Ep. 88: [PILOT] SBF Trial Briefing, Day 6: Caroline Goes Scorched Earth (Oct. 11)

[00:00] What's up? This is Voice Club. Hi. These are our courtroom takes from the Sam Bankman free trial. Caroline goes scorched earth day six. I live in New York and I'm starting to go to the trials. We'll see. We'll see if we keep doing this, but this is going to be 10 minutes on each day of. [00:19] what I experienced. [00:21] Natasha sitting next to CNN, Wall Street Journal, New York Times, and then Boys Club. It was, yeah, there's a line of hierarchy in the courtroom line waiting to get into the trial. At the very front, it's New York Times, Wall Street Journal, CNN, legitimate journalists. [00:39] In the middle is a podcast host and like NPR and some legitimate people at the back of the line, which is me. It's people who are in love with Sam Bankman Freed and showing up because they're obsessed with him. Oh wait, to be clear, that's not you. Not me. And then parody Twitter accounts, which is closer to me than anything else. People kept being like, are you a journalist? And I was like, the fastest way to get to the answer is no. So we're going to just give some hot takes [01:09] horrible thing that happened, but the circus that is this trial and the things that these people did is... [01:15] so atrocious it's unreal it's not of this world and not of this world so some context for what happened today yeah generally caroline ellison is on the stand the prosecutor is interviewing her and asking her questions about her experience at ftx and running alameda research she is this was the ceo of alameda research also the girlfriend to sam vinkman's breed that on and off again

[01:45] she takes the cake in terms of messy relationships and she is a star witness for this trial she's a songbird of the trial she did not hold back and she took a plea deal so she's required to be on the stand and tell her truth right and presumably in a plea deal that means she's not going to serve as much of a sentence she's not going to serve he certainly not she's cooperated with the government [02:15] along with Gary Wong, who was another person who worked at FTX. And they turned on Sam, basically, and rightfully and smartly so, because basically what happens is the judge, they... [02:26] confess to these crimes and they help the prosecutor create their case. And then what they do is how helpful they were to the state to forming that case. That will inform the judge's sentence of them. So I feel like I'm on an episode of Suits. It's giving suits. [02:40] So that's context. She was on the stand yesterday. She was on the stand today and she will have her cross-examination tomorrow. So there was a lot of really interesting stuff today. The main thing that felt like very newsworthy and that I had not heard previously is about halfway through the day after our morning break. This is the first time I've ever been in a courtroom, just so people know. Halfway through the day. [03:02] They had gone through a lot about these balance sheets and the loan calls that were happening. We'll get into that in a bit. But then they transitioned to what was their form of communication? And she's like, signal and in-person is the only way that we really communicated. And we had disappearing messages after seven days on signal. So basically, there's no record of their signal. They're personal signal messages back and forth to each other.

[03:32] that a lot of crypto companies use because of this feature where messages can disappear. So it's a real [03:40] D-gen messaging app, I'd say. It's a real D-gen. And also what's funny throughout the day was that the. [03:47] the jurors were at one point the judge was like, could you please explain to the jurors what a Google doc is? So I was like, man, I, [03:55] We are, there's a level of education and onboarding that's happening here. That's really wild. But [04:01] She said signals was the primary way that they communicated all messages. Sam had many, many meetings all the time with staff about basically best practices around messaging. And he always said, any messages you send in Slack, you should be prepared to have on the front page of the New York Times. So he had some foresight that he might be in trial one day. Thing is, he wasn't wrong. He was not wrong. [04:31] at one point says, [04:32] Were there any, was there ever a time where there were coded terms about criminal activity? And, you know, [04:39] Caroline just whips it out and puts it on the table and says, yes, the time we bribed Chinese government officials to unlock accounts on other exchanges, [04:49] in china caroline their funds had gotten locked up on chinese exchanges essentially fdx's funds got locked up on chinese exchanges exactly and so this was complete news to me for that we moved [05:02] pretty directly into the bribing at that point. So then there's a lot of tension in the courtroom. The judge was like, strike that jury, like strike that from your... Remove it from your memory. Remove it from your memory. And everybody's like, pretty tough to come back from that at this point. And...

[05:16] the [05:18] Judge was like, basically, [05:20] Sam is not on trial for [05:23] bribery. He's not on trial for the Foreign Corrupt Practices Act, which is basically where you can't bribe [05:31] international officials, I guess. Sure. That's not part of what he's being charged for. So the only context that you should be taking from this is the closeness of their relationship and the trust that they had for why the prosecutor is talking about this and having this line of questioning. [05:49] Okay. So basically what happened is these funds got frozen and they were trying to unfreeze them. This was in 2021. Sam was still the CEO of Alameda research at the time. And these $1 billion, he was really stressed out about and he wanted to get unfrozen. Understandably so. They formed a team within FTX and Alameda of individuals who had intimate knowledge of, or understanding of the Chinese government. So many of them were, they, [06:15] people, Chinese people who their parents were officials of some kind in China and had sort of an understanding of best practices. The first thing they try is for several months, they hired a lawyer, and they had a lawyer in China trying to negotiate with the Chinese government to unfreeze these accounts. That didn't work. [06:31] Next, they decided that they would go a trading strategy route where essentially they would set up other trading accounts with Thai prostitutes, in their words, to make money on those accounts and then try to siphon the money from this frozen account to those accounts and then get those accounts back. Shockingly, did not work either. So both of these failed attempts.

[06:55] They didn't really linger on it too much. I had so many questions. I was like, can we pause? But that's not how that works, unfortunately. And so then they moved to, there was a guy named David Ma. And they had the David Ma way, in quotes. And the David Ma way, in the end, was that Caroline was given an amount of money and different wallet addresses. [07:25] one, two different... [07:27] wallet addresses that she believed to be Chinese officials. And then the account was in fact unfrozen. [07:35] Damning. [07:35] damning [07:36] bad look. One of the things that she would do is she would provide company updates to Sam as anybody would to the owner of a business. And she would do these every few months. And then when things started to go bad more consistently on one of these updates and one of her update documents, this is November, 2021. She had a line item on that said notable slash idiosyncratic P and L stuff. And then it was different things that were happening in the P and L like best trading days, [08:06] then one that said negative 150 million for the thing question mark and then [08:13] The prosecutor was like, the thing being, and she was like, the wallet addresses that I was given to transfer $150 million that then unfroze the account. So that's pretty crazy. Also on her to-do list was, quote, things Sam is freaking out about. And it was things like hedging. That was just like a line, hedging. Bad PR. Reddit was one of them.

[08:43] crowned [08:44] Prince of Saudi, who was, he was trying to raise money from. That was a big storyline today as well. And then getting regulators to crack down on Binance was on the list. It was just all there. It was just all there. [08:58] She laid him out. She laid him out. And there's more. She did a lot of bad stuff. She defrauded people. She made false documents. She did the dirty work. [09:10] My hot take on Caroline is that she did a lot of really horrible things and she was present to them and executed on a lot of them. And I think that she was somebody who was submissive to Sam and the things that he wanted to have happened. And she was willing to. [09:28] do what it took and got lost in it. [09:30] and made some really bad decisions. I don't know that she's necessarily super remorseful. That was not her vibe. It's weirdly super voyeuristic and... [09:40] so strange to be in the room and hearing it. And there's a whole culture around the courtroom that I am now a part of as a journalist. As a journalist. I'm not sympathetic to Caroline. I appreciate that she's done a lot of really bad things. [09:55] and [09:56] Is it? [09:57] criminal has done criminal acts. There's a part of me that [10:01] has some empathy [10:03] There's that person in our in anyone's life who's so loyal. [10:08] And loyal to a fault. Mm-hmm. [10:10] And... [10:11] that's the vibe that I'm getting from her where it's like, I will follow you to the end of the earth because I believe in your vision and

[10:18] And... [10:19] I like believe in you as a leader and, and, [10:25] I'm like getting that from this story. Totally. And that's sad because you're just like you, like you said, you get lost in it. Totally. I think at one point she said, I never would have imagined when I first started at Alameda that I would be defrauding our investors and our partners. Mm-hmm. [10:40] or stealing from our customers. And... [10:44] there was something about like the amount of money that they were talking about, like billions and billions of dollars, like, [10:50] I was like, these people are playing. Like they're playing. [10:55] business and they are... [10:57] have lost completely lost touch with reality. And that was like very clear. And even like looking at the signal chats and the telegram chats and these spreadsheets that they were putting together is like, they're living in an alternative universe. That's totally detached from real people. And the fact that actual people were depositing funds into this exchange. So it's, [11:17] really dark but then it's so weird because you're sitting in there and there's moments that [11:23] are [11:25] absurd. Like you're like, there's an absurdity to this that's really entertaining. And that is very strange. Like it's very strange to be [11:32] entertained by that because [11:34] in some ways also you're forgetting that this affected like real people in their lives yeah totally so um okay that's day one day one let us know if we should keep doing this [11:44] We might be back tomorrow. Who's to say? Bye.