WEBVTT - Sam Bankman-Fried's Historic Fraud Trial 0:00:03.200 --> 0:00:08.000 This is Bloomberg Law with June Brusso from Bloomberg Radio. 0:00:09.560 --> 0:00:12.880 The Sam Bankman, freed on trial in Manhattan Federal Court 0:00:13.320 --> 0:00:16.599 looks different from the Sam Bankman freed that presided over 0:00:16.640 --> 0:00:20.439 a crypto empire. Gone are the thick, unkempt curls that 0:00:20.520 --> 0:00:24.160 became his trademark and the subject of a series of memes. 0:00:24.600 --> 0:00:28.159 The baggy cargo shorts, the T shirts and sneakers. In 0:00:28.240 --> 0:00:32.519 their place, a neat, close cut hairstyle reportedly done by 0:00:32.520 --> 0:00:35.960 a fellow inmate, a navy business suit, dress shirt, tie 0:00:36.040 --> 0:00:38.960 in shoes. A jury of nine women and three men 0:00:39.040 --> 0:00:42.760 were sworn in today along with six alternates, and the 0:00:42.800 --> 0:00:46.640 prosecution and defense laid out their cases for the jury 0:00:46.720 --> 0:00:50.599 in opening statements. Joining me from the courthouse is Bloomberg 0:00:50.680 --> 0:00:54.880 Legal reporter Ava Benny Morrison, who was in the courtroom today. 0:00:55.320 --> 0:00:58.000 Did Sam Bankman freed look different from the way we've 0:00:58.040 --> 0:00:59.880 seen him before his arrest? 0:01:00.320 --> 0:01:02.800 Yes, definitely. That was one of the things that first 0:01:02.800 --> 0:01:05.240 struck me when he walked in the courtroom. He looked 0:01:05.280 --> 0:01:08.560 a lot thinner than he has in the past several months, 0:01:08.640 --> 0:01:12.280 and his trademark hair was no longer it was cut 0:01:12.319 --> 0:01:15.280 a lot shorter. You might remember he's always had this 0:01:15.480 --> 0:01:18.600 very messy, curly head of hair. And the weight loss, 0:01:18.760 --> 0:01:21.800 I guess has happened over the past several weeks when 0:01:21.800 --> 0:01:25.280 he's been in the Metropolitan Detention Center in Brooklin. His 0:01:25.319 --> 0:01:28.119 lawyers have complained that he's only been able to eat 0:01:28.160 --> 0:01:30.760 peanut butter and bread and water because he's a vegan 0:01:30.800 --> 0:01:33.000 and they don't have any meals that accommodate him. In 0:01:33.080 --> 0:01:37.119 terms of his mannerism, he seemed pretty cool, calm and collected. 0:01:37.160 --> 0:01:39.639 He engaged a lot with his lawyers. He was keeping 0:01:39.680 --> 0:01:42.959 notes on his own laptop in a XL spreadsheet. He 0:01:43.040 --> 0:01:46.480 was pointing at different potential jurors during the jury selection process. 0:01:46.560 --> 0:01:49.240 He was having jokes and smiling with his lawyers. So 0:01:49.320 --> 0:01:50.639 he seemed to be in a pretty good spirit. 0:01:50.840 --> 0:01:53.120 And the jury tell us about the jury that was 0:01:53.160 --> 0:01:54.160 finally selected. 0:01:54.680 --> 0:01:58.600 The jury that was selected was nine women and three men. 0:01:59.200 --> 0:02:02.440 Most of them are public service jobs worked for the government. 0:02:02.840 --> 0:02:07.400 There is a train conductor on the jury, a retired 0:02:07.560 --> 0:02:10.440 corrections officer who used to work in a prison, a 0:02:10.480 --> 0:02:13.920 special ed teacher, someone who works at a hospital. So 0:02:14.120 --> 0:02:16.000 it was a real mix, but it was a very 0:02:16.040 --> 0:02:17.639 long process to get there. 0:02:18.600 --> 0:02:22.680 The prosecution laid out its case in opening statements and 0:02:22.960 --> 0:02:27.600 painted this picture of Sam Bankman Freed as a calculating criminal. 0:02:28.040 --> 0:02:29.160 Tell us what struck you? 0:02:30.000 --> 0:02:30.240 Yes? 0:02:30.360 --> 0:02:33.720 The theme throughout the prosecution's opening address was that Sam 0:02:33.760 --> 0:02:38.080 Bankman Freed single handedly orchestrated this multi billion dollar forward 0:02:38.080 --> 0:02:41.480 at FTX, and that he tricked all of his customers 0:02:41.520 --> 0:02:46.000 and investors and people who loan money to Alameda Research, 0:02:46.080 --> 0:02:49.520 which was the hedge fund affiliated with FTX. They painted 0:02:49.600 --> 0:02:53.320 him as this sort of criminal mastermind who woodwinked everyone 0:02:53.440 --> 0:02:57.280 over many many years. They said that he only told 0:02:57.400 --> 0:03:00.919 a few people within in a circle about the secret 0:03:01.200 --> 0:03:05.320 borrowing relationship that existed between FTX and Alameda, and those 0:03:05.360 --> 0:03:09.920 people were Caroline Ellison and Gary Wang and Nishad Scene. Now, 0:03:09.919 --> 0:03:12.960 the prosecution didn't mention those three witnesses by name, but 0:03:13.040 --> 0:03:15.520 we know that they are more than likely going to 0:03:15.560 --> 0:03:16.960 testify against them. 0:03:17.000 --> 0:03:20.079 Bankma Free at this trial, and the defense wants the 0:03:20.200 --> 0:03:22.440 jury to see him as a math nerd. 0:03:22.960 --> 0:03:23.160 Yes. 0:03:23.280 --> 0:03:27.320 So the defense's response to what the prosecution's allegations were 0:03:27.800 --> 0:03:32.280 that this is being spun to suit their case essentially, 0:03:32.320 --> 0:03:35.040 and that he's just a math nerd who doesn't party, 0:03:35.240 --> 0:03:39.160 doesn't drink, worked really hard, went to MIT and built 0:03:39.240 --> 0:03:42.840 a multi billion dollar company and was extremely successful, and 0:03:42.880 --> 0:03:46.200 that the loss of customer funds was partly due to 0:03:46.640 --> 0:03:50.000 market downturns last year that were outside of his control 0:03:50.360 --> 0:03:54.080 and also poor risk management at his company. There was 0:03:54.320 --> 0:03:56.800 a bit of a hint in the defense statement. The 0:03:56.840 --> 0:04:00.000 defense said that Sam Batemantrey trusted and relied on Carolina, 0:04:00.600 --> 0:04:03.240 his ex girlfriend and the CEO of al Ameter Research 0:04:03.360 --> 0:04:06.000 to one Alameda because he had taken a backward steps 0:04:06.040 --> 0:04:08.880 from it a couple of years ago to really concentrate 0:04:08.920 --> 0:04:12.560 on what was happening with FTX, But in hindsight, there 0:04:12.720 --> 0:04:16.159 was some four risk management going on at the company. 0:04:16.560 --> 0:04:20.840 And the defense also said that Sam had approached Caroline 0:04:21.000 --> 0:04:23.960 in twenty twenty two when there were the market volatility 0:04:24.240 --> 0:04:27.280 in the crypto industry and said, hey, I need you 0:04:27.400 --> 0:04:32.080 to pedge the Alameda to protect against the possible market 0:04:32.080 --> 0:04:34.800 downturns last year, and she didn't do that. The defense 0:04:34.839 --> 0:04:36.920 didn't stay out right that you know, this is all 0:04:36.960 --> 0:04:40.880 Caroline's fault, but there was certainly a flavor that she 0:04:41.040 --> 0:04:43.919 may wear some of the blame in their case, so 0:04:44.000 --> 0:04:46.040 you did get a little bit of a flavor of 0:04:46.279 --> 0:04:47.680 a blank game going on here. 0:04:47.960 --> 0:04:49.560 Did they call any witnesses today? 0:04:50.000 --> 0:04:53.400 We heard from two witnesses. One was a customer of 0:04:53.520 --> 0:04:56.800 FTX who lost more than one hundred thousand dollars. He 0:04:56.960 --> 0:04:59.960 sort of explained how he signed up, what his expectation 0:05:00.040 --> 0:05:01.640 who were in terms of what they would do with 0:05:02.040 --> 0:05:05.520 his customer funds. And then we also heard from a 0:05:05.680 --> 0:05:10.320 former STX developer who worked at the company for a 0:05:10.320 --> 0:05:12.920 couple of years, was best friends with Sam growing up. 0:05:12.960 --> 0:05:15.080 They went to MIT together and they lived in the 0:05:15.080 --> 0:05:17.760 Bahamas with the thirty million dollar pen house together. 0:05:18.200 --> 0:05:21.000 And finally, do you know what witnesses are coming up tomorrow? 0:05:21.240 --> 0:05:25.160 Yes, we're going to continue hearing from the former STX 0:05:25.160 --> 0:05:29.279 developer who testimony started today, and we're also going to 0:05:29.360 --> 0:05:33.160 hear maybe from one of the cooperating witnesses, Gary Wong, 0:05:33.480 --> 0:05:36.600 and the prostitution indicated this afternoon that he would be 0:05:36.640 --> 0:05:39.360 one of two witnesses who would take the case till 0:05:39.400 --> 0:05:40.040 the end of the week. 0:05:40.520 --> 0:05:42.840 I know you're going to be in the courtroom tomorrow 0:05:42.880 --> 0:05:46.400 as well, and we'll talk to you then. Thanks so much, Eva, 0:05:46.520 --> 0:05:50.719 that's Bloomberg legal reporter Eva Benni Morrison coming up next 0:05:51.200 --> 0:05:54.640 more analysis of the case against Sam Bankman Fried. I'm 0:05:54.720 --> 0:05:57.480 Jim Grass when you're listening to Bloomberg. Joining me is 0:05:57.560 --> 0:06:00.279 John George Aarres, a partner at the Warren Lage Group. 0:06:00.800 --> 0:06:06.200 Before the prospective jurors came into the courtroom, the prosecutor 0:06:06.400 --> 0:06:10.400 said that no plea discussions were ever held with Bankman Freed, 0:06:10.520 --> 0:06:14.200 and no offers for a plea deal were made. They 0:06:14.200 --> 0:06:17.600 made plea deals with three other top people at FTX 0:06:17.800 --> 0:06:20.359 and Alameda. Do you find that odd that they didn't 0:06:20.400 --> 0:06:22.440 offer Sam Bankman free to deal. 0:06:22.920 --> 0:06:28.200 Typically the prosecutor's office will offer a deal, but I 0:06:28.240 --> 0:06:31.880 think this case is unique because of the size of 0:06:31.920 --> 0:06:35.839 the fraud. I mean, the crypto industry. This is easily 0:06:35.880 --> 0:06:39.000 the largest fraud that's impacted it, and I think the 0:06:39.040 --> 0:06:42.599 prosecutors have taken a very hard line position from the 0:06:42.640 --> 0:06:47.640 first announcement of the indictment that they want to hold 0:06:47.720 --> 0:06:51.840 Sam Bankman Freed responsible for what they're viewing as an 0:06:51.880 --> 0:06:56.200 ady to one hundred billion dollar fraud, and the fact 0:06:56.240 --> 0:06:58.760 that they didn't offer him a deal, and the fact 0:06:58.800 --> 0:07:02.520 that they have three other individuals who were really at 0:07:02.560 --> 0:07:05.600 the top of FPX, and they have Caroline Ellison who 0:07:05.839 --> 0:07:10.520 was his former partner and also running Almata Research. They 0:07:10.600 --> 0:07:14.240 must feel strongly that the evidence that's going to be 0:07:14.280 --> 0:07:16.960 presented and the testimony that's going to be brought forward 0:07:17.520 --> 0:07:20.920 is so powerful that they're going to be successful on 0:07:21.000 --> 0:07:24.440 their claims. A prosecutor may head to their bets or 0:07:24.920 --> 0:07:27.960 may notice some weaknesses in their case and say, what's 0:07:28.000 --> 0:07:31.680 cut a deal? But I think a the unique nature 0:07:31.720 --> 0:07:34.720 of this case and the size of the fraud, and 0:07:34.800 --> 0:07:37.160 be the strength of the evidence they believe they have 0:07:37.840 --> 0:07:41.440 has led to this result, which is no offer, no deal. 0:07:42.120 --> 0:07:46.160 How much does the prosecution's case depend on the testimony 0:07:46.240 --> 0:07:50.800 of those three cooperating witnesses you mentioned. 0:07:51.160 --> 0:07:54.760 I think from the prosecutor's view, obviously someone needs to 0:07:54.800 --> 0:07:59.440 tell the story, so they need these individuals to talk 0:07:59.480 --> 0:08:03.040 about the impropriety that was going on with STX, and 0:08:03.440 --> 0:08:06.800 really at the core of this is misuse of customer 0:08:06.880 --> 0:08:11.880 funds and mining to customers. These are individual retail investors 0:08:11.920 --> 0:08:15.520 that put their money into FDx and believe that the 0:08:15.560 --> 0:08:18.760 money was being held there. The reality appears to be 0:08:18.840 --> 0:08:22.119 much different. The reality appears to be that this money 0:08:22.240 --> 0:08:26.800 was being used for many different things, including Sam Bagminfreed 0:08:27.160 --> 0:08:31.320 buying properties for himself as well as making political contributions 0:08:31.680 --> 0:08:35.120 and investing in our Nator research. I think there will 0:08:35.160 --> 0:08:39.920 be enough documents to show the flow of funds, but 0:08:40.040 --> 0:08:44.000 I do think that it's important for the individuals to 0:08:44.120 --> 0:08:48.960 testify to stay and give context to the jury about 0:08:49.000 --> 0:08:53.000 what the internal conversations were and what was happening in 0:08:53.040 --> 0:08:57.040 this ecosystem and everything around it. So could they prove 0:08:57.040 --> 0:08:59.439 the case solely based on documents and show the flow 0:08:59.440 --> 0:09:02.240 of funds. I think that they could make a strong 0:09:02.360 --> 0:09:05.880 case that these funds were exiting FTX and going to 0:09:05.920 --> 0:09:09.800 places that they shouldn't have been. But it's obviously important 0:09:09.800 --> 0:09:14.680 to them that these three individuals, Gary wang Nischad Singh 0:09:14.720 --> 0:09:18.559 and Caroline Ellison all give context to that, and I 0:09:18.600 --> 0:09:19.960 think that will be very important. 0:09:20.400 --> 0:09:24.680 Caroline Ellison had an on again, off again romantic relationship 0:09:24.840 --> 0:09:29.840 with bankman Freed. Does that complicate her testimony well? 0:09:29.880 --> 0:09:33.760 From the defensi's point of view, it's very typical in 0:09:33.800 --> 0:09:39.600 a way collar case to attack the credibility of the witnesses. 0:09:40.400 --> 0:09:44.559 That will certainly be a part of their story. Potentially 0:09:44.600 --> 0:09:48.559 they could say she's a scorned ex lover. She has 0:09:48.600 --> 0:09:53.560 a motivation to say negative things about Sam Bankman Freed. 0:09:53.920 --> 0:09:56.600 But in addition to that, they also have the plea deals, 0:09:57.120 --> 0:09:59.760 and they're going to use those plea deals. This is 0:09:59.800 --> 0:10:04.880 the they're going to use those free deals to say, Caroline, 0:10:05.040 --> 0:10:09.800 you got a deal that is helping you avoid the 0:10:10.240 --> 0:10:14.120 highest level of prosecution. You struck that deal, and you're 0:10:14.120 --> 0:10:18.560 making these statements today not because they're truthful, but because 0:10:18.880 --> 0:10:23.200 you basically saved yourself. So I think it's really two things. 0:10:23.559 --> 0:10:26.320 But I do believe that their relationship is something they 0:10:26.320 --> 0:10:30.000 can mine into and that the defense will probe and 0:10:30.120 --> 0:10:34.800 say you are saying these things because your relationship with 0:10:35.200 --> 0:10:36.920 Sam bankmin Free did not work out. 0:10:37.120 --> 0:10:40.920 Can you explain you know what the prosecution is alleging 0:10:41.080 --> 0:10:41.800 happened here. 0:10:42.360 --> 0:10:46.960 Absolutely, So there's seven criminal charges. They're pretty broad, but 0:10:47.040 --> 0:10:52.360 it's why are fraud securities, fraud, money laundering And there's 0:10:52.520 --> 0:10:58.720 a couple different components. The first component is lying to 0:10:58.760 --> 0:11:03.199 the retail investors, lying to them in that the funds 0:11:03.200 --> 0:11:06.559 that they deposit on FTX would be made available to them. 0:11:06.840 --> 0:11:10.520 They can make withdraws and transactions with the funds that 0:11:10.559 --> 0:11:14.360 they deposited freely and as they chose to, but in 0:11:14.400 --> 0:11:19.400 reality the funds that they had depositive were usurped for 0:11:19.679 --> 0:11:23.800 Almada research. There were transfers of I think around eight 0:11:24.280 --> 0:11:27.800 billion dollars ends up, for lack of a better word, 0:11:27.880 --> 0:11:32.120 going missing. And this goes into the political donations that 0:11:32.240 --> 0:11:36.360 Sambang and Freed made, This goes into Almada research, and 0:11:36.400 --> 0:11:40.199 this goes into him buying personal properties for himself. So 0:11:40.920 --> 0:11:44.640 one component is the lying to the investors, and then 0:11:44.920 --> 0:11:49.520 there are other components which are lying to potential creditors 0:11:49.520 --> 0:11:53.200 and lenders of FTX stating that the financial health of 0:11:53.600 --> 0:11:58.720 FTX is completely fine, when in reality the funds that 0:11:58.800 --> 0:12:02.240 are supposed to be held and FTX were no longer there. 0:12:02.679 --> 0:12:06.080 So the core conduct is the same that all stems 0:12:06.120 --> 0:12:10.920 out of the money that were deposited were essentially misappropriated 0:12:10.960 --> 0:12:15.240 in use for other things, and that led to defrauding investors, 0:12:15.640 --> 0:12:19.720 that led to defrauding lenders, and that led to essentially 0:12:19.840 --> 0:12:24.040 money laundering and misappropriating funds for something that was other 0:12:24.320 --> 0:12:27.880 than their intended use, which is an investment in FTX. 0:12:28.920 --> 0:12:33.120 Prosecutors have something like fifty potential witnesses and they've produced 0:12:33.160 --> 0:12:38.920 so far thirteen hundred exhibits ahead of trial. You know, cryptocurrency, 0:12:39.120 --> 0:12:44.720 altering code, flow of money between FTX and Alameda financial transactions. 0:12:45.360 --> 0:12:48.400 Is it a difficult case to keep simple enough or 0:12:48.520 --> 0:12:50.720 interesting enough for a jury. 0:12:52.440 --> 0:12:56.800 I think that the prosecution's focus will be on exactly 0:12:56.920 --> 0:13:01.240 that keeping it simple. At the core of this case 0:13:02.000 --> 0:13:04.800 crypto and the fact that it was crypto and that 0:13:04.840 --> 0:13:08.720 it involves code, and that it's a new digital asset. 0:13:09.280 --> 0:13:13.079 I believe it's something that they're going to try and minimize, 0:13:13.440 --> 0:13:16.160 and they're just going to focus on what is a 0:13:16.360 --> 0:13:20.719 traditional fraud. You lied to people about what you were 0:13:20.760 --> 0:13:24.720 going to do with the money they entrusted you with, period, 0:13:25.160 --> 0:13:30.120 You lied to lenders about the financial viability of the company. Period. 0:13:30.640 --> 0:13:34.760 The defense will certainly try to put forward the story 0:13:35.160 --> 0:13:38.400 that the terms in use of FTX gave them broad 0:13:38.480 --> 0:13:41.480 latitude to move funds as they chose to fit, and 0:13:41.520 --> 0:13:45.200 that maybe they didn't have proper risk management tools, but 0:13:45.280 --> 0:13:48.840 it didn't arise to the level of fraud. So I 0:13:48.840 --> 0:13:52.640 think the government has an interesting story from the perspective 0:13:52.720 --> 0:13:55.360 of this is a huge sum of money, This is 0:13:55.360 --> 0:13:58.520 a very public figure, and I believe that they'll be 0:13:58.559 --> 0:14:01.520 able to boil it down to the base level of 0:14:01.559 --> 0:14:04.600 the conduct that occurred here. However, that is a complication 0:14:04.720 --> 0:14:06.960 that they faced. You know, I do believe that the 0:14:07.000 --> 0:14:11.199 defense is going to put the spotlight on the complexity 0:14:11.240 --> 0:14:14.040 of crypto and how maybe the jury should not treat 0:14:14.040 --> 0:14:19.320 this as just a typical, normal financial transaction. But in 0:14:19.400 --> 0:14:22.000 some I do think that the government will be able 0:14:22.080 --> 0:14:24.440 to boil this down to a base level where a 0:14:24.520 --> 0:14:26.360 jury can really understand what happened. 0:14:27.480 --> 0:14:30.520 The judge has issued a number of pre trial rulings 0:14:30.560 --> 0:14:35.200 that were setbacks for SBF, including revoking his bail and 0:14:35.280 --> 0:14:38.640 jailing him. He ruled that bankmin Freed couldn't call seven 0:14:38.680 --> 0:14:42.080 expert witnesses, and he made a decision this week that 0:14:42.160 --> 0:14:45.280 his lawyers couldn't refer in the opening statements to the 0:14:45.360 --> 0:14:49.120 advice of counsel defense, which they wanted to use to 0:14:49.240 --> 0:14:53.480 show that bankman Freed didn't have criminal intent here and 0:14:53.640 --> 0:14:57.000 was relying on the advice of his attorneys. How serious 0:14:57.040 --> 0:14:57.960 are these setbacks? 0:14:58.480 --> 0:15:02.720 These are fairly serious facts, the first one being revoking 0:15:02.760 --> 0:15:06.800 bailn being put in prison, and that was because there 0:15:06.880 --> 0:15:10.760 was alleged tampering of witnesses occurring in advance of trial. 0:15:11.200 --> 0:15:14.840 So that shows that SBS is a bad actor trying 0:15:14.840 --> 0:15:18.080 to influence the tropil ahead of time. And SDS has been, 0:15:18.600 --> 0:15:22.480 probably much to his lawyers this day, very public about 0:15:22.560 --> 0:15:26.800 saying things, very public about saying I messed up, that 0:15:26.920 --> 0:15:29.520 people need to know the truth. He did, I believe, 0:15:29.520 --> 0:15:33.360 a sixty minute interview on this. He really went out 0:15:33.440 --> 0:15:35.800 and put himself in the public sphere and already made 0:15:35.840 --> 0:15:39.040 a ton of statements that I'm sure the government is 0:15:39.080 --> 0:15:41.320 going to use against him. But as for the pre 0:15:41.400 --> 0:15:45.840 trial rulings, the judge is narrowing the case down to 0:15:45.880 --> 0:15:49.080 what the relevant defenses are that can be presented, and 0:15:49.160 --> 0:15:52.200 the fact that the judge struck down the reliance on 0:15:52.320 --> 0:15:56.800 council defense. It's a very very powerful defense if you 0:15:56.840 --> 0:16:01.720 are able to show that an individual well fully disclosed 0:16:01.760 --> 0:16:04.680 what was happening to an attorney and that an attorney 0:16:04.760 --> 0:16:09.480 rendered advice, and then the individual who gave him the 0:16:09.520 --> 0:16:13.880 advice followed that punctiliously and went along with what the 0:16:13.960 --> 0:16:17.880 lawyer said. What the judge's ruling indicates to me is 0:16:17.920 --> 0:16:22.440 that there were likely some communications about what was happening, 0:16:22.800 --> 0:16:26.040 but it didn't rise to the formal level of an 0:16:26.080 --> 0:16:30.280 advice of council defense, which is very formulaic and it 0:16:30.360 --> 0:16:34.280 has to be laid out clearly with evidence otherwise, you know, 0:16:34.400 --> 0:16:37.480 anyone that had a passing conversation with an attorney would say, 0:16:37.880 --> 0:16:40.320 or even an accountant would say, oh, well, I relied 0:16:40.320 --> 0:16:44.760 on their advice, and that should exonerate me completely. It's 0:16:44.800 --> 0:16:49.960 a blow for the defense because their story is getting 0:16:50.080 --> 0:16:52.720 narrowed in advance of trial, and what they're going to 0:16:52.760 --> 0:16:58.280 have to focus on most likely is that, yes, things 0:16:58.320 --> 0:17:02.280 happen that may have been in proper from a business perspective, 0:17:02.920 --> 0:17:07.120 but it did not rise to the level of criminal intent. 0:17:07.600 --> 0:17:10.399 And looping back on one of our earlier questions, I 0:17:10.520 --> 0:17:14.280 believe that's where the three witnesses that were formerly at 0:17:14.280 --> 0:17:17.080 the top of SPX and Almeta, we'll be able to 0:17:17.080 --> 0:17:20.480 give a lot of context into what those conversations were 0:17:20.840 --> 0:17:22.600 between themselves and SBS. 0:17:23.240 --> 0:17:26.240 The judge has left it open they can't refer to 0:17:26.280 --> 0:17:29.960 the advice of council defense and opening statements, but later 0:17:30.040 --> 0:17:32.400 on in the trial he may allow them to use it. 0:17:33.240 --> 0:17:37.480 So what the judge is signaling is that formal defense 0:17:37.680 --> 0:17:39.919 in order for it to be advanced. It's going to 0:17:40.000 --> 0:17:43.560 have to be laid out through witnesses, through documents. Right, 0:17:43.600 --> 0:17:46.520 there has to be an attorney client relationship in the 0:17:46.560 --> 0:17:49.640 first instance. Then there has to be disclosure of what's 0:17:49.680 --> 0:17:53.040 happening at STX. Then there has to be advice, and 0:17:53.080 --> 0:17:58.200 then following that advice. So at this point, the judge 0:17:58.440 --> 0:18:03.359 is likely not wanting to cloud the jury's mind with 0:18:03.560 --> 0:18:07.600 evidence that has yet to come forward, and a defense counsel, 0:18:08.200 --> 0:18:11.960 especially in a criminal trial, you want to be flexible 0:18:12.400 --> 0:18:15.359 and you also want to play your cards close to 0:18:15.440 --> 0:18:18.919 your chest. When it's time to reveal the evidence, you 0:18:19.000 --> 0:18:22.040 start revealing it because burden in all these cases, right, 0:18:22.160 --> 0:18:25.880 the burden of proof for a criminal prosecution is on 0:18:26.280 --> 0:18:29.080 the government and they have to meet that burden of proof. 0:18:29.640 --> 0:18:33.160 So when it comes time for the defense to lay 0:18:33.200 --> 0:18:37.199 out what their narrative is, what their defenses are, the 0:18:37.280 --> 0:18:40.880 judge appears to be giving them the opportunity to do that, 0:18:41.320 --> 0:18:43.639 but they're saying, we haven't seen any of that. At 0:18:43.640 --> 0:18:47.439 this stage, you don't get to just baldly refer to 0:18:47.480 --> 0:18:50.240 an advice of counsel of defense without making the proper 0:18:50.240 --> 0:18:51.359 evidentiary show. 0:18:52.320 --> 0:18:55.600 Most defendants don't testify at their own trials. But how 0:18:55.720 --> 0:18:57.520 likely do you think it is that he will take 0:18:57.560 --> 0:18:58.080 the stand. 0:18:58.880 --> 0:19:02.720 It's a very difficult question because he does have so 0:19:02.920 --> 0:19:06.760 many prior statements out there, and he may need to 0:19:06.800 --> 0:19:09.960 give them some context. He may need to make certain 0:19:10.000 --> 0:19:13.360 things clear that when he was saying he messed up, 0:19:13.840 --> 0:19:16.959 that he didn't have the intent to mess up. It 0:19:17.000 --> 0:19:20.119 was just that he didn't have the proper risk controls 0:19:20.160 --> 0:19:23.080 in place, you know, given the stakes that we have here, 0:19:23.240 --> 0:19:27.119 right if SBS is convicted of these charges, the sentencing 0:19:27.119 --> 0:19:29.960 guidelines provide that he could be in jail for I 0:19:30.000 --> 0:19:33.760 mean over one hundred years, so with his life on 0:19:34.320 --> 0:19:37.919 the line. Essentially, it may come a time after the 0:19:37.920 --> 0:19:40.840 government presents their case, which it appears it's going to 0:19:40.920 --> 0:19:44.240 take them about a month in total. You had mentioned 0:19:44.240 --> 0:19:46.160 the amount of documents that are out there, the amount 0:19:46.200 --> 0:19:49.520 of witnesses that they might profer for the hearing, It'll 0:19:49.520 --> 0:19:52.080 take them about a month to lay it out, and 0:19:52.119 --> 0:19:56.400 then based on the nature of that testimony, if they 0:19:56.760 --> 0:20:01.880 feel the defense Council feels that they can put SBF 0:20:01.960 --> 0:20:05.919 on the stand and have him contextualize or explain some 0:20:06.000 --> 0:20:09.480 things in a better way. They may call him, but 0:20:09.560 --> 0:20:12.359 there's a huge risk in doing that, because if you 0:20:12.480 --> 0:20:16.080 call the defendant as a witness, you are opening up 0:20:16.680 --> 0:20:20.399 them to cross examination on everything that they testified about, 0:20:20.680 --> 0:20:23.040 and that might be a moment for the government to 0:20:23.320 --> 0:20:27.639 really go at SBF and damage him and put the 0:20:27.720 --> 0:20:29.800 nail on the proverbial caulsin. 0:20:29.960 --> 0:20:30.760 For his case. 0:20:31.119 --> 0:20:34.800 So it's a very very difficult question, and you've rightly 0:20:34.840 --> 0:20:40.399 pointed out that a defendant rarely testifies in their own case. 0:20:41.600 --> 0:20:45.840 For SBS, this is freedom on the line for the prosecutors. 0:20:46.480 --> 0:20:47.160 What's at stake. 0:20:47.480 --> 0:20:54.000 It's extremely important because they are staking their credibility. They 0:20:54.000 --> 0:20:59.720 are staking the regulatory environment of the crypto industry. On 0:20:59.800 --> 0:21:05.399 this case, FTX before the collapse was the darling of 0:21:05.680 --> 0:21:11.080 the crypto industry. We have individual celebrities like Tom Brady 0:21:11.440 --> 0:21:15.160 endorsing them. They were all over Super Bowl at they 0:21:15.200 --> 0:21:19.879 were very had a huge public profile. So when the 0:21:19.880 --> 0:21:22.520 government takes on a case like this, it's a heavy 0:21:22.520 --> 0:21:25.840 burden for them. They have shown to the public, or 0:21:25.840 --> 0:21:29.080 made allegations to the public that this was a resoundingly 0:21:29.200 --> 0:21:32.720 large fraud and that there are issues with the crypto 0:21:32.800 --> 0:21:35.239 industry and the people that are operating it. And this 0:21:35.280 --> 0:21:37.719 also sends a message to the crypto industry in general, 0:21:38.040 --> 0:21:41.040 which is you will be prosecuted under the laws that 0:21:41.080 --> 0:21:43.879 we have in place if you do not follow them. 0:21:44.359 --> 0:21:48.159 So this is a major pressure for the government to 0:21:48.200 --> 0:21:51.200 get this right, which is why I think they're going 0:21:51.280 --> 0:21:56.040 to go through an extremely detailed and lengthy presentation. Four 0:21:56.080 --> 0:21:59.960 weeks of putting on evidence in and of itself showed 0:22:00.640 --> 0:22:03.440 how much evidence that they have and how seriously they're 0:22:03.480 --> 0:22:07.600 taking this. So it is a big task for the government. 0:22:07.680 --> 0:22:10.520 I'm not sure that it's a huge risk because they 0:22:10.520 --> 0:22:14.080 seem fairly comfortable with the evidence that they have, but 0:22:14.359 --> 0:22:19.240 obviously if SBF is exonerated and he's found not guilty 0:22:19.320 --> 0:22:21.920 on these charges, it is a major blow to the government. 0:22:22.119 --> 0:22:24.480 Thanks so much for being on the show. That's John 0:22:24.520 --> 0:22:27.760 George Aris, a partner at the Warren Law Group. Coming 0:22:27.840 --> 0:22:30.840 up next, the Supreme Court appears ready to reject a 0:22:31.000 --> 0:22:35.280 challenge to the Consumer Financial Protection Board. You're listening to Bloomberg. 0:22:35.720 --> 0:22:39.040 The fate of the Consumer Financial Protection Bureau was at 0:22:39.040 --> 0:22:42.440 stake in a case asking the Supreme Court to declare 0:22:42.440 --> 0:22:47.480 its funding system unconstitutional. But justice is across the ideological 0:22:47.560 --> 0:22:50.320 Spectrum seemed to be struggling with that argument. 0:22:51.000 --> 0:22:52.959 Is there not in the Constitution? Where do we get 0:22:53.000 --> 0:22:53.680 I don't understand. 0:22:53.720 --> 0:22:57.240 We can't just suddenly decide that things are troubling without 0:22:57.280 --> 0:22:59.560 some kind of legal reference point. 0:23:00.040 --> 0:23:04.159 Well, I'm trying to understand your argument that I'm a 0:23:04.240 --> 0:23:05.080 total loss. 0:23:05.880 --> 0:23:10.720 The word perpetual I'm having trouble with because it implies 0:23:10.960 --> 0:23:14.879 that it's entrenched and that a future Congress couldn't change it, 0:23:14.960 --> 0:23:16.560 but Congress could change it tomorrow. 0:23:17.480 --> 0:23:20.000 This is the standard be Is it like an intelligible 0:23:20.040 --> 0:23:23.800 principle of money spent? I mean, I think we're all 0:23:23.880 --> 0:23:26.600 struggling to figure out, then, what's the standard that you 0:23:26.600 --> 0:23:28.480 would use and just assuming that you're right. 0:23:28.920 --> 0:23:34.120 Unlike most federal agencies, the CFPB, the federal government's consumer 0:23:34.200 --> 0:23:40.040 financial watchdog, doesn't rely on the annual budget process in Congress. Instead, 0:23:40.160 --> 0:23:43.600 it's funded directly by the Federal Reserve. But the Solicitor 0:23:43.680 --> 0:23:48.440 General told the justices that the CFPB was indistinguishable from 0:23:48.440 --> 0:23:52.399 many other federal agencies, including ones that date back to 0:23:52.480 --> 0:23:56.920 the country's founding, and both liberal and conservative justices seem 0:23:57.000 --> 0:24:01.600 to agree. Here are Justices Elena Kagan, Clarence Thomas. 0:24:01.760 --> 0:24:07.960 Annual line item appropriations. We're some appropriations, but massively not 0:24:08.119 --> 0:24:11.399 all appropriations, and so you're just flying in the face 0:24:11.960 --> 0:24:14.320 of two hundred and fifty years of history. 0:24:14.800 --> 0:24:17.600 I get your point that this is different, that it's unique, 0:24:17.680 --> 0:24:21.199 that it's odd that they've never gone this far, but 0:24:21.320 --> 0:24:25.879 that's not having gone as far is not a constitutional problem? 0:24:26.000 --> 0:24:28.400