FTX founder Sam Bankman-Fried is getting his day in court, after prosecutors previously called the demise of FTX "one of the biggest financial frauds in American history."
The state of crypto is presented by Tron connecting the world to the power of Cryptocurrency. Federal prosecutors have previously called the demise of FX. Quote, one of the biggest financial frauds in American history joining us now to discuss the legal proceedings is Mince and gold partner, Ira Lee Sorkin. Welcome to the show. Ira. Thank you. Good to be here. All right. So we're talking about this jury jury selection this morning. We're expected to have 12 jury jurors and six alternates. What kind of jurors can you can we expect to see and could a lack of crypto knowledge lead to an acquittal here? How important is it that the jurors understand what's going on? Uh Let me put my disclaimer in him. Um I've never met Mr Bank man. Freed. I've never spoken to him. I happen to know his lawyer for decades. He's a very good lawyer. He's a very good law firm and I fully expect them to do the best they can under the circumstances. Going to your question. Um I don't believe that having a knowledge of crypto will play a role in how the jury decides this, the jury is expected to be fair, neutral, not biased. They have a very good judge, both sides. Judge Kaplan is an excellent judge. He's been on the bench many years and as long as the jurors listen to the instructions of the judge and the evidence, I think they'll come out with the right decision. So that's, that's the, that's the only answer you can give. I don't know the jury, but the jury will have been questioned by the court. Hopefully you'll get an unbiased fair jury to listen to the case. Let's, uh, let's talk about some of the comments that have been made in, in the media ahead of this trial. Uh Everyone is talking about author Michael Lewis. He spoke with CBS 60 minutes and said FTX isn't a Ponzi scheme and it was a quote, great real business. If no one had ever cast Persians on the business, there hadn't been a run on customer deposits. They'd still be sitting there making tons of money and quote, what do you think of comments like this being made, uh publicly, especially as we're getting ready again to select jurors and to begin this trial? Well, the big problem that Mr Franken Fried has is that early on, uh, before he was the subject of a gag order and incarcerated, he didn't stop talking a and I have no doubt that his lawyers told him shut up, but he went ahead and he spoke the problem here is that in every so called white collar case, the government will get up and say, look, you don't have to have. And I'm assuming this is what the government's position is going to be. You don't have to have an understanding of crypto. It is done. Prosecutors get up there and say you don't have to have an understanding of the securities markets on an insider trading case, on a manipulation case. But what a prosecutor will say, you don't have to have an understanding. This case is about fraud, misrepresentation lies. And that's the standard opening that you're going to hear from most prosecutors. So to expect this jury to have an understanding of what crypto is and what FX was all about is pushing the the expectation. I should say that's not going to be the government's case. The government's case has got from what I understand, three cooperators who have pleaded who have been involved and the government will treat this case as it does with virtually every so called white collar case involving securities or crypto as a case that involves misrepresentations, forgive me for being redundant lies. And I think I should add also, even though the industry is not regulated, that doesn't take away from the basic position that the government has, whether it's regulated or not, customers were lied to, customers were misrepresented to money was being used for purposes that investors did not expect or were told that's what the essence of the case is, it's not to educate the jury on the niceties of the blockchains or crypto or that world. I dare say that 90% of the people who got involved in crypto don't really understand it. I think the biggest problem that Mr Bank fraud bank has that he has and that FX has is your last guest said that he is still in crypto and he's starting his own company. I would caution him that whether it's regulated or not by a federal agency, the fact remains is that from everything I've read and heard about FDX, there were no controls in place. There were no, there was no active board, there was no active in house counsel, there was no compliance. The government is alleging Mr Frank Fried went ahead and did what he wanted to do and there was no oversight at this company and that's the big problem with crypto. Yes, that's a good point. But I mean, to be clear, like FDX does not represent every crypto company, right. FDX was definitely in its own category. I wouldn't say that every crypto company is as unregulated as FX, but just to follow up on the regulation question. So I see what you're saying, but I guess like, couldn't there be ok? So you're talking about like lies and fraud and all that. But like, you know, for example, one of the main elements of this case is this idea that, you know, Alameda was basically using customer funds and sort of gambling with them. Right? And I guess if they could prove that, you know, they were deceiving customers or they were telling customers one thing. But this is where I feel like the regulation part is relevant because couldn't the defense say something like, well, you know, given that this isn't regulated and there's no specific rule for crypto exchanges, like who said, we can't use customer money to make bets. Do you know what I mean? Like there's not no like rule explicitly that says that because there's no rule explicitly that says kind of anything. So it seems like the defense could theoretically go down that road, they could go down that road. But there's no regulation that says you are permitted to misrepresent information to investors. There's no regulation that says you can say whatever you want to investors, even if it's not the truth, there's no regulation that says do whatever you want with investors money. You can go back from the time that the SEC was created in the 19 thirties where there was no regulation, but there was still many instances of lies and misrepresentation and fraud and omissions of material facts to those people getting involved in institutions or trading that they didn't understand and you don't really have to understand it. If you make a misrepresentation, you don't have to have a knowledge of crypto. You don't have to have a knowledge of how it all works. What regulation is in the statutes. You can't lie. You can't omit information. You can't make representations that false, forget whether it's crypto or something else. Ok. Selling cars. You can't lie about the odometer. You can't lie about the engine which they'll tell you maybe is a Cadillac engine but they put a Chevrolet engine into it. It's across the board. The statutes are structured that keep people from being told falsehoods. So how, how would you then as if you were defending Sam Bank, I'm afraid as you know, you said you've never met him. But what, what do you think is his best bet here? Is it to play the fool or is it to just be a liar but not as bad of a liar as people think he is? I don't know what his defense is. I've never spoken to Mark Cohen, his lawyer about the case, although I've known Mark for decades, um my speculation is that his defense will be that he did not have criminal intent. He didn't intend to engage in fraudulent misrepresentations and fraudulent omissions. Yes, I did things that were wrong but I acted negligently and carelessly. The fact of the matter is there was no oversight here. Uh and even those public companies in the securities world where there is oversight. Um The fact that you are making misrepresentations and ignoring the proper oversight and the proper compliance. That's what the core of this case is about here, there was no oversight. But even if there had been oversight, people who do get into trouble in these areas that juries don't have a lot of knowledge about. You just cannot misrepresent what you're doing with investors money. You can't omit to tell them. Um, and you can say at some point in time, I didn't think I was doing anything wrong. I was careless. I was negligent. I made mistakes, but I did not have the criminal intent that the government is required to prove beyond a reasonable doubt that I engaged in any illegal fraudulent conduct. Ira, thank you so much for joining the show and giving us some insight there. It's always a pleasure having you on. Thank you very much those Mince and Gold partner, Ira Lee Sorkin.