The former golden boy of crypto is on trial for one of the most lurid corporate fraud scandals of the century. What’s happening at the trial? What are the most compelling pieces of evidence against him? Does he have any chance of winning? Zeke Faux, the author of the new book Number Go Up, takes us inside the courtroom where SBF is facing charges that could put him away for decades.
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In the following excerpt, Zeke Faux joins Derek to explain the basics of the Sam Bankman-Fried trial and dive into Caroline Ellison’s testimony.
Derek Thompson: So we’re catching you in the morning just before you return to reporting on the trial of Sam Bankman-Fried, which is ongoing. Is that right?
Zeke Faux: Yes. Heading to court as soon as we’re done talking.
Thompson: So, before we get some of the texture of the courtroom, can you outline the basic case of the prosecution and defense? I don’t need comprehensive legal precision here. What I really want is: If I’m on the jury, what’s the one-to-two-sentence essence of what the prosecution is getting at versus what the defense is getting at?
Faux: So, the prosecution’s case is really pretty simple. They’re saying that Sam Bankman-Fried’s company, FTX, took in all this money from customers who sent in real money to trade crypto. I mean, if you’re not familiar with it, it’s basically an app like E*TRADE—it works pretty similar to any other trading app—and they’re saying that Bankman-Fried’s hedge fund, Alameda Research, dipped into that customer money, took billions of dollars of it, and went and spent it on various bad investments, real estate, political donations, all sorts of stuff.
Thompson: So it’s a showdown between “Sam Bankman-Fried was incompetent” versus “Sam Bankman-Fried was criminal.” The most famous witness against Sam is Caroline Ellison, his sometime girlfriend, who was also at the helm of Alameda Research. What was the most damning thing that Caroline said about Sam on the stand this week?
Faux: Caroline described what sounds like a clear criminal conspiracy. She said that Sam told her to lie constantly. Lying seemed to be a key part of her job as the head of Alameda. First of all, Sam told her that she had to use disappearing messages on Signal because that’s the way financial companies get into trouble. I.e., “If we write down the stuff we’re doing, it’s against the rules, and it’s bad.” And just like Mafia gangsters, they had euphemisms for everything. Caroline said she never liked to write down that Alameda was using FTX customer money, so she called it “FTX borrows.” And my favorite euphemism, she said that they bribed Chinese officials with $150 million because some of their money had been locked up in China, and they wanted to get it released. She had to put an entry for this in a spreadsheet. She just called it “the thing.”
Thompson: The thing?
Faux: Yes. One of the parts that I found most interesting was when the prosecutors asked her about utilitarianism, about Sam’s philosophy, because I’ve always thought that Sam really was serious about this stuff, and that’s what drove him to do what he did. Whereas others have said it was all sort of a smoke screen, a fraud. He just wanted to have this image as this effective altruist. So Caroline said, as a utilitarian, he believed that the ways people tried to justify rules—like “don’t lie” and “don’t steal”—within utilitarianism didn’t work. And he thought the only moral rule that mattered was doing whatever would maximize utility, trying to create the greatest good for the greatest number of people. And then the prosecutor said, “What did he say about how lying or stealing fit into that?” And she said, “He didn’t think rules like ‘don’t lie’ or ‘don’t steal’ fit into that framework.”
Now, another fun part was when she discussed how Sam went about cultivating his image. She said that when they moved to the Bahamas, they originally had been given luxury cars, but they realized this was a bad look, and they switched to a Toyota Corolla for him and a Honda Civic for her. She also said that Sam believed his hair had been very valuable. He thought he got higher bonuses at Jane Street because of his hair and that it was an important part of the FTX narrative.
Thompson: This does not go directly to the question of Sam’s culpability, but was Caroline on the stand sad about what had happened, angry about what had happened, shameful about what had happened? What was the emotional tenor of her testimony?
Faux: She at first was chipper. She presented pretty well. She seemed like someone who was thoughtful and was sticking to the facts. And later on, as she walked through the history of FTX and got to the part where it collapsed, she broke down sobbing, and she said that she felt a sense of relief when FTX collapsed because she didn’t have to lie anymore, and that she could start taking responsibility and being honest about what she’d done. And she said, “I felt indescribably bad about all the people that were harmed and the people that lost their money, the people that trusted us that we had betrayed.” And, I mean, it looked very genuine.
This excerpt was edited for clarity. Listen to the rest of the episode here and follow the Plain English feed on Spotify.
Host: Derek Thompson
Guest: Zeke Faux
Producer: Devon Manze
Subscribe: Spotify
Derek Thompson
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