Speaker 1: Pushkin.
Speaker 2: Hey there, it's Michael Lewis. Before we get to this episode,
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Speaker 2: at Pushkin, dot fm, Slash Plus. Welcome to Judging Sam,
Speaker 2: The Trial of Sam Bankman Freed. I'm Michael Lewis. Sam
Speaker 2: is the founder of a cryptocurrency exchange called ftx that
Speaker 2: at one point was worth forty billion dollars. Some thought
Speaker 2: that he'd bring cryptocurrency into the mainstream. Others thought that
Speaker 2: he might save the world with his philanthropy. But instead
Speaker 2: his fortune is gone and he's been charged with financial
Speaker 2: crimes that could put him in prison for the rest
Speaker 2: of his life. I spent a year and a half
Speaker 2: reporting on Sam. I was there for the good days,
Speaker 2: which were astronomically good, and I was there for the
Speaker 2: catastrophic collapse. While Sam was under house arrest, I visited
Speaker 2: him often, and I wrote a book about it all.
Speaker 2: It's called Going Infinite, The Rise and Fall of a
Speaker 2: New Tycoon. You can hear more about the book in
Speaker 2: Sam's Backstory in our last episode. But now we're picking
Speaker 2: up where the book left off and following the trial
Speaker 2: that will decide Sam's fate. I won't be able to
Speaker 2: go every day, but producer and reporter Lydia Jane cottwill
Speaker 2: and she and I will be talking regularly about the
Speaker 2: twists and turns of the proceedings and will bring you
Speaker 2: more like interviews with experts, eyewitnesses, and sources I've developed
Speaker 2: throughout my time reporting on Sam. In this episode, lydia
Speaker 2: Jene has questions for me and Rebecca Mermelstein, a defense
Speaker 2: attorney at the law firm Omelvini and Myers. We'll talk
Speaker 2: about what we can expect to happen today, which is
Speaker 2: the first day of Sam's trial. So, Lydia Jean, what's
Speaker 2: on your mind?
Speaker 1: Thanks Michael, and welcome Rebecca. We're recruiting this on September
Speaker 1: twenty six. But it's exciting to think that when this
Speaker 1: episode comes out, Sam's trial will be underway. As I'm
Speaker 1: getting ready to report on it. I have a few
Speaker 1: questions for both of you. Michael, I'm going to start
Speaker 1: with you. So, I was wondering if maybe we could
Speaker 1: go back to the beginning of this chapter of Sam's life.
Speaker 1: Where were you when you heard that Sam Makmin Freed
Speaker 1: had been indicted?
Speaker 2: God, you know, it's funny. I don't remember where I
Speaker 2: was then because the trouble had been brewing for so
Speaker 2: long before then. I spread God, I might have been
Speaker 2: in the Bahamas. I was back and forth for this period,
Speaker 2: from the point that FTX collapsed in November of last
Speaker 2: year to the point when he's extradited in end of December.
Speaker 2: I was in Bahamas at least half the time.
Speaker 1: Yeah, And what were you thinking when all of this
Speaker 1: was beginning? How did you process it at the time.
Speaker 2: And unravel so quickly? It went from being a company
Speaker 2: that venture capitalists were valuing at forty billion dollars to
Speaker 2: a company that was bankrupt in like three days. And
Speaker 2: when that happened, I had a couple of thoughts at once.
Speaker 2: Some of them. Several of these thoughts I had were ignoble.
Speaker 2: The ignoble thought was I wasn't quite sure how I
Speaker 2: was going to write this book, And now I know
Speaker 2: how I'm going to write this book, and the story
Speaker 2: is unbelievable, and I can't believe I'm sitting in the
Speaker 2: middle of it and getting to watch it. The immediate
Speaker 2: thought was the incredulity at the panic in the air
Speaker 2: that there were hundreds of employees of FTX in the
Speaker 2: Bahamas who just ran for the airport, and it was
Speaker 2: this wonderful quiet where it was just me and Sam,
Speaker 2: and Sam's parents and Sam's therapists and one or two
Speaker 2: brave souls from FTX who hadn't fled. I also thought
Speaker 2: how curious it was the speed with which it went
Speaker 2: from this pretty widely admired and reputable operation to being
Speaker 2: viewed as this vast criminal enterprise without there being a
Speaker 2: whole lot of new data except for the fact the
Speaker 2: money was in the wrong place. The money wasn't there.
Speaker 2: There was supposed to be fifteen billion dollars inside of FTX.
Speaker 2: That and a lot of that was not inside of FTX.
Speaker 2: It was clearly inside of Sam's hedge foot, but before
Speaker 2: the most important executives in the place could explain what
Speaker 2: had happened or had any idea what had happened, everybody
Speaker 2: changed their mind all at once, So there was it
Speaker 2: was It's just like how fast it went from one
Speaker 2: judgment to another judgment.
Speaker 1: Was there a part of you that was like maybe
Speaker 1: this swall blow over or were you like this, there's
Speaker 1: a before and there's an after, and now this is
Speaker 1: an after. Thanks will never be the same?
Speaker 2: That's a good question. No, I thought things would never
Speaker 2: be the same. Sam thought for the first five or
Speaker 2: six weeks that he was going to revive the exchange
Speaker 2: with the help of some aging crypto people and that
Speaker 2: this was all resolvable. I couldn't really see that path,
Speaker 2: and that the things run on trust and it went
Speaker 2: from being very trusted, like nothing in crypto is that trusted.
Speaker 2: But as things going, Crypto maybe the most trusted. I mean,
Speaker 2: it's brand was trust to being completely not trusted, and
Speaker 2: once that happens, it's very hard to kind of get
Speaker 2: it back. So I didn't think. I didn't think he
Speaker 2: was coming back. It was interesting to watch him flop
Speaker 2: around trying to figure out how to get it back.
Speaker 2: The other thing I remember, and Rebecca could speak to this.
Speaker 2: The lawyers came in and out. His lawyers came in
Speaker 2: a couple of times, and I remember talking to them
Speaker 2: early December, mid December, how long it would take before
Speaker 2: the United States government actually felt it had its case
Speaker 2: and it was strong enough that they wanted the Bahamas
Speaker 2: to extradite him and then bring him to the States.
Speaker 2: And I remember the lawyers thinking they had many months
Speaker 2: like that. They didn't think this was going to happen
Speaker 2: that fast because it's too complicated and everybody needed to
Speaker 2: understand what happened first, and that was it. So that
Speaker 2: was a shock to everyone, even the pros, like how
Speaker 2: fast they got him out of there and how fast
Speaker 2: they got him here.
Speaker 1: Rebecca, could you maybe just summarize what exactly Sam has
Speaker 1: been charged with?
Speaker 3: Sure, I think they largely fall into really three related issues.
Speaker 3: The first is there's an allegation that he defrauded the
Speaker 3: investors in FTX basically by lying, right, And that's going
Speaker 3: to be a theme here again and again and again
Speaker 3: about misrepresentation. So there's some charges that relate to lies
Speaker 3: and defrauding of investors in FTX, there are alleged lies
Speaker 3: to lender. So there's were loans that had been made
Speaker 3: to his entities, and there's allegations that he lied to
Speaker 3: those lenders both to get money from them and then
Speaker 3: to keep money from them to keep them from taking
Speaker 3: their money back. And then of course lies to FTX customers,
Speaker 3: to people who were sending a currency right dollars yen
Speaker 3: lira two accounts that were purportedly held at FTX, it
Speaker 3: turns out they were largely held at Alameda, it's part
Speaker 3: of the problem. And then stealing that money from his
Speaker 3: customers without their knowledge. So that's the big framework. I
Speaker 3: think those are the three areas you're going to hear
Speaker 3: the most about at the trial. That breaks down into
Speaker 3: seven different charges in this case. Often you're going to
Speaker 3: see a what we call a substantive offense that he
Speaker 3: did a certain crime, he committed a certain crime, and
Speaker 3: also a conspiracy, which is a companion to it. Right,
Speaker 3: it's a separate crime to agree to commit the crime
Speaker 3: with other people, and so you're going to see those
Speaker 3: go together a lot. So you have a wire fraud
Speaker 3: on the FTX customers and a conspiracy to do that
Speaker 3: same thing. You have a wire fraud on Alameda's lenders,
Speaker 3: you have a conspiracy to do that same thing, and
Speaker 3: then you have conspiracy to commit securities fraud in relation
Speaker 3: to FTX investors, a conspiracy to commit commodities fraud on
Speaker 3: FTX customers, and finally money laundering, which basically is an
Speaker 3: allegation that he was hiding the money he was stealing.
Speaker 2: It's interesting to me if a lay person reads the charges,
Speaker 2: there's no they can't visualize the crime. I think of
Speaker 2: the problem is like all one big problem. The money
Speaker 2: was in the wrong place, and that's pretty simple, like
Speaker 2: money that should have been in cold storage and FTX
Speaker 2: was in hot little hands of alimeter research. And then
Speaker 2: it gets framed with all these complicated words and in
Speaker 2: kind of abstract terms like why are fraud? How does
Speaker 2: that even come about as an idea that we're going
Speaker 2: to charge him not with the money being in the
Speaker 2: wrong place, but in him sending electronic messages that hide
Speaker 2: the fact that the money is in the wrong place.
Speaker 3: Yeah, it's a great question. I think it's really a
Speaker 3: quirk of the federal system, which is to say, some
Speaker 3: thing happens, everyone has the feeling it's a crime. You
Speaker 3: have to match it to a statute. There has to
Speaker 3: be something that makes it a crime. But the reason
Speaker 3: wire fraud is a federal crime is because after you
Speaker 3: have to have the misleading statement and the effort to defraud,
Speaker 3: you have to have an interstate or international wire, and
Speaker 3: that gives the federal government the power to regulate it,
Speaker 3: and it gives federal prosecutors the power to prosecute it.
Speaker 3: So it's a little bit of a funny quirk.
Speaker 1: If Sam is found guilty on all seven counts that
Speaker 1: he's been charged with, how long could he go to prison? For?
Speaker 3: The maximum as a matter of law is a little
Speaker 3: over one hundred years. Is that likely?
Speaker 2: Though?
Speaker 1: Would you serve them consecutively?
Speaker 3: It's a great question, so you can structure a sentence
Speaker 3: a lot of different ways. Will he actually get one
Speaker 3: hundred and ten years in prison? It would be a
Speaker 3: very extraordinary sentence for a white collar defendant, even a
Speaker 3: white collar defendant at this scale. I think it's unlikely.
Speaker 3: The statute'd say this is the most amount of time
Speaker 3: a judge could give him in jail, But the sentence
Speaker 3: and guidelines are a very complicated algorithm that gives judges
Speaker 3: a recommended range for someone, and in a fraud case,
Speaker 3: the overwhelming the most important factor is the loss amount
Speaker 3: in the case, and this one's obviously off the charts. Yeah,
Speaker 3: and so his guidelines range here, I haven't looked at it,
Speaker 3: but I'm almost certain will be life in prison, which
Speaker 3: is not very useful as a recommendation to a judge.
Speaker 3: So I would say, he's looking at a lot of time,
Speaker 3: but you shouldn't use the statutory maximum sentence as a
Speaker 3: presumption about what he's looking at.
Speaker 1: Sam's now in jail at the Metropolitan Detention Center in Brooklyn,
Speaker 1: and his lawyers have been saying that the fact that
Speaker 1: he's held there has been making it hard for them
Speaker 1: to work with him. You've had clients at the Metropolitan
Speaker 1: Detention Center?
Speaker 3: Is that right I have?
Speaker 1: Can you describe what it's been like to work with them?
Speaker 3: There's no question it's extraordinarily harder to help someone prepare
Speaker 3: for trial or even for any part of their case
Speaker 3: when they're in prison. For any number of reasons. Prisoner's
Speaker 3: by and large can't make phone calls. They do have
Speaker 3: some access to phone time. Those phone calls are recorded.
Speaker 3: In every instance, there is inmate email. Again, the government
Speaker 3: has access to that they are almost certainly reading Sam
Speaker 3: Bankman's freed'ze emails, and you don't want to risk that
Speaker 3: they're going to look at something you're saying to your client.
Speaker 3: So if you think about what that means about visiting
Speaker 3: your client, that means every time you want to see
Speaker 3: your client, you have to go out to Brooklyn, MDC
Speaker 3: is kind of a little bit in the middle of nowhere,
Speaker 3: relatively speaking. It's not an easy place to get to.
Speaker 3: You have to go through prison security, You have to
Speaker 3: lock your possessions in a locker, you have to go
Speaker 3: through a metal detector. That are very strict rules about
Speaker 3: what colors you can wear. You can't wear colors that
Speaker 3: are the colors of inmate uniform, so no khaki, no orange.
Speaker 3: And then there's a lot of waiting. There's a lot
Speaker 3: of bureaucracy, and you are really at the mercy of
Speaker 3: a bop prison guard who's not all that interested in
Speaker 3: being helpful, and so you wait, You wait to be
Speaker 3: let into the visiting room, You wait for them to
Speaker 3: bring your client down. Twice a day inmates are counted.
Speaker 3: That is, the whole prison shuts down so that every
Speaker 3: single person can be counted and nobody can leave or
Speaker 3: enter at that time. Sometimes it takes an hour, so
Speaker 3: you could get stuck. You're done but you can't leave,
Speaker 3: or the other way you could be waiting to get in.
Speaker 3: So everything is very, very very slow and without seeming
Speaker 3: rhyme or reason. There's often just a shut down and
Speaker 3: you get there and you can't go in, so it's
Speaker 3: extremely frustrating, as you might imagine.
Speaker 1: Yeah, I actually tried to visit the MDC yesterday a
Speaker 1: half an hour uber and they were doing prisoner account
Speaker 1: and I wasn't allowed in and they made me stand
Speaker 1: in this basically bus stop area where I couldn't see
Speaker 1: anything that was happening at all, and I gave up
Speaker 1: and went so.
Speaker 2: Did you actually knock on the door and say can
Speaker 2: I come in?
Speaker 1: I stood in front of the door, and then a
Speaker 1: guard came up to me and asked me what I
Speaker 1: was doing, and I said I was a journalist, and
Speaker 1: he said, you can't come in.
Speaker 2: You had no one to see though, you're no purpose.
Speaker 1: There, I know, I just wanted to see how far
Speaker 1: I lead got.
Speaker 2: You're the only one in America trying to get into jail.
Speaker 1: Yeah, I did not make a very I made it
Speaker 1: right to the front steps.
Speaker 2: We'll be right back. Welcome back to judging Sam the
Speaker 2: trial of Sam Bankman.
Speaker 3: Freed, Rebecca.
Speaker 1: I was wondering if you could give us a preview
Speaker 1: of what we should expect to happen on the first day.
Speaker 3: Sure. So the first day I expect will largely consist
Speaker 3: of jury selection, which is to say that people will
Speaker 3: be brought in in a veneer thirty forty fifty people
Speaker 3: at a time typically, and these are people who live
Speaker 3: in the New York City area. So it's going to
Speaker 3: include Manhattan, the Bronx, Westchester, and a few of the
Speaker 3: southernmost counties of the Southern District of New York. And
Speaker 3: they're going to have received a summons in the mail
Speaker 3: that tells them to come in. They won't know that
Speaker 3: they're coming in for any particular case. And actually there'll
Speaker 3: be hundreds of people sitting in a main room called
Speaker 3: up one of the you know, in groups to whatever
Speaker 3: courtroom needs to pick a jury that day. It may
Speaker 3: not only be Sam bankman Fried next week. And then
Speaker 3: the judge will ask a series of questions, some of
Speaker 3: which are virtually standard for every single criminal trial, and
Speaker 3: other of which the parties have asked the judge to
Speaker 3: ask and he's agreed that are specific to this trial.
Speaker 3: To try to ascertain a few things, is this a
Speaker 3: person who can sit at this trial or any trial?
Speaker 3: For example, if you don't speak English fluently, then you
Speaker 3: can't be a jur right, if you have a medical
Speaker 3: condition that means you can't sit for a long period
Speaker 3: of time in a chair, you can't be a jur
Speaker 3: Do you have a small child at home and you're
Speaker 3: not able to stay until five o'clock because you have
Speaker 3: to do school pickups. So you're going to get a
Speaker 3: lot of people who just say I can't be here
Speaker 3: for logistical reasons, some of them really can't, and some
Speaker 3: of them just don't want to be on a jury.
Speaker 3: And then you're going to get people who have strong
Speaker 3: opinions about facts that are related to this case that
Speaker 3: they are going to say or the parties are going
Speaker 3: to determine make them unable to be an impartial juror
Speaker 3: if you lost money in the FTX bankruptcy, you probably
Speaker 3: can't be a juror on this case. If you are
Speaker 3: be friends with Chris Everdale, who's one of Sam Bankman's
Speaker 3: Freed's lawyers, then you probably can't be on this jury,
Speaker 3: and so you'll have a long process of trying to
Speaker 3: weed through people who can really be impartial and sit
Speaker 3: in a fair way and listen to the facts and
Speaker 3: learn them for the first time and not be affected
Speaker 3: by what they may have heard other places and decide.
Speaker 3: And I could be wrong. Judge Caaplin's a very efficient judge,
Speaker 3: but that is very likely to take the whole first day,
Speaker 3: and that will be all that happens. And it's a
Speaker 3: little interesting for a few minutes, and then it gets
Speaker 3: a little repetitive.
Speaker 2: Is it possible it goes on for a much longer time?
Speaker 2: Can it?
Speaker 1: Case?
Speaker 3: Certainly could. I would say it's not unusual for it
Speaker 3: to spill into a second day. It would be pretty
Speaker 3: unusual for it to spill into a third, but it could.
Speaker 1: You mentioned that Judge Coplin is pretty efficient. So yeah,
Speaker 1: the judge in this case, his name is Lewis Caplan
Speaker 1: And Rebecca, you're a former prosecutor in the Southern District
Speaker 1: of New York. That's the office that's bringing this case
Speaker 1: against Sam.
Speaker 3: That's right.
Speaker 1: What can you tell us about Judge Coplin?
Speaker 3: So I never tried a case in front of Judge Caplin,
Speaker 3: But I would say his reputation is as someone who
Speaker 3: is very smart, very confident in his own decision making.
Speaker 3: He makes decisions quickly. Some judges have a reputation that
Speaker 3: whoever spoke last kind of convinces them. I don't think
Speaker 3: that's true with him, and I think on balance he's
Speaker 3: seen as someone who's a good judge for the government,
Speaker 3: both because I think he's friendly to the government's purpose,
Speaker 3: which is not to say that he's not impartial, but
Speaker 3: he's not an aunt, doesn't have an anti prosecutor bent,
Speaker 3: and at the end of the day, I always felt
Speaker 3: as a prosecutor and now I still feel this way
Speaker 3: as defense lawyer, that judges who are rigorous about enforcing
Speaker 3: the rules of the court room, about enforcing limitations on
Speaker 3: what's admissible and the rules of evidence, are better for
Speaker 3: the government because the government is more likely to be
Speaker 3: playing by the book, and as defense lawyers, we often
Speaker 3: are trying to find a little more wiggle room, and
Speaker 3: so a judge who doesn't allow that is better for
Speaker 3: the government than for the defense.
Speaker 1: Right It's like the rule followers versus the rule breakers.
Speaker 3: I don't know that I like to think about myself
Speaker 3: now as a rule breaker, But it's a fair point
Speaker 3: the rural skeptics, Yes, the rule skeptics. I think that's right.
Speaker 3: And of course, the other thing that's interesting about Judge
Speaker 3: Capelin here is that the defendant has really pissed him
Speaker 3: off by his pre trial antics, if you will. And
Speaker 3: I don't think that Judge Kaplin is going to let
Speaker 3: that affect the way he handles the trial itself. But
Speaker 3: I think it's a bad sign for sentencing ray.
Speaker 1: I was going to say, in a case like this,
Speaker 1: what difference does who the judge is make? Because at
Speaker 1: the end of the day, right, it's the jury that
Speaker 1: decides whether Sam is guilty or innocent.
Speaker 3: Oh, but I think the judge makes an enormous amount
Speaker 3: of difference in lots of ways. The first is that
Speaker 3: there are lots of evidentiary rulings that could go either
Speaker 3: way that reasonable minds can disagree, And trial judges have
Speaker 3: an enormous amount of discretion to control the flow of
Speaker 3: evidence in their courtroom. Some judges, even though they tell
Speaker 3: a jury, you shouldn't read anything into my questions, you
Speaker 3: shouldn't read anything into how I rule on objections. I
Speaker 3: don't have an opinion. Juries love judges. They watch judges
Speaker 3: for signs and they interpret every single thing the judge
Speaker 3: is doing. So again really matters. And then judges have
Speaker 3: an enormous amount of discretion at sentencing. And so if
Speaker 3: you can they're actually our statistics published on this, you
Speaker 3: can see some judges are really light sentencers, some are
Speaker 3: really harsh sentencers. Again, it really matters.
Speaker 1: Okay, another question for you, Rebecca. Let's move forward to
Speaker 1: opening statements. If you were to make a bingo card
Speaker 1: for what you would expect the prosecution and the defense
Speaker 1: to say in their opening statements, what would you put
Speaker 1: on those cards. Let's start with the prosecution.
Speaker 3: Okay, that's a fun question. You'll see. I predict that
Speaker 3: the government's opening will have the same form it always does.
Speaker 3: It's going to have what's called a grab, a quick, pithy,
Speaker 3: kind of interesting way to grab the jury's attention, and
Speaker 3: then they'll kind of pause. They're going to explain what
Speaker 3: happened here. They're going to tell the story of the
Speaker 3: downfall of FTX, and then they'll talk about how they're
Speaker 3: going to prove that to the jury. Who's going to
Speaker 3: come talk to them what kind of documents they're going
Speaker 3: to say, So they're going to talk about lies. They're
Speaker 3: going to say, lie lie lie, lie to FDx investors,
Speaker 3: lied to customers, lied to lenders. I think there's a
Speaker 3: possibility that you'll hear some kind of victim vignettes, right,
Speaker 3: the little lady in Topeka who lost her life savings
Speaker 3: in the downfall, right, because it puts a human element
Speaker 3: on it. Otherwise it's a little abstract, and you want
Speaker 3: to really say, these are real people. This wasn't monopoly money.
Speaker 3: It mattered. So I expect you'll hear about victims. I
Speaker 3: think you'll hear the word victim. I wouldn't be surprised
Speaker 3: if you surprised if you heard things like greed, right.
Speaker 3: And I guess that's not enough words for a BINGO card,
Speaker 3: but I think that's probably the top ones i'd pick.
Speaker 3: And if you're the defense, you're going to hear a
Speaker 3: lot about cooperators. I predict, as I think has been
Speaker 3: sort of widely published at this point, there are people
Speaker 3: who have pled guilty and agreed to cooperate in this trial,
Speaker 3: and so the defense is going to have to go
Speaker 3: on the offense there and You're going to hear a
Speaker 3: lot about why those people can't be trusted, what their
Speaker 3: incentives were to cooperate, and why they're lying. I also
Speaker 3: think you're going to hear a lot about a rush
Speaker 3: to judgment. This moved really fast, and so it moved
Speaker 3: so fast in ways that the jury won't actually get
Speaker 3: to hear about that. Charges had to be dropped because
Speaker 3: they weren't brought fast enough and the government got over
Speaker 3: at Skis. And you're going to want to say they
Speaker 3: don't understand what happened. They saw this thing, these young
Speaker 3: hungry prosecutors wanted to make a name for themselves, and
Speaker 3: they jump the gun and they don't really understand it.
Speaker 3: And I think tied to that theme is going to
Speaker 3: be complexity. Right, this stuff is hard to understand. It's
Speaker 3: easy to make a mistake, either that the government has
Speaker 3: made a mistake or that Sam Bankmin freed himself. Didn't
Speaker 3: understand certain things I would expect to be part of
Speaker 3: the defense theme.
Speaker 1: For a final question, it's for both of you. You
Speaker 1: both have talked about how on the trial, right the
Speaker 1: prosecution is going to say a story about whether Sam
Speaker 1: is guilty or innocent, and the defense is going to
Speaker 1: say a story about whether Sam is guilty or innocent,
Speaker 1: And Michael, you called it a story war. I guess
Speaker 1: I wonder what do you think the bigger story is?
Speaker 1: Like why should listeners care or why do they care
Speaker 1: so much about Sam's skilter innocence.
Speaker 2: It's a great question that it's puzzled me. Like I
Speaker 2: thought when all this thing, when it blew up in November,
Speaker 2: that I thought by January everybody'd be bored with it.
Speaker 2: The culture moves so fast from one story to the next,
Speaker 2: and its memory is so short. This story has not
Speaker 2: done that. People have had an enduring interest, consuming interest
Speaker 2: in FTX and Sam Bankman freed. My first guess that's
Speaker 2: why that is is they don't feel like actually, no
Speaker 2: matter what they say on Twitter, they don't feel they
Speaker 2: actually understand it. So it hasn't resolved itself in their
Speaker 2: minds as a completely clean story. There's a tendiness to oh,
Speaker 2: crypto crook. He was a crypto crook from the beginning.
Speaker 2: You know, we already fooled everybody. That story's kind of
Speaker 2: a boring story. They know it's more interesting than that.
Speaker 2: They just don't know that they don't know and that
Speaker 2: they don't know bothers them, do you know, I think so.
Speaker 2: I mean, I think his best is I've tried to
Speaker 2: describe it. I hope the reader puts down the book
Speaker 2: and feels their own conviction about what happened. But it's
Speaker 2: never died down. You know, Sam Bagman Freed is discovered
Speaker 2: to be living on peanut butter and bread in the
Speaker 2: in the Metropolitan Detention Center in Brooklyn, and it's front
Speaker 2: page news in the New York Times. People can't get
Speaker 2: enough of it. And I think it's because they don't.
Speaker 2: They think they don't completely understand it.
Speaker 1: There's something about this story that's not adding up.
Speaker 2: That's right.
Speaker 1: We're bothered by that. We want to know. Yes, what
Speaker 1: do you think, Rebecca, Well.
Speaker 3: It's interesting because you ask two questions, which is why
Speaker 3: should we care and why do people care? And actually
Speaker 3: I'm not sure we should care as much as people do.
Speaker 3: You know, this is in some ways just one of
Speaker 3: so many crimes, and you know, especially when we talk
Speaker 3: about something like the food at the MDC. And I
Speaker 3: think you've seen some statements in the press by the
Speaker 3: federal defenders saying like we hope this press attention on
Speaker 3: this one person will actually motivate change for everyone, because
Speaker 3: these are not new things, right, Lots of these things
Speaker 3: are true for every person who's in jail, and MDC
Speaker 3: is a jail for people, by and large awaiting trial,
Speaker 3: So every single one of them has not yet been
Speaker 3: found guilty and they're subject to these conditions. And why
Speaker 3: should we care so much about this one person? Why
Speaker 3: do we care? I think part of it is an
Speaker 3: Icarus story, right, there's a shot and freud to it,
Speaker 3: which is, here's this boy, wonder King who seemed to
Speaker 3: be using his you know, brain to just print money
Speaker 3: and become so successful. And there's a little bit of
Speaker 3: human nature to say, kind of good, right, I knew
Speaker 3: it couldn't be that easy. If it were that easy,
Speaker 3: we'd all be doing it. And it must have been
Speaker 3: must have been a fraud. And I'm glad to see
Speaker 3: him kind of get what's coming. And so I think
Speaker 3: that creates kind of an interest in it. And then
Speaker 3: of course it is important because I think for a
Speaker 3: lot of people, Crypto felt like an area where you
Speaker 3: could print money, where anybody could make money, and it's
Speaker 3: important for people to understand sort of what the cost
Speaker 3: is of having an unregulated currency. It's more and more regulated,
Speaker 3: of course, but the dangers of crypto writ large are
Speaker 3: a little bit on display when you talk about how
Speaker 3: this could fail so spectacularly. Whether it was a crime
Speaker 3: or not, it certainly failed spectacularly.
Speaker 1: We'll be back in a minute with one last thing.
Speaker 1: And we're back with one last thing. Our one last
Speaker 1: thing today is about a lawsuit against Sam's parents. Recently,
Speaker 1: lawyers for FTX sued them in an attempt to get
Speaker 1: money back to repay their creditors. In this suit, FTX
Speaker 1: alleges that Sam's parents either knew or willfully ignored signs
Speaker 1: that Sam was quote orchestrating a vast fraudulent scheme. I
Speaker 1: should also note here that my boyfriend is a lawyer
Speaker 1: at Sullivan and Cromwell. That's one of the firms that's
Speaker 1: been representing FTX in the bankruptcy, but not Sam Bankman Freed.
Speaker 1: He and I have a firewall up about this case,
Speaker 1: and Sullivan and Cromwell is not involved in this particular
Speaker 1: lawsuit against Sam's parents. Rebecca, I wonder what stood out
Speaker 1: to you most about this suit against Sam's parents.
Speaker 3: I should preface it by saying that I am not
Speaker 3: a bankruptcy lawyer. This is really sort of outside of
Speaker 3: my area of interest. But I think one question it
Speaker 3: raises for a lot of people outside the law is
Speaker 3: are they next right? Are they going to be charged
Speaker 3: with a crime?
Speaker 1: Yeah?
Speaker 3: And what can we interpret from the fact that this
Speaker 3: lawsuit was brought? And I think the short answer is
Speaker 3: not that much. And I should say that I did
Speaker 3: some homework for this one and spoke to one of
Speaker 3: the partners at my law firm, a Melvini named Daniel Shama,
Speaker 3: who's an expert in bankruptcy. So here's what I learned
Speaker 3: that was really interesting, which is there's something called a
Speaker 3: clawback in bankruptcy, which is, once a bankruptcy happens, you
Speaker 3: can clawback. You can take back money from people who
Speaker 3: got money from the entity that went bankrupt. And there's
Speaker 3: rules about how that works. There's time limits, there's all
Speaker 3: kinds of things, but the one that's the most relevant
Speaker 3: here is called a fraudulent transfer. And what that means
Speaker 3: is that within a window of a number of years
Speaker 3: before the bankruptcy, you can take back money from people
Speaker 3: who got it. If two different kinds of things happened.
Speaker 3: One is that there was an actual intent to defraud creditors.
Speaker 3: That's the legal language. And what I mean by that
Speaker 3: is you knew the ship was sinking, so you gave
Speaker 3: a lot of money to your parents so that it
Speaker 3: would be there for you. Right, that would be a
Speaker 3: fraudulent transfer because you were doing it to keep the
Speaker 3: money away from creditors in the bankruptcy people who were
Speaker 3: owed money. The other one is when it might have
Speaker 3: been that the person who got money didn't even know
Speaker 3: that they were doing anything wrong, but they received something
Speaker 3: for quote less than reasonably equivalent value or fair consideration.
Speaker 3: So what does that mean? If I give you a
Speaker 3: monet right from my company and I only charge you
Speaker 3: a dollar for it, you have not paid reasonable consideration
Speaker 3: for it. Right. It's another way of getting the money
Speaker 3: out of the entity before the ship sinks.
Speaker 1: So the idea is still you you gave me the
Speaker 1: monet because you wanted the money to be safe.
Speaker 3: It doesn't have to be that. That's why, In other words,
Speaker 3: if I gave it to you and it wasn't really justified,
Speaker 3: even if there wasn't necessarily a nefarious intent, there can
Speaker 3: be enough for a clawback. And so you know, you
Speaker 3: can Imagine, for example, you know, the person who delivers
Speaker 3: copy paper to FTX realizes things are not going well
Speaker 3: and they say, we'd like you to pay our bill
Speaker 3: in full right now instead of normally gets paid every
Speaker 3: sixty days. That's not there's nothing fraudulent about that. But
Speaker 3: now this creditor might have gotten more than their fair
Speaker 3: share than someone else, right, So that's another kind of
Speaker 3: place where you'd have a clawback. You'd say, well, wait
Speaker 3: a minute, we have to get all the money back
Speaker 3: on place and give everyone their fair share. You don't
Speaker 3: get to paid in full, right. So I think the
Speaker 3: question with Sam's parents here is, you know, were these
Speaker 3: fraudulent transfers? And obviously the allegation is yes, that they
Speaker 3: knew or should have known that this money that came
Speaker 3: to them was not legitimate. What's the punchline? That is
Speaker 3: just a totally different standard than a criminal standard to
Speaker 3: say that they should have understood that something was awry
Speaker 3: or that they got money that they didn't really deserve. Right,
Speaker 3: did they earn that for some reason? What were they
Speaker 3: doing that justified these huge payments. That's different than they
Speaker 3: knowingly participated in the crime, and they themselves did things
Speaker 3: in further owns of it. So I don't think you
Speaker 3: can read from this civil lawsuit that charges against them
Speaker 3: are likely, But I also don't think it's impossible. There
Speaker 3: are allegations that Sam's mother in particular, told him to
Speaker 3: hide certain donor identity information in connection with campaign contributions.
Speaker 3: That's a little if that's true, that's kind of a
Speaker 3: suggestion that she committed a crime. And of course his
Speaker 3: father was involved in the business itself. So could they
Speaker 3: be charged. I think time will tell, but I wouldn't
Speaker 3: read too much into this lawsuit.
Speaker 1: Well, michaelis Rebecca Ramolstein. I am excited to cover the
Speaker 1: trial and check in with both of you.
Speaker 3: Thank you, Alja anytime.
Speaker 2: This episode of Judging Sam was hosted by Lydia, Jean Kott,
Speaker 2: Catherine Gerardeau and Nisha Venken produced this show. Sophie Crane
Speaker 2: is our editor. Our music was composed by Matthias Bossi
Speaker 2: and John Evans of stell Wagons Symphonette. Judging Sam is
Speaker 2: a production of Pushkin Industries. Got a question or comment
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