FTX founder Sam Bankman-Fried's trial is on pause until next week, when prosecutors say they plan to rest their case on Oct. 26. CoinDesk Managing Editor of Global Policy and Regulation Nikhilesh De, along with CoinDesk Regulatory Reporter Liz Napolitano, who were in the courtroom, share insights into the latest legal developments and the key takeaways.
Sam Bateman Fried's trial is on pause until next week when prosecutors say they plan to rest their case on October 26th. Joining us now to discuss all the legal developments are Coin desk, global policy and regulation. Managing editor Nick Day along with coin desk's regulatory reporter Liz Napolitano. Welcome to the show, Nick and Liz. Good morning. All right. Court is on pause. FTX is general counsel told jurors on Thursday saying that he never approved the crypto exchange lending customer funds to sister firm Alameda Research. Nick, can you unpack some of the testimony we heard from FTX is general counsel before court went on this break. Yeah. So on Thursday, we heard from Ken. So who was the general counsel between uh 2021 and 2022? Um You know, if you talk a bit about the various, you know, details of the case, you know, one of the defense arguments has been that uh FTX terms of service did not explicitly ban Alameda or let users know that Alameda would never be borrowing customer funds. And so, you know, there wasn't any kind of misappropriation. I think we lost Nick. He's frozen Liz. Yeah, Liz, we're going to throw it off to you while we get Nick back here. What have you found most striking about being inside the courtroom? What are we not hearing about in the news? Well, I mean, I think in general as reporters, being inside the courtroom is particularly insightful, there's definitely a certain air to it that you don't get just from, uh, watching the feed in the overflow room in the courthouse. Uh, when we were there, I mean, we can really observe the dynamic between Kaplan who runs a tight ship in his courtroom and Cohen and Everdell, who raised, you know, tons of objections during the trial and who have been like asking for tons of sidebars. And we kind of how that creates some type of tension in the trial and how it's perhaps even informed the judge's attitude toward the defense, which isn't really great for Beman freed. It's also cool because we've been able to observe the reactions of the jurors as well. And we've been able to see how the defense, the strategies of the defense and prosecution respectively have been landing with the jurors in some cases. You know, we see them arguing certain things and, you know, throwing around terms like, you know, quant research firm or, uh you know, crypto wallets or something like that and we just look over the jurors and they're either, you know, having just total looks of bewilderment on their faces or, you know, looking at each other quizzically or, you know, in some cases, we've just seen them, uh not often, almost fall asleep in the courthouse. So that's been really interesting to say. So because you're looking at the jurors, I, when you're not looking at the great artwork by, by Nick Day, who is the Picasso of our, of our century, um What exactly uh what's hitting and what's missing. And if you were, if you had to guess, just based on facial recognition, uh software in your mind, if you will, uh the reactions of everyone who do you think is uh winning in this? I mean, right now, I think the prosecution is definitely doing a bit of a better job in terms of just breaking down what some of these really complex crypto terms mean. Um I think that it's, you know, remember that this jury is composed of, you know, people from various backgrounds, uh a variety of ages, you know, young people and, you know, their early thirties, people in their well into their sixties, um, some of whom are, you know, I think we won. One guy was a security trader. We have some people who, um, you know, have never studied finance and people, you know, who are working jobs in much different industries. So, um I think just the uh terms, the crypto terms that they've been using in the trial had been somewhat of a barrier that both the prosecution and defense have been, uh, have to overcome. I think prosecution has been doing a better job of defying those terms and, uh, asking the witnesses to do that as well. And do you think that that is in many ways, kind of controlling the situation in a way the defense is not? Yeah, I mean, I definitely think so, but at the same time it almost seems like sometimes when the defense doesn't, uh you know, ask the witnesses to define the terms that they're using. I'm almost wondering if like, they're trying to obfuscate the meanings of some of these things to kind of just hope that, uh you know, jurors will just kind of gloss over these information and just, you know, uh wait for the events to present its case. Nick, welcome back to the show. I got to get your take on the judge. We've heard about the judge becoming seemingly annoyed with the defense. This week, we heard that both the prosecution and the defense got a little bit of a scolding during the trial. I think that he called one of the, uh witness testimonies, uh, a quote joke. What happened there? Yeah. So Judge Lewis Kaplan has been, you know, overseeing this case for most of this year. Um I think the way he's looking at this is you have a jury of 18 people, right? Both primaries, six alternates who are losing functionally, you know, six weeks of their lives to this case. And so he's very protective of their time. And what we heard from this week where we had two witnesses who uh one of them was a former FTX lobbyist whose only job really was to read certain things that SBM feed had said uh you know, to Congress or sent to Congress and uh details that were published on the FTX blog, basically just getting them on the record. But in such a way that, you know, you didn't really need her to be the one to do it. And then you had another witness who uh was a Google employee whose job was to say Google produced these records and I am confirming that Google produced these records. He didn't know anything about the records. He was asked about metadata, he knew nothing about that. And so the judge was wondering why they flew someone in from Texas to Google play, why they had someone else come in and why we spent, you know, quite a bit of time on Thursday talking about these issues when they are all public records that you could really have just said, ok, well, you know, these are things that the prosecution and the defense both agree are real records that were, you know, said or created by these real companies. And so you don't need people testifying for them. And we saw a bit of that on Thursday come out with the judge, you know, expressing his frustration at the fact that yeah, we really did have someone who didn't know anything about metadata from Google come into the court and spend less than, you know, 20 minutes on the stand talking about how he doesn't know anything about metadata. But that is metadata that there, there was metadata produced by Google. Pretty weird. I want that job, by the way. Um The, the other thing of course is how, you know, we, we've been talking about uh also the defense and how are they doing here? And, and, and what are we, what can we expect from them going forward if you have any guesses that? I mean, it, it seems as we, we just talked with Liz that there, the prosecution seems to be, at the very least, it sounds like they're in a little bit more control of the situation than the defense. Yeah, I think that's an absolutely fair assessment. Right. Right. So far, the prosecution has presented a very clear narrative over the first three weeks of this trial. Their view is that Sam B and Fried had access to customer money, he took customer money, he spent customer and investor money on things that, you know, he shouldn't have spent customer and investor money on. It's a very straightforward narrative. The defense in contrast has, uh you know, it hasn't begun presenting its case. We heard bits of what their arguments are going to be through the opening statement. Um You know, that things were, uh, you know, going well until they weren't that it was all a tragic accident that, you know, this was a problem, you know, created by the fact that it was a bunch of, you know, some inexperienced young people. Uh, you know, roughly at my age, Liz's age who were just kind of building things that didn't quite work out. We haven't seen the actual presentation yet. So, so far they've only had a chance to cross examine the witnesses and those have absolutely fallen flat. But what we might see is, you know, once the defense is able to begin presenting its case next week, uh they might have a better, more coherent narrative to express the jurors and remember, they don't have to prove that they can free, didn't do whatever he's accused of. They just have to prove that the government didn't prove beyond reasonable doubt that be greed did what he's accused of. So the burden for them so to speak is a little bit lighter. The other thing is they might just be trying to set up for an appeal. Um If they, they, you know, think that the jury is not going to side with them regardless, they might want to try and just see if there's any way they can find like technical issues or other problems that they can then bring to an appeal court after this trial is over. That's a hell of a gamble. Nick. It's Friday and we got to have a lot of fun. We've been loving your sketches. We spoke about them with Liz when we were trying to get you back. It's just fun. Art. This is serious. Yeah, it's everything. Tell us about, about your new found passion. Your new, your new job is a strong word. I guess there's times in the courtroom when you're kind of, you know, you're waiting for something to happen. You know, uh the person asking questions, maybe taking notes, the person sitting on the and is maybe take a minute to think about. I, oh, well, let me throw some, you know, sts together. Uh you know, sometimes they're more in detail than others. But yeah, it was really kind of a joke that I just started sharing internally and like give the point of Slack and uh then they come out of court and find that they're like going viral on Twitter and stuff and like every other reporter started to do it. And that was, you know, that if, if I have no other legacy from my time as a journalist, I hope that these sketches are uh yeah, the last thing while you went through whatever it is, I mean, this might be, this might be the, the uh the record that, that survives uh after a nuclear meltdown of the world. But the um the, the question I have here is now, how are you getting the subjects, the images of the subjects. You're sitting in a, a separate room from them. You're using the camera, the courtroom TV, if you will to do this. Yeah. So the way the court is set up, you have a primary courtroom where you have the actual, the judge, the jury, the witnesses, the defendant, the lawyers and it only allows about, or the court only allows about 20 people from the public and the press to go into that everyone else is funneled to the overflow rooms, uh where we do have, uh we have to look at, you know, people, uh everything that's going on on the screen. So the screen has, it's basically three parts and uh you might have that sketch too where I kind of like mocked it up. But you have the exhibits on one side and then on the other side, you have a split screen view of the lawyers and the defendants that make a breed and the witness. So, um it's not high quality. These are, you know, not, uh not the kind of cameras, you know, you would uh expect from a tech company for example, but they're good enough to get some pretty poor sketches out there. And, you know, you can generally make out, you can just make out details, people have faces and stuff. You can't see glasses maybe, but you can see like they have noses and mouths, which is uh important one would think. Well, this is this has been very enlightening and, and uh you know, I, I think that this is uh probably one of the most important uh art art projects of the 28th first century and, and uh on behalf of uh of art students everywhere, um you know, we thank you for your, for your service. I think it's my day job, Nick Liz, thanks for joining the show. Uh We hope you both get a break, take a break while Court is on a break and we'll see you sometime next week. Have a good weekend.