Sam Bankman-Fried’s Trial Is Almost Over; Here’s What You Need To Know

Reviewing Sam Bankman-Fried’s testimony over the last few days—first on direct examination, then on cross examination, and then again on redirect—one might be left with the impression that the 31-year-old former CEO of FTX and founder of Alameda Research is on trial because both collapsed. He is not. Thus, on the eve of closing arguments, and as the trial approaches its conclusion, what matters most are the crimes charged in the indictment against Bankman-Fried and the evidence introduced at trial.

The Trial Is Not About Whether FTX Or Alameda Research Collapsed

As a refresher, Bankman-Fried is on trial for seven separate crimes: wire fraud on customers of FTX; conspiracy to commit wire fraud on customers of FTX; wire fraud on lenders to Alameda Research; conspiracy to commit wire fraud on lenders to Alameda Research; conspiracy to commit securities fraud on investors in FTX; conspiracy to commit commodities fraud on customers of FTX in connection with purchases and sales of cryptocurrency and swaps; and conspiracy to commit money laundering.

For each of those crimes, the jury will be asked to reach a separate verdict as to whether Bankman-Fried is guilty or not guilty. The jury will not, however, be asked whether Bankman-Fried’s acts caused FTX or Alameda to collapse.

Yes, in its closing argument to the jury, the government is likely to point out that Bankman-Fried’s crimes did ultimately lead to the collapse of FTX and Alameda. Moreover, the defense will surely argue that Bankman-Fried wished he implemented better risk management, and that running FTX was like building an airplane while flying it—arguments to which the defense has alluded throughout the case. But that is not what the prosecution of Bankman-Fried is about. For purposes of determining whether he is guilty or not guilty, what matters is whether Bankman-Fried misappropriated funds and whether he made misrepresentations to customers, lenders, and investors.

It Does Not Matter Whether Caroline Ellison Effectively Hedged Alameda Research

On direct examination, Bankman-Fried placed blame on his former girlfriend and Alameda Research CEO Caroline Ellison, claiming she failed to adequately hedge Alameda Research against the risk associated with cryptocurrency investments. But it does not matter whether Alameda was effectively hedged or whether Ellison had effectively hedged Alameda. To focus on Ellison’s investment strategy is to lose sight of the issues in this case and the elements of the crimes charged.

And It Doesn’t Matter Whether Bankman-Fried Can Recall Committing Crimes

The purpose of cross examining a defendant in a criminal case is not to get the defendant to admit on the stand that he committed the crimes charged in the indictment, but rather to subject the defendant’s testimony to the same scrutiny as that of any other witness in the case.

One problem for Bankman-Fried is that the version of events to which he testified during direct examination by his counsel is in conflict with the testimony of other witnesses who testified earlier, during the government’s case in chief. Those witnesses included his alleged co-conspirators and former inner circle—Gary Wang, co-founder and CTO at FTX, Nishad Singh, head of engineering at FTX, and Ellison, CEO of Alameda—as well as other employees and customers.

During cross-examination by Assistant United States Attorney Danielle Sassoon, things for Bankman-Fried got worse. At times, his answers were evasive or non-responsive. At other times, particularly in response to questions about the business of FTX and Alameda, or about statements he had made, he testified that he did not recall.

Unfortunately for Bankman-Fried, on multiple occasions when responding that he did not recall, prosecutors were quickly able to produce exhibits that proved a particular event had occurred, or a particular statement had been made. For example, while Bankman-Fried may not have recalled having made certain statements to journalists, prosecutors were able to present to Bankman-Fried, and thus to the jury, evidence of those statements having been made.

Whether he was truly unable to recall, or simply believed that by saying so he could avoid having to provide harmful testimony, it is the evidence that matters, not Bankman-Fried’s recollection of it.

Submitting The Bankman-Fried Case To The Jury

Later this week, the jury will be asked to consider the crimes charged in the indictment and to reach a verdict as to each. The jury can find Bankman-Fried guilty on all counts, not guilty on all counts, or guilty on some counts and not guilty on other counts.

Between now and when the jury’s verdict is returned, there will be much speculation, but know this. The trial of Bankman-Fried is not about whether FTX or Alameda collapsed, whether Ellison effectively hedged Alameda, or whether Bankman-Fried can recall committing crimes. The trial is about whether Bankman-Fried misappropriated funds and whether he made misrepresentations in order to obtain or retain money from customers, lenders, and investors; whether he committed fraud, conspired to commit fraud, and conspired to commit money laundering. Focus on the crimes and the evidence. The main thing is to keep the main thing the main thing.