For this bonus episode of Chain Reaction, Jacquie is joined by TechCrunch+ Editor in Chief, Alex Wilhelm, go over the FTX/Sam Bankman-Fried trial before getting into his testimony from Thursday and Friday.
For this bonus episode of Chain Reaction, Jacquie is joined by TechCrunch+ Editor in Chief, Alex Wilhelm, go over the FTX/Sam Bankman-Fried trial before getting into his testimony from Thursday and Friday. They talked about:
Join us next week for another trial recap
Keep up to date with Jacquie's coverage at techcrunch.com
Join us next week for another trial recap.
Chain Reaction comes out every Thursday at 12:00 p.m. ET, so be sure to subscribe to us on Apple Podcasts, Spotify or your favorite pod platform to keep up with the action.
Jacquelyn Melinek 0:01
Hey everyone, its Jacqueline melanic. Welcome to chain reaction, a show that unpacks and dives deep into the latest trends, drama and news with some of the biggest names in crypto breaking things down block by block for the crypto curious.
So this is a very special bonus episode, we're going to do our best to recap the SAM Venkman free trial. It is the fourth week of the trial and the defendant himself took the stand on Thursday and Friday. This is the first time he has spoken publicly since the trial began. And at the beginning of the trial, all he said was yes, so this is really the first time he's spoken publicly. But the crazy part about all of this, and I'm sure me and Alex will get into this is that the judge sent home the jury on Thursday. And we will get into the reasoning behind that. And the main takeaways from SPF collecting six hours of testimony and then some and it's not over. It's gonna go Monday, maybe Tuesday, maybe forever. Hopefully not. But I have the TechCrunch plus editor in chief Alex Wilhelm here to help me parse through what went on in the courtroom and what can go next. Alex, thanks for being here.
Alex Wilhelm 1:12
I mean, an absolute pleasure. It's quite literally the least I can do to work late on a Friday, given that you've been arriving at the courthouse. And it turns out 230 In the morning, yeah, it wasn't even first, what happened, like it was like 6am, that it was a little earlier. And then suddenly, you're getting there literally when party o'clock is still happening.
Jacquelyn Melinek 1:29
So someone tweeted, I hear you have to get there at 3am. So whoever that person is, I hope you have a bad weekend. And then also, prior to that, it was like when it was Caroline Ellison's testimony, people got there pretty early around like 430, right. And we thought that was crazy. But I think because it's Sam, and that tweet and all these rumors about you have to get there at three people were just like pushing the envelope of getting there earlier and earlier. And I'm exhausted, yes.
Alex Wilhelm 1:57
Now, one thing I learned today is that the courtroom is actually quite small. So how many folks can actually fit in there in like the observation section.
Jacquelyn Melinek 2:03
So for the public and media, we are pooled together. It is 21 seats. But that is assuming that the judges clerk doesn't bring any friends, which has happened in the past today, the judges clerk brought in two friends. So 21 People thought they were getting in, and it actually turned out to be 19. So the last two people didn't get their seats. And that's just a surprise.
Alex Wilhelm 2:24
I helped bigger dinner parties. And that by accident, like I like that's a crazy, small number.
Jacquelyn Melinek 2:28
It's tiny. So then there were overflow rooms. I think there were three overflow rooms today and yesterday. And typically there's only one or two but because there were so many people there that wanted to see sambangan Free testify, they opened up more rooms, and I was spot number seven today. And spot number four yesterday. So
Alex Wilhelm 2:43
Wow. I owe you like 17 lunches at this point in time. Like it's absolutely crazy.
Jacquelyn Melinek 2:48
But what's insane to me take a vacation day. Yeah, no,
Alex Wilhelm 2:50
you can take as many as you'd like after this to trust me. But one thing that blew my mind is how fast time has gone. Because this was the fourth week of this trial already. Yeah.
Jacquelyn Melinek 2:59
So this is week four. And they said they're hoping to wrap it up by next week. And initially, they were hoping for Monday or Tuesday, and now they're like maybe Friday or the following Monday. And it was supposed to be six weeks. And if everything is shaking out the way they say so it might end on like the six week mark at the beginning.
Alex Wilhelm 3:16
Okay. Now, when the trial kicked off tons of media attention, everyone's super interested, the opening statements were full of fireworks. And then it did seem to kind of slow down a little bit for a couple of weeks. So what's happened recently to kind of catch us up to this key moment in which Sam took the stand himself.
Jacquelyn Melinek 3:33
Yeah. So I think prior to Sam, we had someone from the FTX. General Counsel Come on. And he basically said that Sam wanted him to create a, quote, legal justification for the reason they used billions of dollars of customer funds amid the collapse because they were trying to fundraise more money to stay afloat, yada, yada. And this lawyer basically said he came up with some things, but like, none of them would hold up. And Sam was just like, Yep, got it, according to this guy. And then Sam comes up and he testifies. And I guess we could start with on Thursday, what happened and what we kind of talked about in the intro, yeah.
Alex Wilhelm 4:10
Which is this insane. No jury in the room. Now, I have to tell everyone who's listening to this. If you are a legal expert and know lots about the courts and so forth, I may sound like an absolute country bumpkin here. And that's because I am I didn't know the jury could not arrive for a day of testimony from the lead defendant. So what the hell
Jacquelyn Melinek 4:29
yeah, we were all really shocked by it, because we were basically told, you know, we have the government's last witness in the morning, and then the defendant had two witnesses, and then it was gonna be Sam. Sam was testifying. That's what we were told. That's why we got up there before the crack of dawn to hear him speak. And the judge sent the jury home because basically the defense's team submitted some filing the night before saying these were the topics they wanted to talk about, and the prosecutors kind of opposed it. So the judge said It was basically to determine whether or not the testimony could be shared with jurors. And he said, I haven't had a hearing of this nature in a long time, if ever, so it was basically like a mock hearing, but everything was on record, it counted. And it was called a testimony. Okay,
Alex Wilhelm 5:17
so essentially, Sam arrives on Thursday, and with his first round of testimony, the room is equivalently empty, because the jury is not there. So it's just the lawyers, the defendant and the judge, and then the folks watching.
Jacquelyn Melinek 5:29
Yeah, but I mean, it wasn't empty. It was full just minus the jurors. And all the reporters were there. We all wrote it. And the judge told the jurors before he told them to go home for the day, do not look anything up. And whether or not they did who's to say.
Alex Wilhelm 5:42
I mean, also they did. Just poor Jerry, can you imagine you're finally here, finally. Oh, thank God, the defendants gonna be on the stand. And then you're like, go home, don't do anything. Like what do you do watch Netflix online? Try not to think about anything that's going on in your life. It's been weeks. Yeah. Crazy.
Jacquelyn Melinek 5:57
Yeah, it is pretty crazy. But a lot was said on Thursday, they talked a lot about the signal situation and the data retention policies. They asked where the written policies were, and Sam couldn't really answer that. And then he said, Oh, we asked for it, and then we never got it. Which last charge? Yeah, well, because he was no longer FTX. He said he couldn't get access to it. And then they talked about other like big takeaway pictures for KYC policies, like regulatory mandates and stuff when it comes to data retention. And he also just continuously kept blaming his lawyers for everything. He was like, oh, you know, people would just put things on my desk, and I would sign it because I trusted them. And I kind of get that, you know, like, he was juggling a million things, but at the same time, like, Don't sign important documents, unless you know what it is. And that's not a cop out for a reason that everything happened. Yeah.
Alex Wilhelm 6:50
Also, the dog ate my homework excuse doesn't fly in third grade. It doesn't fly when you are running a multibillion dollar business. Yeah,
Jacquelyn Melinek 6:56
I accidentally signed divorce papers. You know, like, that doesn't happen. You gotta read it. Yeah.
Alex Wilhelm 7:01
And even worse, like if the defenses method here is saying Sam was too incompetent to be trusted. Well, that's one way to approach this. It doesn't really fly with me, given the way the company presented itself. But what I'm really curious about because you weren't there's what was Sam? Like? I mean, evasive, confident, sweaty, like what was what was the vibe there? Yeah. So
Jacquelyn Melinek 7:20
on Thursday, Sam was very jittery, very happy to talk. He was like talking a million miles per hour. I couldn't write as fast as he was speaking. And he was going on and on and on. Like he was giving like more than the questions asked for. He did that on Friday, too. And then that was with the defense. And then when it came to the prosecution's turn, he was very slow pause, the lot said I don't recall for many, many things, and was just way more hesitant with what he had to say.
Alex Wilhelm 7:48
So I'm curious, though, because we did this dress rehearsal day on Thursday sans jury to see how it would go. Were there a lot of objections? Was it a reasonable choice in the end, after the fact.
Jacquelyn Melinek 7:58
So the judge slept on it. And then today, on Friday, he came in and said, like, Yep, we're good with everything that was said yesterday, like, you could go ahead and like, ask Sam about it in front of the jurors. And that was before the jurors came in the room. And then they come in and everything. And so we've only gotten to part of the defense's questioning to Sam, we haven't seen the prosecutor side yet. And they kind of already know some of the things that will be brought up, if not all, because they're watching it. So they'll just cross every single aspect that the defense has brought up. And yeah, it was a little like Sam was still himself, but he was more composed, confident. He talked in a slower tone, even though it was still like his fast self. It was a bit slower, and it gave off more sincere energy. I think he was trying to win over the jurors.
Alex Wilhelm 8:47
That's what I was gonna ask him about. Because one thing that I recall from an earlier time we were chatting about this was you were discussing how Sam was looking at your jurors and kind of staring at though yes, you almost felt like I mean, we're reading a lot into his body language here, like almost intimidating them and to some degree, but yeah, it sounds like he was more solicitous.
Jacquelyn Melinek 9:04
Well, yes, in his voice, but he was staring at them while he was on the stand to when they walked in, he would stare at them during breaks. He would stare at them when he spoke, he would like look to them, oftentimes, he would look forward, but there were other times where he would speak directly to the jurors, and sometimes like, he had more of like a approachable face. And then other times it was just deadpanned, and I was like, buddy, what are you doing?
Alex Wilhelm 9:30
Probably freaking the fuck out. That's what I would be doing. Can you imagine like the sheer amount of like, okay, Jackie, are you an anxious person by nature?
Jacquelyn Melinek 9:38
Sometimes, depending on the situation,
Alex Wilhelm 9:41
more endearingly anxious, the idea of being a high profile char like this, but I'm the person in the dock. Oh my gosh, I wouldn't be talking a billion miles an hour or tripping over myself and pissing myself I think.
Jacquelyn Melinek 9:54
I mean, he is human at the end of the day, and I think that's what he's trying to play on as well. So
Alex Wilhelm 9:59
try They come across as human. I mean, that's, that's tough. Yeah. I think in a setting like that when you can, it's not designed to make you look super pitiable, I don't think.
Jacquelyn Melinek 10:08
And I've said this in the past, but it's like a marathon. And it's an endurance game. I hope I never have to play. Because I can't imagine sitting on a stand for hours and hours and hours, and you can't miss up anything you say? Or you're not supposed to lie, right? Because who's to say with what's going on here? But it's hard. It's really hard.
Alex Wilhelm 10:29
So the jury is there. So it's Friday and they're watching us go down any notes on the jury themselves? Like, are they fidgety? Are they generally do they want to cry, because they've been there for a while.
Jacquelyn Melinek 10:39
So I expected more from the jury today, I expected more reactions, they laughed at a few jokes that the whole room laughed at, they really didn't show any facial reactions to anything, Sam was saying, and many of them did not take notes at all today. Like, in the past, I've seen jurors take a lot of notes. And some of them have their notebooks out. But they didn't write anything. So
Alex Wilhelm 11:04
so I feel like you're leading me towards the conclusion that you're leaving, unsaid there. So how do you read that particular lack of note taking Jackie? Hi, I
Jacquelyn Melinek 11:11
feel like they want to follow his mannerisms and like, actually pay attention. But at the same time, it seems like they don't want to write down anything he has to say, which I was really surprised by. And yeah, what
Alex Wilhelm 11:23
do you take from that? You're almost almost said it.
Jacquelyn Melinek 11:26
I don't want to do it. But I take that they probably don't buy anything he's saying they don't care that's they've already made up their minds is how it feels. And I think maybe there'll be a little bit nicer. But it's like a lot of the things Sam has said, has already been, you know, counter argued in earlier testimonies. Yeah. There was one part where they talked about Alameda, quote, borrowing money is how he refers to things. And instead of saying that Alameda took FTX customer funds, he's saying they borrowed it, and they would give it back later. And it was all these things. And it's just like, he said that there was no rules against FTX doing this. But in earlier testimonies, we literally saw the terms of service that said FTX can't do this. So
Alex Wilhelm 12:12
interesting. It's almost like some things here, much like the FTX balance sheet aren't adding up.
Jacquelyn Melinek 12:19
Yeah, it's definitely interesting. And there were there are some fun parts of the testimony to or just like humerus beds, they talked about how when they were looking at sponsorships and partnerships, back when FTX was still a thing. They brought up the Miami Dade heat arena that they bought for $135 million deal. The naming rights for naming rights. Yeah, exactly. And when they asked like, why Miami why this amount, whatever, he said, he thought it would be good to get their name on a sports arena. He said, that's really good branding. And a lot of people pay attention to those types of things. And so he had his marketing team, find which arenas were available for naming rights. Because you know, a lot of them last for so many years. You can't just go and say like, I want the city fields, like Citi Field probably has that name forever. And so they found that there were four stadiums that were up for renaming, and one of them was the New Orleans Saints. The other was the Kansas City Chiefs, the Kansas City Royals, and then Miami Dade heat arena. And apparently with the New Orleans Saints and the Kansas City Chiefs. They were already in talks. They're like we're not going to compete on that front. And then apparently with the Kansas City Royals, he said no offense to Kansas City Royals fans, but we don't want to be known as the Kansas City Royals of crypto exchanges.
Alex Wilhelm 13:37
Just Kansas City slammed Yeah,
Jacquelyn Melinek 13:40
exactly. And you know, everyone laughed at that point. And he like he was smiling on the stand, too. So it was just like funny little moments like that. You know,
Alex Wilhelm 13:47
I want to loop back, though, to what's coming up in this because I've enjoyed very much watching this unfold. But where are we on the prosecution's question of Sam like, do they have more time ahead of them? Like, is it a lot cuts coming up? Because that's going to be spicy as hell
Jacquelyn Melinek 14:01
yeah. The fun thing about this is you never get a timeline. And even when they give you an estimated timeline, I think they always go over it. So the defense said they would take four to five hours in their prosecution of Sam. And today, they started at 950 in the morning, and they took the whole day. And I'm not going to do the simple math on that. But it's like seven hours already. Maybe that's the lunch break and the little breaks they throw in between. And yeah, they're not done. They got to a lot. They covered a lot of ground, but they're gonna go into Monday. And then God knows how long the prosecutors are going to stay with Sam. In the past. They had Gary Wong Caroline Ellison and the Schaad saying on the stand for roughly like a day and a half each of them so those were people who pleaded guilty. Yeah, and they were part of the FTX Alameda inner circle shebang, but this is like the quote unquote, head honcho the mega Don so might be a bit longer and they basically said at the end of trial today that they expect tend to go to like the end of the week. And the judge said, if we have to do Friday, we'll do Friday because it's typically only four days a week. But he's like, I want to get this done with.
Alex Wilhelm 15:08
Yeah. So I have a really silly question. And this is going back to my I'm a country bumpkin on the legal circuit. So don't judge me too harshly. But we all are. Sam got a dress rehearsal answering questions from his own team, right. And then today on Friday, once again, he was answering him his own team. And it doesn't sound like he did that well answering questions from his own crew. So when the prosecution takes over, oh, Lord,
Jacquelyn Melinek 15:32
for what it's worth, I think he did well, because he was he was well prepped. Okay. And he knew how to answer the questions properly. But he did go on a lot of monologues like, if I asked you, Alex, where do you work? You would tell me, I work at TechCrunch. But he would say I work at TechCrunch and then go on for like another 3040 seconds about things that he just wanted to throw in. He wants to get on the record, you know,
Alex Wilhelm 15:54
so like, instead of saying, I work at TechCrunch, I would say, Well, I've worked at a variety of media companies in my life and across different roles and so forth. Now currently, I do have a main gig. But I also have an interesting prosecutors
Jacquelyn Melinek 16:03
would say objection. And then he would sustain it. And it would be like answer the question. I think Sam showed his personality. And I think for what it's worth, he did a good job, the defense was doing their role of making Sam look as if he wasn't as responsible as the prosecutors are making him out to be.
Alex Wilhelm 16:23
Well, we will see the other side of that particular coin coming up. Yes, a couple more weeks of this. How are you holding up personally? Like, I mean, are you assign someone to a multi month trial before so like, I don't know, are you just like really sick of like the smell of the courtroom at this point?
Jacquelyn Melinek 16:39
You know, it's funny, because in the first couple of weeks in the courtroom, we were allowed to talk when they were at sidebar, or like, whisper to each other, look at each other's notes to like, you know, make sure we all got the same numbers, like when you're sitting next to other reporters, and it's just gotten so so strict. Like today, I got yelled at, I'll be honest, I got yelled out, because they thought I was talking. And they're like, if we catch you talking again, we're gonna send you out. And in my head, I'm like, I wasn't talking. But you can't fight them. And it's just, I think the energy has become very sucked out. But at the same time, everyone's so excited, because it's Sam. But literally, there is like, no speaking, complete silence for everyone. Not just the media in the public, but like even his parents, they're not allowed to whisper. Like they can totally get yelled at if they did. So on that note. Yeah, who yells at you. Is it the bailiff? The security guard? Does that the bailiff and then he apologized to me afterwards? Oh, no, I think, you know, I think he had to yell at someone to show the judge. He was doing his job and like
Alex Wilhelm 17:44
wondering, Hey, this is me. Publication discrimination. No, thank you, Jackie. Go pick on someone else.
Jacquelyn Melinek 17:50
Yeah. But I also want to point out that yesterday after Sam had his two witnesses, one of the two witnesses who was a bohemian attorney that he worked with after FTX claps came up basically towards the front of the stand, like there's a barrier, so you can't cross over. And she went over to like, Wave at him. That was the first time I've ever seen him smile, like with his teeth. He smiled. He waved. He was like, Oh, my God, like, it's so nice to see or whatever. And then his parents were smiling, like everyone seems happy with the way the hearing testimony, or Well, I guess that was the actual testimony that was pre hearing testimony. And then today, Sam's dad smiled to the whole galley of people at one point, and it was very strange. So I think they also feel positively about how things are going for him.
Alex Wilhelm 18:34
Well, in a sense, this is their moment to shine. This is them asking him the questions, trying to get their side of the story on the books and in the minds of the jurors and hopefully into their notebooks for later perusal. But it's going to flip around, because he's going to be on the stand and going to take questions from the other side of things. So
Jacquelyn Melinek 18:49
yeah, it'll be interesting to see how the prosecutors go about everything, like even little bits, where it's not that significant. But it paints a picture of like, who Sam is like, they were talking about how much FTX raised and he was going through all the funding rounds they've done. And first of all, he was kind of off the mark with some of the numbers. He was like, oh, yeah, we were like this valuation when that wasn't the correct valuation. It's like, surely you know, your valuation. He said they had a $40 billion valuation at the end. And they did it. It was below that. And then he also said one of the rounds was 500 million. And that round was actually for 20 point 69 million, which was a joke round. It was a joke, but it was a meme fueled round, giving a shout out to for 20 and 69. And he purposely did not say that in front of the judge and the jury and he just rounded up to 500. That's what rounding
Alex Wilhelm 19:41
now that's line a round down. That's how rounding works, or you just round the 420 or a little more than 400 million or less than
Jacquelyn Melinek 19:48
450 500 million. Okay, how do you not Jackie?
Alex Wilhelm 19:51
Let's let's be totally on this here for a second. Given the way surely
Jacquelyn Melinek 19:54
he knows what his funding rounds were.
Alex Wilhelm 19:57
No, I was gonna say given how this all works. Doug for FTX in his money management skills, maybe he was being honest. Maybe he thought it was 500. Maybe that's where 80 million.
Jacquelyn Melinek 20:06
Yeah, right. He can't remember the round that he basically made a joke out of.
Alex Wilhelm 20:11
I mean, I don't know how much money spent on breakfast this morning. That's the same thing as getting 420 million and $500 million mixed up.
Jacquelyn Melinek 20:17
It's this. Yeah. A lot of the blame, too. He kind of just said he wasn't involved in some things. And he found out about it later. And he was quote, surprised by it. Yeah.
Alex Wilhelm 20:26
So my read of this company, given how critical the inner cabal was, is that that is not going to fly. It's not like they were distributing lots of authority down. I mean, remember what the old FTX USC I was saying about how like, clearly there was like a set of decision makers, and then there's everyone else. You can't control power and arrogant all authority to yourself, and then tell everyone else later on, you have no idea what's going on. You can have it one way or the other. But you can't have both. Yeah, I think personally, my view, just my two cents.
Jacquelyn Melinek 20:54
And like when Gary Caroline and Ashad testified a lot of their testimony was Sam directed me to do it. Sam told me to do it. And I'm sure that's part of their cooperation agreement. And I also think there's truth to that. Like he was the CEO, and he had majority stake of Alameda and FTX. So his interest was always to basically have his thumb on the scale at all times.
Alex Wilhelm 21:16
Yeah. Well, if you're the majority shareholder, and you're in charge, I mean, people might expect you to actually know what's going on at the company. Shockingly enough. I
Jacquelyn Melinek 21:22
mean, there was one point where he was like, Oh, I stepped away from Alameda, but I still helped out with venture investments and hedging and other things. And it's like, so did you step away? Do you know like, you just got rid of the title? He wears many hats.
Alex Wilhelm 21:37
Yeah. Well, I mean, it turns out most of the time, it makes you more employable. Or in this case, possibly more culpable. Yeah. Which is not quite as much fun. All right. So we're gonna do this again. Next week. We'll hear from the prosecution. We'll get a lot more from you. I'm expecting three, five stories a day, probably next week?
Jacquelyn Melinek 21:53
Yeah, that's sorry. I don't need a life or anything. It's just 24/7. Yeah.
Alex Wilhelm 21:57
I don't know. I'm kind of irked about all of this. Because going back to the Ford $20.69 million round, like, I don't know, be serious jokes.
Jacquelyn Melinek 22:06
Yeah, he made jokes, like casual for important, quote, unquote, serious companies. He also talked about, like, his clothing and stuff, where they asked him like, why did you always wear T shirts and cargo shorts? He's like, they were comfortable? Because that's valid. Yeah, I guess that's true. And then but they asked, Why was your hair always the way it was? And he was like, I just forgot to get haircuts.
Alex Wilhelm 22:27
Again, very
Jacquelyn Melinek 22:29
common thing. Yeah, the only
Alex Wilhelm 22:31
good. The only thing that I think Sam did well, was he really did bring slacker casual to the apex of political and economic society. The reason why I don't find it humorous that they raised that meme round and so forth, and are kind of acting like, oh, gosh, who knew what was going on? Because they took a lot of money from folks. And that involves, in my, in my mind, a lot of fiduciary responsibility. And if you want to be a fuckup, open a lemonade stand, you know, like, don't don't go into international finance and try to like invest in a leg just
Jacquelyn Melinek 23:02
need stands were profitable on like, FTX.
Alex Wilhelm 23:06
Actually, well, that means that they were much more viable business, and they probably would have lasted longer to and didn't have to register in the Cayman Islands. Bahamas whatever. Yeah. All right. Well, Jackie, let's get you some rest. Because you've been fantastic. An absolute legend on this beat. And I guess we'll just do it all again next week.
Jacquelyn Melinek 23:22
Yeah, let's do it. Thanks for talking with me about it. Do my pleasure. We'll be back next week with conversations around what's going on in the wild worlds of web three with top players in the crypto ecosystem. You could keep up with us on Spotify, Apple Music or your favorite pod platform and subscribe to our companion newsletter, also called chain reaction. Links to the newsletter and stories we talked about can be found in our show notes. And be sure to follow us at chain underscore reaction on Twitter. Chain Reaction is hosted by myself Jacqueline melanic and produced by Maggie Stamets with assistance from Nishad Kulkarni and editing by Kel Bryce Durbin is our Illustrator and Henry pink Yvette manages TechCrunch audio products. Thanks for listening in. See you next time.
Transcribed by https://otter.ai