At a glanceMark Cohen spent hours last week getting his client’s version of numerous aspects of his alleged crimes. Bankman-Fried testified he was unaware of many elements of the fraud, including Alameda Research’s various special...
At a glance
- Mark Cohen spent hours last week getting his client’s version of numerous aspects of his alleged crimes. Bankman-Fried testified he was unaware of many elements of the fraud, including Alameda Research’s various special privileges.
- This laundry list of denials leaves government prosecutors spoiled for choice of topics in their cross-examination — and we’ve already seen Bankman-Fried collapse under questioning from assistant US attorney (AUSA) Danielle Sassoon.
- A question hovers over this strategic oddity: Are the high-profile defense lawyers crafting their own strategy? Or are they taking marching orders from the delusional Bankman-Fried and his parents?
Sam Bankman-Fried seemed calm and confident in his first testimony before the jury in his own defense on Friday, October 27. But with prosecutors set to cross-examine the former FTX CEO as early as Monday, that confidence and sense of calm will likely evaporate.
That’s in part because the defense’s direct questioning seems to have left prosecutors spoiled for choice of topics in their cross-examination of the alleged mega-fraudster. Defense lawyer Mark Cohen has taken Bankman-Fried through a laundry list of specific points already laid out by prosecutors, rather than using his client’s testimony to craft a clear alternate explanation of what happened to FTX customers’ money.
Cohen’s approach let Bankman-Fried directly deny the versions of a few events laid out by prosecution witnesses. However, it also handed a gigantic cache of ammunition to prosecutors.
Read more: How Sam Bankman-Fried thought he could win it all back
Join us in showcasing the cryptocurrency revolution, one newsletter at a time. Subscribe now to get daily news and market updates right to your inbox, along with our millions of other subscribers (that’s right, millions love us!) — what are you waiting for?
I didn’t do it
Bankman-Fried could be seen swaying anxiously from side to side when he first took the witness stand last week. His much remarked-on jailhouse haircut has begun to grow out, and he even seemed to have a strange bald spot over his left temple. His baggy suit was accentuated by a sloppily-tied tie, the skinny tail flapping down to his belt.
Bankman-Fried claimed that he believed Alameda Research’s borrowing from FTX was drawn entirely from the accounts of margin traders who had agreed to that use. He also claimed that “FTX didn’t have restrictions” on how funds withdrawn from the platform by borrowers could be used, meaning Alameda was free to do whatever it wanted with the funds. But as we already heard in Thursday’s evidentiary hearing, Bankman-Fried’s understanding was not firmly grounded either in advice from his lawyers, or the actual agreements signed by customers. That line of questioning will surely return in Sassoon’s cross-examination this week.
Cohen also led Bankman-Fried through an incident when FTX’s vaunted ‘risk engine’ seemed to malfunction, triggering cascading liquidations that could have threatened Alameda, thanks to its role as a buyer of last resort. Bankman-Fried then described meeting with Nishad Singh and Gary Wang and asking them to implement safeguards against an ‘erroneous liquidation’ of Alameda. In Bankman-Fried’s telling, he asked for some sort of “alert [or] delay” in liquidating Alameda.
Cohen also asked Bankman-Fried about FTT, the FTX exchange token. Specifically, he asked about the mechanism and price growth of FTT, with the apparent goal of establishing that Alameda’s purchases of FTT were legitimate market decisions, rather than market manipulation. But prosecutors have already introduced the idea that Alameda’s stash of FTT, which it used as collateral to borrow customer funds, was worth far less than it appeared on paper. Sassoon will almost certainly take the invitation to drive that point home one more time, with Bankman-Fried in the hot seat.
Read more: Sam Bankman-Fried lied to FTX lawyers about using customer funds
Aside from this handful of meaningful denials, Cohen’s questioning was largely boring and confusing. In one representative early stretch, Cohen asked Bankman-Fried “What is a database?,” whether FTX’s database was “on a computer,” and “how many computers did you have?” More time was devoted to such seemingly irrelevant details than to key questions of criminal responsibility. Cohen also skipped back and forth in time frenetically, repeatedly backtracking to cover questions he “forgot to ask,” or following Bankman-Fried’s digressions through time.
And not only did the defense introduce a staggering range of topics — Bankman-Fried’s answers often opened up even more. For instance, Cohen asked Bankman-Fried about FTX and Alameda’s 2020 relocation to Hong Kong. Bankman-Fried offered that Hong Kong had a good regulatory environment, suggesting the goal of the question may have been to rebut the idea that FTX was located outside of the US to avoid regulatory oversight.
Read more: Sam Bankman-Fried’s defense team failed to crack Caroline Ellison
Is Bankman-Fried the client from hell?
While Cohen did little to make it coherent for the jury, the defense’s version of events was at least vaguely discernible for those paying close attention.
Whoopsie.
Some will note that this is almost unchanged from the narrative laid out in the media tour Bankman-Fried undertook after his exchange’s collapse. This, along with the generally shambolic nature of the defense, has led to speculation:
Or is their seeming ineptitude merely a by-product of having perhaps the worst client of all time?
Bankman-Fried’s contempt for lawyers — and for that matter, for the system of law itself — was further clarified by the recent release of Bloomberg’s excellent documentary “RUIN.” In a recorded interview with citizen journalist Tiffany Fong on November 16, 2022, Bankman-Fried says that his lawyers were at the time urging him to stop making media appearances.
“After that, they said Sam, we only have one thing to tell you. You have to promise that you never, ever say “you fucked up” again. I told them to go fuck themselves … I don’t think they know what they … look, they know what they’re talking about in the extremely narrow domain of litigation. They don’t understand the broader context of the world,” the then-30-year-old Bankman-Fried opined.
Read more: Sam Bankman-Fried’s lawyers can’t stop making mistakes
It seems Bankman-Fried doesn’t have any more respect for legal expertise within the “extremely narrow domain of litigation,” either because according to absolutely every legal authority I’ve spoken to, it’s nearly impossible Cohen and Everdell actually want him to take the stand. As Judge Lewis Kaplan made clear at the beginning of the trial, that decision is ultimately Sam’s alone, and he seems to have chosen to die on the hill of his own innocence.
On top of Sam’s seeming contempt for expert advice, the defense team may be facing interference from Bankman-Fried’s parents, Joseph Bankman and Barbara Fried. They are in court daily, often flanked by fellow Stanford law professor David Mills, who has seemed to act as an intermediary between the parents and the core defense team. Fried in particular has seemed to react badly to the defense’s performance at various points.
Mills was garrulous in court during the first weeks of the trial, but by last Friday, events seemed to have taken their toll. Seen exiting the conference room for family members, Mills seemed not just dejected but defeated, his lanky fringe of grey hair drooping into his fallen face as he shuffled down the halls of the Southern District of New York courthouse.
Starting on Monday, as impossible as it may seem, things are poised to get even worse.