Sam Bankman-Fried's Trial Is 'Already' Impacting U.S. Crypto Regulation: Lawyer

The State of crypto is presented by Tron connecting the world to the power of Cryptocurrency. Good morning and welcome back to first mover FTX founder Sam Bateman Fried will be back on the stand again today for more cross examination in his criminal trial. Joining us now to discuss his cat and partner and co chair for the firm's financial markets and Regulation Practice Group. Dan Davis. Welcome back to the show, Dan. Hi, thanks for having me today. All right, we're talking about the Sam Beman Fried trial. Prosecutor Cutter have really drilled down on the core question of whether SPF lied to customers, investors, the public or even Congress. What do you make of the cross examination so far? I think it's been a pretty effective cross examination. It's certainly if you're a defendant in a criminal case, that's the real risk you take. If you decide to testify in your own case, you do get a chance to try to convey your version of events. But then you open yourself up to what we've seen over the past day, which is a cross examination, a pretty significant cross examination by the government where they're able to use a number of Sam Ban Fried's previous statements against him and push him on a number of things. So it, it's a big risk that Saman Fried has taken and the government is certainly bringing everything to bear against him and try to bring the case against him. So, uh had he not taken the stand with some of the quotes they, they use quotes that he made in public, the interviews post, post collapse that he went on talking to Andrew Ross Sorkin. He, he did a whole Zeke Fox uh et cetera. He, um he seemed to make a lot of statements in public that were used yesterday in the cross examination. Would they have appeared anywhere in this trial? Had he not taken the stamp? It's always possible that they may have that they may have, but you almost guarantee that these types of statements will come in. If you testify, it's much harder to get them in if he doesn't testify. And as you noted, a lot of the statements that he was cross examined on happened in that time period after the FDX bankruptcy in November of 2022 and the time he was arrested in December of 2022. And so this is why a lot of defense counsel will suggest to their, to their clients not to make these types of public statements. And this is the reason why is because these statements can be used in, in your eventual trial. You know, before Sam took the stand there, this big question of will. He won't he? Some analysts, some experts said it would really be a Hail Mary if he were to take the stand and convince at least one juror that, you know, maybe, maybe he was acting in good faith. How do you think it's going for him? Was this a good decision? Look, I think it's, I think in general anyone will tell you that it's a very risky strategy to take the stand. I think, I think Sam Ban Manfried is experiencing that the risks associated with that strategy. I'm reminded of a recent criminal trial where, you know, the defendant testified that was Elizabeth Holmes in the Theranos trial. Um And, you know, after the trial, some of the jurors came out and said, you know, that, that overall they thought that trial testimony did not help her and that she didn't come across as very credible in that testimony. And so, you know, it is, it is a big roll of the dice to see, you know, after the cross examination, if the jurors think that you're, you're credible and certainly the government's put a lot of things in front of Sam Beman Fried where there appear to be some pretty significant contradictions. And so that's something that the jurors are going to have in front of them and have an opportunity to evaluate. Now it was a Hail Mary, but it turned out to be a hail Satan. It seems so. What exactly is his recourse? Now? Can he turn around and say if it turns out that it's the, uh, attorneys who talked him into it? Can he say, look, they put me in a bad situation? I want a retrial, I want, I want to appeal this. It does he have it, does he have a leg to stand on if that's the case? You know, certain, certainly there are, there are a number of potential issues that his counsel may raise in an appeal. Basically, any, any evidence that the judge did not allow to be put forward in the case. You know, there, there can be an argument that, that, that evidence should have been presented to the jury and that a retrial is necessary. That's always something that's potentially in play with an appeal of, of a, of a criminal case depending on how the jury rules, of course. But of course, you know, the judge had good reasons for excluding the testimony about trying to avoid confusion with the jury and you know, a couple of other issues. So it's, it gets very complex at the appellate level. But certainly if, if you were a defense counsel, any district court ruling that excludes evidence or excludes anything that you want to bring forward is a natural place to look to if there is a conviction. And if, if there's an appeal of the case and you mentioned that those are things that you would expect the judge to not allow so realistically, I mean, how, how long could this, could his appeals take place if he does get convicted? I, I mean, do you in such situations like this? I mean, how long before uh a, a defendant finally gives up and says, you know what, I, I'm, I'm cooked. I mean, the appeal process itself can go for quite some time. You have the, you know, the Court of appeals, which is a whole one level of review and that can take a couple of years and then, you know, depending on the nature of an appellate decision, there's always the possibility of seeking Supreme Court review. Now, the Supreme Court doesn't have to take your case. You can make a petition to the court and then the Supreme Court decides whether they'll even take the case and they only take a small number of cases. But even then a Supreme Court part of the process itself can take an additional year or two. So it can take, it can take quite an amount of time. Even after assuming there's a, there's a conviction here for the appellate process to work its way through. How do you think that this is going to pan out for Sam Bacon Fried? And I guess separately, how do you think things are going to pan out for other F TX Alameda executives who have already pleaded guilty? Who are working with the state. What kind of sentencing do you think they're going to get? And it's very difficult to predict what sentencing is going to be that the cooperating witnesses are obviously going to get credit for their cooper operation. The government is going to assess how, how, how, how useful the cooper operation was and how truthful their, their testimony was in the government's eyes. But certainly, you know, a cooperating witness will tend to get a significantly reduced sentence. But you can still expect some, some some meaningful sentences for the Cooper. Witnesses for Sam Bakeman free very difficult to predict. You know, he, he, he, you know, if, if there's a conviction, it could be on different counts, the different counts themselves carry different potential sentencing ranges. So there's, there's a wide variety assuming a conviction, what the, what the nature of the sentence itself could be. Does he stand a chance at all? Now to say, look, guys, I'll Cooper on a couple of other cases you might be working on. If you push for a lighter sentence, I'll plead guilty to a couple of things that you want me to or, or, or has that ship sailed. You know, there's always that possibility, you know, I've had, I've had cases where cases had settled in the middle of trial or on the eve of trial. So there's always, you know, it depends on if the parties are in the same ballpark. So to speak about, you know, if there's some sort of deal that they can do, I think such a deal is unlikely at this stage in the case because, you know, both sides have seen each other's cards and have their views about whether, whether the government's case is going to be successful or not and those may be very different views. Um, so it's, it's, it's relatively rare for some type of an agreement to be reached at this part of the case. It's not foreclosed, right? But if the government says, look, we're, we're working on another case here. We'd sure love, uh we'd sure love a little bit of uh clarity. Uh We'll, we'll go light on you on a couple of these things here and, and uh or do you think that they say, look, this is slam dunk? What do we care? So it's always a possibility but like you said, if, if the government thinks they've got their case and they, and they've got their man, so to speak, um It's very unlikely that they would be seeking some sort of out of court resolution right now. And Dan, quickly before we go, you previously were general counsel at the CFTC. How do you think this case is going to impact regulation in the U SI? Think it's already impacted regulation at the U SI? Think I think any regulator and any person in Congress wants to make sure what happened with F TX does not happen again. And so, you know, a lot of regulation is trying to prevent the last crisis. And so I think the nature as we learn more about what happened within FDX and what led to the downfall that's going to inform regulators and Congress about regulation or legislation that they can pass to, you know, purportedly mitigate or eliminate the risk of this type of event happening again. Dan, thanks so much for joining us. It was a pleasure having you on again. Pleasure. That was cat and partner Dan Davis.