commingling of funds? And then

0:15:31.116 --> 0:15:36.476
<v Speaker 4>you hear Caroline saying Sam, I guess and then she

0:15:36.556 --> 0:15:37.556
<v Speaker 4>let out a little giggle.

0:15:38.516 --> 0:15:39.156
<v Speaker 5>Uh huh.

0:15:39.156 --> 0:15:42.436
<v Speaker 1>So that's the moment, rights the that's it.

0:15:42.876 --> 0:15:45.316
<v Speaker 4>And this is a big moment because this is her

0:15:45.356 --> 0:15:48.836
<v Speaker 4>on tape saying that Sam had authorized this, and this

0:15:48.916 --> 0:15:52.316
<v Speaker 4>is before there was an investigation into FTX. She was

0:15:52.356 --> 0:15:55.556
<v Speaker 4>not a cooperating witness. She hasn't been charged with anything,

0:15:56.076 --> 0:15:58.796
<v Speaker 4>so she doesn't have as much motivation as she did

0:15:58.876 --> 0:16:02.036
<v Speaker 4>during her earlier testimony to be pointing the finger at Sam.

0:16:03.076 --> 0:16:05.836
<v Speaker 1>So, Caroline Ellison already a lot of drama and then

0:16:05.876 --> 0:16:09.116
<v Speaker 1>we have a secret recording drama on top of drama.

0:16:09.876 --> 0:16:11.876
<v Speaker 1>Thanks LYDIGI, thank you.

0:16:11.836 --> 0:16:12.516
<v Speaker 3>So much, Jacob.

0:16:19.796 --> 0:16:23.356
<v Speaker 4>On our next episode, I check in again with Michael Lewis.

0:16:25.076 --> 0:16:28.996
<v Speaker 5>I'm here and so I'm in the rain in London

0:16:29.036 --> 0:16:32.116
<v Speaker 5>on the street. But it's killing me that I can't

0:16:32.116 --> 0:16:36.436
<v Speaker 5>see this. What I'm find is, generally is that the

0:16:36.596 --> 0:16:38.076
<v Speaker 5>things are coming up that I just left out of

0:16:38.076 --> 0:16:39.956
<v Speaker 5>the book because I thought they were sort of less

0:16:39.956 --> 0:16:42.676
<v Speaker 5>important and they didn't really tell the story. And there

0:16:42.676 --> 0:16:46.996
<v Speaker 5>are things that are interesting but sort of fit with

0:16:47.036 --> 0:16:52.276
<v Speaker 5>the characters. My little private goal is for the characters

0:16:52.316 --> 0:16:56.076
<v Speaker 5>who emerge in the trial. It's not that every detail

0:16:56.196 --> 0:16:58.876
<v Speaker 5>is going to be the same as the book because

0:16:58.876 --> 0:17:03.196
<v Speaker 5>I don't know everything, but it's that you say, oh, yes,

0:17:03.476 --> 0:17:07.156
<v Speaker 5>that's what that character does and that there isn't a

0:17:07.276 --> 0:17:10.676
<v Speaker 5>violation of that, and we'll talk Carter like linked.

0:17:10.636 --> 0:17:12.636
<v Speaker 3>Sam as I'm talking he is.

0:17:16.396 --> 0:17:19.396
<v Speaker 2>This episode of Judging Sam was hosted by Jacob Goldstein.

0:17:20.556 --> 0:17:23.876
<v Speaker 2>Lydia Gencott is our court reporter. Katherine Girardeau and Nisha

0:17:23.956 --> 0:17:27.876
<v Speaker 2>Venken produced this show. Sophie Crane is our editor. Our

0:17:27.956 --> 0:17:31.276
<v Speaker 2>music was composed by Matthias Bossi and John Evans of

0:17:31.356 --> 0:17:35.796
<v Speaker 2>stell Wagons Symphonette. Judging Sam is a production of Pushkin Industries.

0:17:36.196 --> 0:17:38.676
<v Speaker 2>Got a question or comment for me, There's a website

0:17:38.676 --> 0:17:43.556
<v Speaker 2>for that atr podcast dot com. That's at r podcast

0:17:44.036 --> 0:17:48.036
<v Speaker 2>dot com. To find more Pushkin podcasts, listen on the

0:17:48.076 --> 0:17:52.676
<v Speaker 2>iHeartRadio app, Apple Podcasts, or wherever you listen to your podcasts.

0:17:53.276 --> 0:17:56.756
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0:17:57.116 --> 0:17:59.516
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0:18:03.396 --> 0:18:07.396
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