Sam Bankman-Fried trial: Here’s what you missed during week 3

The third week of former FTX CEO Sam Bankman-Fried just wrapped, bringing the prosecution one step closer to resting their case.

The government called ten witnesses this week, marking week three the busiest yet and bringing the prosecution’s total count so far to 17 witnesses.

Southern District of New York senior Judge Lewis Kaplan was less than pleased with some of the government’s choices, but held off expressing his frustration until the jury was out of the room.

“This is a joke,” he told counsel on Oct. 18 after their third witness of the day left the stand. “We had a witness this morning who knew absolutely nothing…and this afternoon we fly somebody in from Texas to put in documents about [which] he knows nothing or next to nothing.”

Neither the prosecution nor the defense offered an apology to the judge, but the government did appear to pick up the pace later in the afternoon.

The defense is expected to begin their case on Thursday, Oct. 26, a date they tried to push back but which Kaplan insisted they start, as soon as the prosecution rests. As a compromise, the defense is allowed to start presenting their case after the lunch break on Oct. 26.

Former FTX head of engineering, Nishad Singh, accounting professor Peter Easton, FBI forensic accountant Paige Owens and former FTX attorney Can Sun had some of the most interesting testimonies. Here’s a recap of what happened in court this week.

Apollo said ‘no, thanks’ after seeing FTX’s $7 billion hole

Former FTX lawyer Can Sun revealed on Thursday that he hopped on Zoom with Apollo Capital back on Nov. 7, 2022 in a last-ditch effort to raise capital to fill their $7 billion hole.

In a meeting that same day with Bankman-Fried, Sun, Nishad Singh and someone Sun referred to a “Joe” (potentially Bankman-Fried’s father), Bankman-Fried announced that Apollo wouldn’t be handing over any cash until the team could provide a “legal justification” for the missing funds. Sun said he toyed with some potential ideas, but there was no legal reason he could find to explain the hole in the balance sheet.

“There were theoretical arguments, but none of them was supported by the facts,” Sun told the jury.

After a long night in the Bahamas, complete with private discussions with both Singh and Bankman-Fried, Singh confirmed Sun’s “growing suspicion” that Alameda had taken customer funds. Sun handed in his resignation the next morning.

That evening on Nov. 7 had “basically confirmed my suspicion that had been rising all day that FTX did not have the funds to satisfy customer withdrawals and that they had been misappropriated by Alameda,” Sun said.

No mandatory political donations here

Singh sang like a bird for the prosecution, following in the footsteps of FTX co-founder Gary Wang and ex-Alameda CEO Caroline Ellison. He confessed to his crimes right as he took the stand.

When grilled by the government, he backed up Ellison and Wang’s previous statements that said SBF had the “final say” with Alameda decisions, despite having both Ellison and ex-co-CEO Sam Trabucco in charge.

The celebrity endorsement deals — a focal point for the government so far — were brought up with Singh confessing that he didn’t know what Kendall and Kris Jenner do, though he was able to define the careers of Katy Perry, Jeff Bezos and Leonardo DiCaprio.

Bankman-Fried allegedly wanted to grow “FTX’s influence” to “help propel its success” as “endorsement deals and celebrities can promote FTX.”

Singh objected to the money being spent, saying that it was “really toxic” to the cultures of Alameda and FTX. He claimed that the team was building a culture where both “politicking and social climbing” were not rewarded, “ and yet “here [they] were, rewarding people in exorbitant amounts.”

SBF’s high school friend, Singh, pleaded guilty to six federal charges — including conspiracy to defraud the US by violating campaign finance laws.

The current trial is not centered around the political donations made by Bankman-Fried or Singh, prosecutors do intend to target Bankman-Fried for running an alleged “illegal campaign finance scheme,” according to a superseding indictment filed in August by US attorney Damian Williams.

However, the topic was broached during Singh’s testimony — both by prosecutors and the defense.

While at FTX, Singh’s name and bank account were used to make some political donations — though the actual money came from Alameda loans.

Singh said he “initially” cared about the donations and was “invested” in them, but “for the majority of them…[his] role was to click a button” and verify — through his Prime Trust bank account — that the withdrawals were not fraudulent.

In the government’s opening statements, prosecutor Thane Rehn said that SBF “had [his friends] make political donations in their own names, even though the money came from the defendant.”

However, during cross-examination, Singh admitted to Bankman-Fried’s attorneys that he was “not required” to be the face of the political donations.

The forensic accountants bring some surprising spice

Rounding out the prosecution’s case this week were the money experts: a Notre Dame professor and a FBI forensic accountant. With them came even more spreadsheets, but also some revelations the jury probably found alarming, or at least the government hopes.

Professor Peter Easton’s findings, which he had collected more than $100,000 to put together, showed a simple conclusion: Alameda and FTX had, in the end, nowhere near enough funds to satisfy what FTX customers were owed.

Bankman-Fried and his teams’ bookkeeping was shoddy at best, Easton added, pointing to the 47 bank accounts that accepted fiat FTX customer deposits. In terms of cryptocurrency deposits, by the end of October 2022, FTX had only $1.1 billion of the $11.4 billion it owed to exchange customers.

Adding to Easton’s damning findings, the government opted to show various slack messages and internal communications between Bankman-Fried and his team in which he directed the transfer of funds to various investments and recipients.

Later, the prosecution called on the FBI’s Paige Owens, a CPA specializing in tracing political donation money. Owens corroborated Easton’s work, adding that her analysis showed that Alameda definitely wired money through Ryan Salame, former CEO of FTX Digital Markets, to make campaign contributions.

Her conclusions, however, depended on the “last in, first out” method, which stipulates that the most recent deposit funds the following withdrawal. The defense countered this basis, asking why, for instance, Owens did not use the “last in, first out” method, which would have resulted in different conclusions about the origins of various transfers.

Owens confirmed that “last in, first out” is also a commonly used method for this type of accounting analysis and agreed that yes, it could result in different findings.

Bankman-Fried’s team was even successful in finding one example where Owens agreed that it appeared a Political Action Committee donation made by Alameda was actually funded by a deposit from law firm Heller and Robbins, not the North Dimension bank account where customer funds were held.

But given that it was already 4:30 pm ET at this point, Kaplan’s preferred adjournment time, it was unclear the jury was following as closely as they had earlier in the day.

Judge Kaplan’s sass continues

Throughout the trial, Judge Kaplan has shown a sassier side to his professional handling of the courtroom. Outside of scolding the defense and prosecution for not communicating well enough, Kaplan ribbed lawyers from both sides during week three.

During Singh’s testimony on Monday, Oct. 16, he kept referring to the “allow negative” feature as a “flag,” prompting Judge Kaplan to ask what kind of flag he was talking about.

“I don’t imagine it’s ‘Don’t Tread on Me’,” Kaplan said.

Additionally, when Singh was discussing crypto mining, Kaplan sought more clarity.

“Let me just interpose another dumb question. When I was your age, mining basically referred to digging in the ground for gold and coal and stuff like that. That’s not what you’re talking about, is it?” he asked.

Kaplan previously issued a moratorium on late-night letter motions after both the defense and prosecution filed a number of papers, so when prosecutor Nicolas Roos misspoke and said that he’d wrap the testimony by 8:30 pm ET instead of 4:30 pm ET, Kaplan shot back that he was “worried” about an 8:30 pm ET finish.

Roos read out on Wednesday a large number of exhibits to put on the court’s record, leading Kaplan to ask Roos if he could “repeat” the 20+ exhibits “backwards.”

Roos quipped, “those are my lotto numbers” in return. Kaplan then wished him luck.

A few minutes later, a juror was struggling with a monitor. In return Kaplan said, “if you can get that one fixed, maybe you can work on my PC.”

Christian Everdell, one of the lawyers representing Bankman-Fried, spoke too quickly in front of Kaplan, prompting Kaplan to respond that he listens to “33 RPM records, not 45.”

“Nobody listens to records,” Kaplan added, leading defense attorney Mark Cohen to say that he remembers 33 RPM records (which were first introduced in 1948, according to Victrola).

Cohen and Kaplan shared another moment near the end of Wednesday as the defense counsel said he was looking at the Judge’s calendar to plot when the defense could possibly put on a case. Cohen assured Kaplan that he carries the calendar with him “all the time.”

“I’ll treasure that thought,” Kaplan said.

And, finally, Kaplan pushed the lawyers to work out a compromise adding, “If you can manage that, I’m going to send you to the Middle East.”

“That’s above my pay rate, your Honor,” Cohen said in return.

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