As the SBF trial begins, we are witnessing how the FTX story comes to an end. People are concerned about what will happen to the affected investors and creditors. What will happen to the billions of dollars worth of encrypted assets involved in legal proceedings?
October 3, 2023: Jury Selection
On Tuesday morning Eastern Time, FTX founder Sam Bankman-Fried appeared in a suit and tie at the Manhattan Federal Court as the court initiated the jury selection process. There were more than 50 candidates for the jury, and about 40 reporters attended the hearing.
New York Southern District Senior Judge Lewis Kaplan hopes to assemble the necessary jury (including 12 jurors and 6 alternate jurors) by the end of the day, so that the trial can begin as scheduled on Wednesday. The work on Tuesday is to eliminate potential jurors and ensure that they have no health issues or other conflicts of interest if the trial lasts for six weeks.
Background
FTX filed for bankruptcy on November 11, and Bankman-Fried resigned as CEO.
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SBF left the Bahamas on December 21, 2022 and was extradited to the United States to face charges. The Department of Justice has brought a total of 13 criminal charges against SBF, 7 of which will be tried in the preliminary hearing. The second trial will be held in March 2024.
In theory, if convicted, SBF could face a maximum sentence of 110 years in prison. However, the judge stated that based on previous rulings in New York City courts, the sentence is likely to be much shorter than the guideline recommends.
Caroline Ellison, the former head of Alameda Research (SBF’s ex-girlfriend), FTX co-founder Gary Wang, former FTX engineer Nishad Singh, and former FTX CEO and Bankman-Fried’s senior aide Ryan Salame have all pleaded guilty and expressed their willingness to cooperate with the judge’s investigation.
SBF will be represented by the law firm Cohen & Gresser, and prominent defense attorney and former federal prosecutor Mark Cohen will serve as the lead counsel. He has repeatedly requested for SBF’s early release but has been denied.
A Glimpse Outside the Courtroom
It is a beautiful and sunny morning. Outside the federal court at Foley Square, the New York Police Department has set up long barriers to manage traffic and prevent pedestrians from walking near the court, while also creating a designated area for the media.
There is a special fence in front of the court where employees can enter, and potential jurors for the day are also queuing there. Police remind them to have their subpoenas ready for inspection. Several media outlets have gathered in the nearby area, and news vans for broadcasting are parked around Foley Square.
Prosecutor States SBF Never Received a Plea Deal
During the jury selection process, one of the federal prosecutors, Nicholas Roos, stated that no plea deal has been offered to SBF.
Before the prospective jurors entered the courtroom, the judge told SBF, “You have the right to testify in your own defense in this case. The decision is up to you… If you wish to testify, please stand up after the defense statement is finished.”
When asked if he understood this, the former CEO of FTX responded, “Yes.”
The defense and prosecution presented a series of questions for Kaplan to screen potential jurors, including asking about their familiarity with FTX and the case, as well as their perceived ability to provide fair service.
Some anecdotes from the jury selection process
Several prospective jurors revealed that they or their relatives had lost money in cryptocurrencies, with one person’s brother nearly going bankrupt. None of the jurors indicated that they had made money through cryptocurrencies. One young person stated that they fundamentally opposed cryptocurrencies but did not explain why. Another person insisted, “I don’t understand cryptocurrencies,” despite their son trying to teach them.
Some potential jurors expressed scheduling conflicts that prevented them from serving on the jury. One candidate informed Judge Lewis Kaplan that she would be getting married on November 3. The judge congratulated her on her upcoming wedding and then excused her. Another person mentioned attending a friend’s wedding during the trial, but they were not excused.
One prospective juror disclosed that she had previously worked at the private equity firm Insight LianGuairtners and claimed that the company had suffered losses due to investments in FTX and Alameda Research.
However, she stated that she had no personal dealings with the company and could make a fair decision “based on the facts.” Kaplan did not immediately strike her from the jury list.
Judge Kaplan is known for his commitment to truthfulness. He is an experienced legal scholar who has presided over significant cases.
When potential jurors provided reasons for not being able to serve for six weeks, he posed sharp questions, asking about everything from the location of the Miss Universe office to the reasons for a six-month trip to Maui. When one potential juror mentioned hearing loss, he shrugged and said, “I don’t think that will be a problem. You’re not the only one here with slight hearing loss,” referring to himself, an 78-year-old judge.
Kaplan was born in the Staten Island area of New York City, graduated from the University of Rochester and Harvard Law School, and served as a law clerk for then-First Circuit Court of Appeals Judge Edward McEntee.
How might SBF defend himself?
In the case of white-collar crime, Columbia Law School professor and former federal prosecutor Daniel Richman told Wired that possible defenses include: “I didn’t do it; I didn’t intend to do it; those who say I did are lying.”
Based on a series of interviews before the arrest and legal motions before the trial, SBF’s defense seems to fall into the category of “not intentional”. Specifically, he is preparing a so-called “lawyer’s defense suggestion,” in which he will shift the blame to the legal advisors, arguing that these advisors gave him reason to believe that everything about FTX was legal.
Richman explained that theoretically, if this method is applied properly, it can become a “get out of jail card.” However, this is usually a difficult defense to make because it requires the defendant to prove that the advisors had all the information necessary to provide informed advice—and the evidence must be solid. In this case, SBF must prove that his legal team knew everything about FTX’s operations, such as Alameda bank accounts, undisclosed intercompany loans funded by customer deposits, and so on.
Richman said, “This is where many lawyer defense suggestions fail.” Such a defense would also give the prosecutor the right to review SBF’s communications with legal advisors, which is often subject to attorney-client privilege. If he made statements in the lawyer’s office that could incriminate him, he may prefer to avoid this privilege.
SBF’s primary hope is that the defense does not need to present evidence. His lawyer only needs to create doubt in the minds of the jury, which can be achieved through various means. The lawyer’s defense suggestion may be the core, but SBF may also try to undermine the credibility of witnesses who testify in court, or shift the responsibility for fraudulent acts onto his subordinates. He has multiple options.
Jury selection will continue tomorrow
As of the adjournment on Tuesday afternoon, jury selection was still incomplete, with about 50 people remaining in the candidate pool. The judge stated that the entire process will need to continue tomorrow morning, and both the defense and the prosecution are expected to make opening statements totaling approximately 90 minutes.
(Continuously updated…)
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