Former Alameda Research CEO Caroline Ellison testified that she committed fraud at the direction of her ex-boyfriend and former colleague, FTX founder Sam Bankman-Fried.
The state of crypto is presented by Tron connecting the world to the power of Cryptocurrency. Joining us now to discuss further, the SPF trial is partner at law firm Kenny Hertz Perry, Braden. Perry, welcome Braden. So you may have heard we were just discussing the trial that I, you know, was watching yesterday and I just want to start with a really high level question because definitely the impression that I got from being there and just to be clear, my colleagues at coin desk are covering this much more extensively. We have people there every day. Um But the impression that I got is that it is just not looking good for Sam, right? I mean, just basically the stuff that the witnesses are saying and then also as we mentioned, kind of just the vibe of the judge like he just does not seem into Sam Beckman Fried at all. Um And so I guess my high level question for you is just, can Sam recover from this? Like, does he have a chance at all? I mean, or is this just kind of like already sort of over? Well, thanks for having me. Uh That's a good question. And right now, I think Sam Beckman Fried is um in a bad spot. You have a judge that's been ruling against uh the defense on a number of different issues. I think there are gonna be some major uh upcoming issues that, that will have to be addressed, including advice of council defenses uh as well as some of the other types of defenses, including whether or not these investors are made whole and whether or not that matters. And so it, it has not been a good start to Sam Ben and Fried's trial for him. Um, that's very clear. So relatedly though, I mean, just looking at these witnesses, right. Because like another big theme in this, at least yesterday was that, you know, Caroline and Gary both struck a deal with the government. Now, obviously they sort of both made clear that this does not guarantee that they're going to get a free at all. Right. It's just sort of like we'll see what happens, but I'd be curious for you to break this down because you listen to their, to what they're, and yes, they're sort of saying that like, you know, Sam was steering the ship but they, like, weren't helping, right. They were, they were doing bad stuff too. So what, what does it look like for them? I mean, you know, I think like, yes, they have a deal with the government. No, it's not guaranteed. Like, what are the chances that Caroline and Gary will get off with nothing will get off free. I mean, what is the outlook for them? It's unlikely. I, I think because of these plea deals, they plead guilty to crimes. Um That's, that's first and foremost, both of them have pled guilty to crimes when you, uh, the government needs them as a witness. And uh generally in these federal trials, you want these cooperating witnesses and these are the key witnesses for the government. Um, when it comes to their sentencing, it will really depend on a number of different factors, including the guidelines, uh including the judge, uh they will have cooper operation credit and it depends on what that is based on how much they help this trial. It's a, it's a give and take when it comes to this type of cooper operation for these witnesses, how much longer do you expect things to go on in this trial? I mean, you know, people are expecting weeks or, or, you know, is it just a few days and they wrap up because they've made a strong case already? What are we looking at here? And, and, and if it's going to last a little longer, what, what else would they would the prosecution need to do and, and the defense need to do? And I, I think you brought this up earlier. It's, this is a matter for the jury and what you want to do in a fraud case is show the fraud, um ensure you have proved your case and move on. Uh especially when it comes to complicated cases like this. I, I think that getting into a lot of the details of crypto um to a jury that likely has not had a bunch of experience with it, uh maybe a little dangerous for the prosecution because uh what this boils down to is a fraud. Um whether or not sandbank and fared, defrauded investors and that's what II I think the government should stick to. And if they do that, it likely won't last much longer. They've had these key witnesses, they've had a victim. Um I'm, I'm unsure of what they need further after making sure that they make their case that Sam Beckman Fried defrauded investors. So, on that note, um it, it seems as if uh a bit of a battle going on between the doj and the defense around the uh introduction of information around the anthropic investment is coming up. We've had the pros, the prosecutions say we do not want this mentioned that this is a distraction. Um But it looks as if uh the defense would really like to discuss this, which I gather is perhaps a, a, an effort to complicate that the evaluation of FTX actually has all these other really complicated factors that you're not really getting the full picture. What's your take on that? And, and, and should that be admitted into evidence. Yeah, it's a, it's a good move by the defense because all, again, all you need is one juror. And so if you're providing this information about how the valuation of FTX has worked and whether or not there was a victim harm, those other issues that all come into, um, a distraction of the fact that the prosecution's try to prove is that Sam Bachman Fried committed fraud, then that brings into play additional um room to argue uh reasonable doubt. And again, it's a, it's a complicating factor. I think it's gonna be extremely complicated for uh for jurors who don't have experience in understanding these valuations or uh or what the effect of, of this investment um activity was on FTX as a whole. So, uh you know, if, if this defense gets thrown out, if the advice of counsel, defense gets thrown out where the judge is not allowing this type of testimony, it could be really damaging to the defense. We keep asking this question of a number of our guests here. We'll ask it to you. Do you think that Sam should take the stand as a criminal defense attorney? Um I would not want him to take the, take the stand. I think that uh and again, it's a very dynamic situation. You have to evaluate the, the government's case that's been put on. Um you know, as a lawyer, your advice generally is do not put him on the stand. Um again, it's his decision in the end. And, uh, and frankly, at this point in time, I would discourage him. I actually have one technical question while you're here. I know that one of the charges that Caroline mentioned was wire fraud. Can you just, can you clarify specifically what that means in that case? Because this is the wire fraud is such a broad, I mean, the other ones are really clear, it's like, you know, securities fraud, commodities fraud, whatever, what is, what is wire fraud specifically in this, in this context. So the way you bring wire fraud and the way that jurisdiction works within federal cases is you have to have a, a piece of jurisdictional, um for lack of a better word, uh hook to the case. And wire fraud essentially is just using means um to facilitate uh the fraud. And so it can be any way anything from phone. And that's a traditional wire fraud, uh standard is using the phone lines to facilitate fraud. That's how they did a number of the, uh the mafia cases. But now it's, it's more technical including uh emails, including the internet. Um, a anything associated with the transmission of communications or other type of data uh during the commission of the fraud is considered wire fraud. It seems as if one of the key issues is going to be uh addressing who in fact was in charge of elam whether or not, you know, Caroline had authority or whether she was taking lead from, from Sam on this and, and clearly, you know, Gary Wang's um testimony that he was instructed to write code that would have given Elam an unlimited opportunity to draw down funds was uh something that, that speaks to, you know, Sam Backman Fried's kind of uber control of everything. Do you think there's still an opportunity to, to challenge that? I mean, do, do you think that there's a way for the defense to come back and suggest that, you know, she really did have some role in this? Y Yeah, I think so. And again, this is a uh a factor when it comes to uh the defense, you know, the, the argument that, um, it was all Sam Beckman Fried is, is something that's almost laughable because at, at some point these individuals weighing uh, Ellison, they committed acts on their own and they have pled guilty to committing those acts, uh which are criminal acts. And so, uh, to blame everything on Sam Backman Fried, I think is, um, is something the prosecution is trying to prove, but they don't need that. Uh, all they need is his cooper operation as a conspirator. Uh I in this fraud as a whole. So, um, you know, to the extent that, that they're wanting to prove that he was instructing everything related to this fraud, uh I don't think they need it. Uh But that's what they're trying to do. And in the end, you know, obviously the, the plea deal set out the facts related to, uh, both Wagon Ellison and, and their, uh, their acts that they committed themselves. Alright. Well, thank you, Braden. That was Kenny Hertz Perry partner, Braden Perry.