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The Horrible, Terrible, No Good, Very Bad Day of Sam Bankman-Fried

Sam Bankman-Fried began his testimony like the brilliant former golden boy from crypto’s better days. He ended the longest, strangest, most torturous day yet of his criminal trial more imperiled than ever before.

“Part of the problem is that the witness has what I'll simply call an interesting way of responding to questions,” Judge Lewis Kaplan said before a gallery of exhausted faces late Thursday. They and he were the only audience around for a special hearing that turned what was supposed to be Sam’s first day of testimony into a freewheeling “deposition,” as defense counsel Mark Cohen put it.

The only solace for Sam may be that the jury wasn’t there to hear it. Kaplan had sent them home after lunch. He wanted to hold a “for my ears alone” hearing to determine if some defense arguments were admissible – a practice he’d seldom done in his 29 years on the federal bench.

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This newsletter isn’t so concerned with the contours of their arguments. Still – because Sam is so concerned with giving EVERY DETAIL some airtime – we’ll touch on them briefly for context. The defense wants to ask Sam about the lawyers he leaned on while running FTX and Alameda (into the ground). The government does not want to let them do this.

To be clear, this is only a portion of the defense argument. When Bankman-Fried shows up Friday to testify in front of the jury, he'll have broader issues to discuss. But even if we put aside the specifics, the main issue may still be that he'll be the one testifying, and he'll still be subject to a cross-examination.

Shortly after you read this newsletter (assuming you read it at 6 a.m., which, like, you should) Judge Kaplan will decide whether to let both sides’ arguments play out again before the jury. Assuming he says yes, we’ll hear it all again and cover it then. Assuming he says no, well, you’ll get the greatest hits here.

Here’s the gist: Sam Bankman-Fried soared high with a strong command of the narrative and its characters when his lawyers walked him through what was almost certainly a well-rehearsed back-and-forth. He reminded the gallery – at the very least, this reporter – why so many people fell under the fast-talking crypto billionaire’s spell during FTX’s good times.

Sam stayed on-script, repeatedly pointing the finger at former FTX General Counsel Dan Friedbrerg and external counsel from Fenwick & West. They drafted most or all of the documents around the various policies that Bankman-Fried says prove he didn't intend to defraud his customers, he testified.

Sam excelled and even Judge Kaplan seemed to know it. When the 78-year-old jurist asked Sam to break down what a “block explorer” was, the explainer-in-chief launched into a lucid depiction of the websites crypto investors use to track where their tokens are. He emanated the eagerness and bravado of the technical boy wonder he used to be.

Even before FTX collapsed (and especially after, during an ill-advised media tour) Sam positioned himself as a confidence man with all the answers. His self-belief in the SBF ability to talk it out – this was paramount to the SBF image. Maybe it was the source of his powers.

On Thursday, it was the fount of his floundering.

Thirty minutes after the block explorer explanation (or maybe it was an hour? Time is weird) Sam's game of savvy answers gave way to jumbled evasiveness. On cross-examination he waffled on a question about FTX’s document retention policy, saying he wasn’t sure if his answer was “admissible” for reasons you really don’t need me to get into.

A bemused, slightly annoyed Judge Kaplan snapped back: “You worry about block explorers.”

Everyone and their mother (literally: one prosecutor’s mom was there, as well as the defendant’s) came to watch Sam Bankman-Fried spar with the government on his biggest stand yet. A rainbow sneaker-wearing Michael Lewis caught a delayed red eye from California to lean in on the penthouse courtroom’s wooden pews. In front of him, Sam’s publicist nervously chewed on a blue pen while three sketch artists added flairs of color to their works; to their left nearly 20 reporters scribbled in notebooks that were fast running low on paper. All around the courtroom a revolving cast of five or more U.S. Marshals kept everything under close control.

Sam kept himself under control – or, I guess his version of control. Which is probably not the control his lawyers want (which would be under their control). He continues to present himself as the master of his own story. At least, he thinks he is.

During a blistering cross-examination by Assistant U.S. Attorney Danielle Sassoon, Sam Bankman-Fried voluntarily defenestrated his unrecognizably svelte frame into a treacherous pit of legal whoopsie-daisy that even Judge Kaplan tried to save him from – and failed.

Reminding us all that humans are persistence hunters, Sassoon had already distinguished herself throughout this trial as the government’s patient testimony tactician. She lays traps that witnesses walk into, conjuring statements they can’t escape. Her command of her sections of this case is such that she can refer to documents, narratives and names that people like Sam really should know of – but don’t.

Her questioning of Sam forced the self-sure alleged fraudster deep into his own patchy memory hole. A typical back-and-forth went like this:

"Did you have any discussions with lawyers about the permissibility of Alameda spending FTX customer deposits sent to Alameda's bank accounts?"

He wrangled around many of her queries with over-answers, non-answers, indirect answers and apologies that he did not know more. The judge told him off for being slippery.

"Listen to the question, and answer the question directly," Judge Kaplan instructed Bankman-Fried at one point.

On the stand, Bankman-Fried licked his lips so often that it resembled something of a tic. His mouth must have been dry, because he downed at least three bottles of water.

But he didn’t treat those bottles with the angry fists that have subconsciously betrayed his state of mind before. During his ex-girlfriend Caroline Ellison’s testimony two weeks ago, Sam put those poor Deer Park plastic throwaways in an air-squelching chokehold and then capped them, preserving their crumple. On Thursday, he did no such thing.

Instead, Sam ran headlong into the flames of his own making. Toward the end of the overlong day, Sassoon asked him if he believed that safeguarding customer assets meant not embezzling their money. It was a gimme of an objection from the defense that Judge Kaplan inevitably sustained.

Not to be deterred, Sam plowed ahead and said, while basically smirking, yes.

“Haven't you been sitting here for four weeks?” an exhausted though definitely amused defense counsel Mark Cohen chided his renegade client, after reminding him that he didn’t need to answer things Judge Kaplan ruled non-answerable.

The courtroom giggled. Judge Kaplan threw up his hands and laughed.

Courtroom scenes

VIDEO: Sam Bankman-Fried’s Terrible, Horrible, No Good, Very Bad Day
Crypto World Daily

  • An alternate juror asked to be excused because he was throwing up uncontrollably – but then asked to stay and "refused to leave," Judge Lewis Kaplan told the court at the start of Thursday's session. After checking that everyone was okay with excusing him (everyone was), he sent the juror home.

  • Krystal Rolle, an attorney and King's Counsel in the Bahamas, answered a question that raised much confusion over the past two days – she is not related to Christina Rolle, who leads the Securities Commission of the Bahamas. Rolle just happens to be one of the most common surnames in the island nation.

  • Assistant U.S. Attorney Nicholas Roos asked Rolle if she met with defense counsel repeatedly to prepare for her testimony Thursday and whether that's normal – almost certainly in an effort to undermine one repeated line of questioning from defense attorneys to prosecution witnesses.

  • We had multiple overflow rooms Thursday, though a lot of people left after realizing Bankman-Fried wouldn't testify before the jury or until after lunch.

  • Judge Kaplan lost his patience with both the DOJ and defense during various cross examinations: he told defense attorney Christian Everdell his attempts to get an FBI witness to discuss a list of group chats was "not helpful," and that "this is not an exam for new eyeglasses." He later went on a long example about working at his father's deli in an effort to move AUSA Thane Rehn along when cross-examining a defense witness.

What we're expecting

VIDEO: Sam Bankman-Fried is his own worst enemy, says former SEC official John Reed Stark
CNBC Television

Okay Sam's going to testify today. Like, for real this time. Probably. No he's definitely testifying. In front of a jury this time!

But first, Judge Lewis Kaplan is going to rule on the defense's motion to argue good faith efforts and role of counsel. He asked the parties to discuss any outstanding issues on the motion but he'll probably rule first thing in the morning. At which point we'll get the jury back in and they'll get to Sam's real testimony.

The revised timeline for the rest of the trial seems to be: Bankman-Fried will go through the direct examination and may begin his cross examination on Friday. That's probably going to continue into Monday. The DOJ isn't sure yet if it will present any rebuttal witnesses to whatever the defendant says. Either way, we may get to closing arguments by Tuesday, followed by jury instructions and deliberations.

We're getting close to the end folks. I'm genuinely going to miss it.

Edited by Marc Hochstein.


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