Sam Bankman-Fried's Lawyers Test the Judge's Patience

Have you ever seen a Toyota Corolla?

AccessTimeIconOct 6, 2023 at 10:00 a.m. UTC
Updated Oct 6, 2023 at 3:44 p.m. UTC
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It could take six weeks for prosecutors to make their case against Sam Bankman-Fried. But only three days were needed for the judge overseeing his trial to lose patience with the former crypto chief’s defense team.

Judge Lewis Kaplan was visibly and audibly disgruntled and mightily displeased with Mark Cohen & Co. on Thursday. On multiple occasions the white-haired federal judge chastised the defense attorneys for asking imprecise and repetitive questions of government witnesses. During one especially aggravating cross-examination he called the attorneys over for a sidebar slap-down.

“I’ve given you a lot of latitude, but” the repetitive questioning “needs to be curbed,” the 78 year-old judge told defense attorney Chris Everdell as he probed Adam Yedidia, a former friend and employee of Sam and now a witness for the prosecution.

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Kaplan’s displeasure with the defense team underscores the difficulties they face when mounting their two-pronged campaign to secure a “not guilty” verdict from the jury. First, they must use cross-examination to undermine government witnesses’ credibility in jurors’ eyes. Second, they must inject Sam’s most favorable facts into the court record by asking witnesses questions that don’t get shot down at a cringe-worthy frequency.

There was plenty of cringe in the courtroom as the defense tried questioning Yedidia, the government’s first spicy witness, to share insider knowledge of crypto exchange FTX and its downfall.

Yedidia had been called to testify about a bug in FTX’s accounting software that caused it to wildly overstate how much money Alameda Research owed exchange customers: $16 billion instead of the real debt, which was half of that. Of course, even $8 billion missing from customers’ accounts was a big problem, too. (Alameda was FTX’s banking gateway during the exchange’s early days. Customers wired their money to the trading firm and then got credited in their FTX account. The messy, “secret” arrangement was one factor in FTX’s subsequent loss of $8 billion in customer funds, according to prosecutors.)

The defense offered a different take. In its opening arguments lawyers characterized Alameda’s banking relationship with FTX as no secret and its loss of customer money as nothing criminal – though perhaps really, really dumb (from a risk management perspective, that is). They want to get that line across to the jury.

Sam’s lawyers appear to be injecting that effort into their cross-examination, where they’ve been asking witnesses questions whose answer they want to be yes. For Yedidia, this included questions about who could use FTX as an exchange (objection), how hard people were working (objection) and whether the witness “thought that FTX was very well run” (ob- erm, well, you know the drill).

Thing is, prosecutors have any number of procedural ways to block such questions from entering the record – and also from letting their witnesses answer it. Assistant U.S. Attorney Danielle Sassoon objected to the above questions and Judge Kaplan sustained them. Most of Thursday’s 84 objections landed against the defense.

Sometimes Kaplan sustained prosecutors’ objections even before they’d lodged them. Sometimes he did so sounding exasperated. At one point he spent a minute staring at the ceiling. At another, he chastised the defense attorneys for being, well, stupid.

“Do you recall seeing a Toyota Corolla,” Everdell asked Yedidia in an attempt to underscore that Sam didn’t blow his wealth (or was it his customers’ wealth?) on expensive things that go vroom. “Objection!” cried Prosecutor Sasson.

“I don't think there’s anybody in the room who has never seen a Toyota Corolla, so let's get on with it,” Kaplan said, eliciting the day’s biggest laugh from the gallery.

The judge himself drives a BMW X7. I saw him wheeling off into the late afternoon traffic Thursday wearing sunglasses and what appeared to be french cuffs.

His license plate read: “USJ 1.”

What we're expecting

FTX co-founder and former chief technology officer Gary Wang has already taken the stand, getting in about 40 minutes or so of testimony at the end of the day Thursday. He’s probably going to spend quite a bit more time on Friday discussing his role in overseeing FTX, and more specifically the backdoor that allowed Alameda to access FTX customer funds.

While the judge is clearly not thrilled with how the defense is proceeding so far, the real question is how will the jury take it. Even though the judge sustained objections to several defense questions, the mere fact that defense attorneys raised questions hinting at issues with witnesses’ credibility may leave a lasting impression.

Similarly, the fact that Yedidia – the former FTX developer – said he lost his belief in the company because “FTX defrauded all its customers” is probably going to leave an emotional mark that may be difficult to overcome, even if the defense and judge immediately asked to strike the line from the record.

We are seeing the DOJ’s strategy continue to play out – and again, it seems almost laser-focused on this emotional appeal. We heard from Matt Huang – who admittedly may not be a super-sympathetic figure, as a fairly well-off venture capitalist – who told the jury that his firm marked down $278 million of investments in FTX to zero.

And now we’re hearing from Wang, who just very loudly opened up his testimony by saying yes, he committed crimes and he did that with Bankman-Fried and the rest of the FTX inner circle.

On a logistical note: Wang’s testimony will conclude Friday. Prosecutors expect to wrap up midway through what will be an abbreviated day. Depending on cross-examinations, we may or may not hear from the next witness, BlockFi’s Zac Prince, later today. Otherwise, he and Elan Dekel, a vice president at a company called Pinecone, are expected to begin testifying next week.

Reminder: There is no trial on Monday for Columbus Day (or Indigenous People's Day). Court will resume on Tuesday, Oct. 10.

Edited by Marc Hochstein.

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Danny Nelson

Danny is CoinDesk's Managing Editor for Data & Tokens. He owns BTC, ETH and SOL.

Nikhilesh De

Nikhilesh De is CoinDesk's managing editor for global policy and regulation. He owns marginal amounts of bitcoin and ether.


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