Sam Bankman-Fried Convicted

At the end of the day, the defense had an unwinnable case. Their defendent is an idiot, and all of his co-conspirators plead guilty to all charges.

To be fair to SBF's lawyers, you're going to have a hard time coming up with a good defence when your defendant is bang to rights.

I’d guess that the defence team knew they’d loose and this was in some way the start of their sentencing reduction plan: “the money was stolen to cover mostly business losses and to keep FTX going rather than for personal gain”.

Fact is, this could have helped him and his company, eventually.

Another two or three years of very sympathetic (bought) politicians on his side and his business could have become legit as a result of those politicians forcing the liquidation/closure of almost all SBF's competitors (certainly Binance would have become bust), and the US "standing behind" FTX as a beloved crypto assed in the fight against China. I.e. very, very similar to what's happening now with AI and with people like Sam Altman.

Which is to say that I'm surprised to see that the defence hasn't pushed more on that "SBF was just a pawn in the hands of very corrupt politicians"-card, that could have worked given a politically divided jury.

SBF is a dumb criminal, who then screwed over everyone he abused into creating this theft. I honestly can't imagine many easier setups, less sympathetic defendants, or parades of pissed off co-workers willing to put the knife in him before he got it in them.

> SBF did not have any intention of committing a crime.

His fraud started early on, and he used the same tactic over and over again. He lied to his customers about how their funds were held, then abused them whenever any problem involving money came up in his life. Least self aware villan ever created.

So... money laundering?

The guidelines calculations, contrary to public belief, are pretty easy! You will have a pretty good success rate just carefully reading the charged statutes in the indictment and then following the instructions in the guidelines. But the PSR, prosecution, and defense filings all take a bunch of time, and involve "reporting" or "research" or whatever you'd want to call it.

That process ostensibly can't even start until everyone knows what the precise convictions were.

For what it's worth, I think there's a very good chance he just gets the statutory maximum penalties here, because the dollar loss and victim count numbers max out the 2B1.1 guidelines (which, for instance, cap out at $10MM in dollar losses). Attributing specific dollar losses and victim counts is ostensibly one of the things that makes sentencing take so long, but as long as it takes I think the outcome is a foregone conclusion.

† Later: they're definitely not public; there's a whole victims rights thing about getting victims partial access to PSRs so they can be heard in the sentencing process. I guess I can stop looking for them.

It is not often that I get to say this lately, but the jury restored some of my tired faith in the system in US.

I was on the jury of a federal fraud trial with 2 defendants with 15 charges, ~30 million in losses.

We were thorough and went through each count separately, including reviewing some of the evidence, and were done in maybe 8 hours spread across 2 days.

We ended up with a mixed verdict: one count not guilty for both, another not guilty for one. I fully believe they were aware and committed fraud for the not guilty counts, but the prosecutor wasn’t able to cross the “reasonable doubt” threshold in our minds for those specific instances.

Only thing we weren’t super careful about was the first requirement for Mail/Wire fraud, which is “Mail and wires” were used.

It was amusing that the prosecutors brought in a bank IT guy to explain that “the internet uses wires”, but not really something we questioned.

At the end of the day he deserves everything he's getting

First thing we all agreed we would not be coming back on Monday…

The whale sushi article is excellent and is a good intuition for most white collar crimes. You run into the big exception in these ultra-high-dollar cases like Theranos and FTX, because of the 2B1.1(b)(1) dollar loss chart.

Not trying to say that this is something I'd build a moral or legal system around. Just that emotionally I can kind of see it.

At this point, I wouldn't be surprised if they do. To deter potential future-SBFs. I mean, the whole cryptocurrency space is filled to the brim with scammers, many will never face anything at all. But when you've nailed the biggest of them all, might as well set an example.

EDIT: I do not believe he will serve 110, or 50, or 20 years. But hopefully they will dole out the maximum of a realistic sentencing.

A couple of year behind the bars would be a complete joke. From all I've seen, I have zero faith that SBF will be "rehabilitated" by a year or two in prison.

So it's not the case that when one person is responsible, someone else has to be irresponsible to balance things out?

It worked great until regulators disallowed the Sprint purchase because it would have put too much of the long-distance market in one company. (And as we all know, we stress a lot about choosing our long-distance carrier these days.)

Then all of the somewhat shady side-deals became concerning, as WCOM was no longer growing like it was. Then people started looking more closely at the financials. Then it all went kerflooey.

It was ahead of its time because it's not that different from tech companies today, only replace business growth with user growth. Profits? Ha ha ha, don't be silly.

> That’s when SBF told Sequoia about the so-called super-app: “I want FTX to be a place where you can do anything you want with your next dollar. You can buy bitcoin. You can send money in whatever currency to any friend anywhere in the world. You can buy a banana. You can do anything you want with your money from inside FTX.”

> Suddenly, the chat window on Sequoia’s side of the Zoom lights up with partners freaking out.

> “I LOVE THIS FOUNDER,” typed one partner.

> “I am a 10 out of 10,” pinged another.

> “YES!!!” exclaimed a third

Like, he’s rambling about how you should buy bananas with Bitcoin. How was this compelling to people who control serious money?

It always struck me as the opposite. If someone running a crypto futures exchange said they wanted people to buy bananas and groceries on their platform that’s be a signal to pass, right?

This worked great as a marketing gimmick for sure, as people love the mythos of a revolutionary company run by a tech prodigy.

But it also works when everything falls apart because SBF's delusion driven ego sucked up every morsel of attention and responsibility.

I also wouldn't be surprised if, through various means, many of his investors ultimately walked away with far more money than they started. And nobody bothers asking questions about that because SBF does such a great job of drawing all the attention.

"Dad, why is the American government the best government?

"Because of our endless appeals system"

Thank You for Smoking

appeals aside, it's not over... We've had first trial, yes, but what about second trial?

Four charges had been separated out into a second trial for March 11 of next year. Same judge, different jury? May have been due to logistical reasons or discussions with the Bahamanian government around extradition. It sounds like the government has the option of dropping these over the next months as well.

Sentencing for this one (or both but that seems extremely quick) was just scheduled for March 28 2024.

If you want a really detailed overview of his testimony and cross-examination: https://www.youtube.com/@molly0xfff/streams

> do they know where the money went

Not all of it (at least, not for the trial). They showed significant components of it as part of the trial, but they don't need to show a super detailed breakdown of every single dollar as part of the trial, so I don't think we got that.

> If not, how did they prove intent (I assume they proved intent)?

Circumstantial evidence and witness testimony mostly. Including a cross-examination of Sam that thoroughly undermined his credibility.

1. To pay for Alameda's (Sam Bankman Fried's hedge fund) and FTX's loses

2. Invest in venture capital and make acquisitions

3. Political donations

4. Charitable donations

5. Luxury real-estate, boats, etc.

6. "loans" (i.e. transfer of stolen funds) to FTX's top executives

RE: Intent - Intent was easy to prove. All of Sam Bankman-Fried's fellow executives testified against him. In addition, Sam Bankman-Fried gave several interviews after FTX's collapse where he basically admitted he lied, fucked up, etc. Also, there was a lot of documents proving Sam Bankman-Fried lied. A good example is him saying FTX was fine on Twitter (X) and then it collapsed a few days later.

Here are some good FTX resources:

https://newsletter.mollywhite.net/s/the-ftx-files - Molley White did a good job covering the trial.

https://www.justice.gov/usao-sdny/pr/united-states-attorney-... - This site contains the government's indictment against Sam Bankman-Fried.

https://restructuring.ra.kroll.com/FTX/Home-Index - A lot of the FTX bankruptcy documents are on this website.

https://newsletter.mollywhite.net/s/the-ftx-files

There have been tons of articles, podcasts, videos, and tweets about the trial. Evidence was mostly chat logs of SBF ordering crimes and testimony from Caroline, Gary, and Nishad that he ordered them to do crimes.

This is complicated, but often it's possible to try someone in a single country, especially if it's their home country. In CSAM cases this often happens, the facts might happen in Asia, but someone is tried in their home country. I know the law in my country has provisions specifically for this and murder cases among others.

Is it actually possible that all creditors will get their money back? Pretty crazy if so.

[1] - https://www.vox.com/future-perfect/23794855/anthropic-ai-ope...

1. The donations to candidates are usually pretty small (think $2,900/candidate). The candidates can return the money but getting all of the money back will not do much for the creditors.

2. Some PACs got a LOT of money (think millions of dollars). The problem is they probably already spent it. You can probably sue them to try to get back the money but the PACs will probably just declare bankruptcy.

Here is a link to the donations: https://www.opensecrets.org/donor-lookup/results?name=&cycle...

This fraud became worse the more negative the balance became since it became more and more misleading to users to continue to present themselves as a financially healthy business.

What they should have done instead is to not allow alameda to have an account with special rules and negative balances, and to actually operate their business as they claimed. They likely would have grown less quickly or even gone out of business, but sometimes the way you avoid fraud is indeed by going bankrupt instead of lying.

They also could have not lied to users, both about the status of alameda's account, and about the status of FTX's liquidity. Each time they made a statement about their exchange that excluded that materially relevant information was also fraud.

I do say all of this with full awareness that a large fraction of YC startups also "fake it until they make it", i.e. lie about what their product can do, lie about their financials, etc. Most YC startups are also committing fraud on a much smaller scale, and just manage to keep the scale small enough that no one goes to prison.

There's not necessarily an "exact moment" that they can pinpoint, nor is that their job to do so.

FTX was promising customers it would hold onto their funds and keep them safe, much like a bank. Then they did not. That's the short of it, tat is what they uncovered. The date it "began" was not in scope of the case, just the end result, and the end result was that there was fraud.

> What should he have done instead?

Again, the short of it is: He should have delivered what he promised to customers, or not make those promises to begin with.

Here is what he should have done:

1. Sam Bankman-Fried SHOULD NOT HAVE STOLEN CUSTOMER MONEY.

2. Sam Bankman-Fried should have been honest.

3. FTX should have kept excellent records. FTX was notorious for its bad record keeping. Also, its poor record keeping meant it was not sure how much money it had and it was not sure which money it owned and which money its customers owned.

When he used customer funds deposited into FTX to gamble through Alameda.

Since customer deposits into 'FTX' went straight to Alameda's bank account, it began pretty much the moment Alameda executed a trade. Everything after that was just more fraud to cover up the consequences of the original fraud.

> What should he have done instead?

Not treat customer deposits like a personal piggy-bank.

Very early on. Probably from the very start.

When Alameda, before FTX existed, gave investors leaflets saying Alameda had guaranteed 20% returns and it could sustain 20% profits on as many billions as they would get. This was a lie and criminally defrauding investors already.

SBF never did the Kimchi trade (i.e. arbitraging the US/Asia Bitcoin price differences) at scale (it's not even clear if he even managed to do it at all: he claims he did, but he's a pathological liar who kept lying in court).

So Alameda was already a scam. Then FTX was a bigger scam, to keep the Alameda scam going.

But the Alameda scam came first.

> What should he have done instead?

He should have kept playing LoL only.

When assets held on behalf of customers were comingled with company assets?

The fraud began when he gave false information to investors and customers.

>Clearly OP has no fucking clue what he’s talking about because the videos in question don’t prove he’s front running.

>The Youtube video you linked to (I watched some from the point you linked), appears to be about trading an arb opportunity that existed because of a large sell wall on Binance. Where does it show he's using 'private FTX analytics' to 'front run his customers'?

1) There's not a lot of weight to put on such criticism because for any success there are also critics. Critics are wrong until and unless they're right. As others have noted, in this case, he wasn't convicted for the thing these critics were claiming he was doing.

2) ... But, it's Bitcoin. Any critic claiming anything Bitcoin related is probably tied to a scam is statistically likely to be correct. ;)

Some of the replies to that... my god.

Now there will be another hearing in March during which the judge will consider all of the evidence (even that which wasn't allowed in the original trial) to determine what his punishment should be.

The judge will have to abide by the federal sentencing guidelines which specify the punishments and severity they can apply but otherwise it's a matter of their discretion.

I don't even think SBF had the book-learning, just intellectual arrogance. "I don’t want to say no book is ever worth reading, but I actually do believe something pretty close to that. I think, if you wrote a book, you f---ed up, and it should have been a six-paragraph blog post."

Raw intelligence is not enough in that context. Ideally you want to have apprenticed for at least a few years at a real exchange or custodial service. Somewhere you learn all the engineering details about how to architect it with proper financial controls, safeguards, and correctness guarantees so that this kind of failure cannot happen, either via human skullduggery, mistakes, or system bugs or security vulnerabilities.

Sam never had any of that. He probably got caught up in the moment, implicitly assumed he was smart enough to compensate and not need it, that money is fungible and free-flowing and he can move it around and always make more, etc. And his investors were all finance guys overly impressed with his trading ability and ignorant of the above. This is the unfortunate but unsurprising result.

After all, it's not difficult to find an effective book teaching one to safely cross a road.

Getting offtopic, but isn't this more an indictment of America's insane car-centric culture? It's ridiculous that you see a major thoroughfare going through a heavily populated zone which is extremely unsafe to cross yet still laugh at students which "almost get hit by cars".

But how many MIT students actually get hit by cars? the number would be unusually high if the number of close calls were unusually high, but without looking up any statistics I can assure you it's something nobody ever thinks twice about.

Also Mass Ave which tons of people cross is not the most highly trafficked street by MIT, that would be Memorial Drive, but hardly anybody even has a need to cross Memorial Drive so that part is also hinky.

It kinda makes me sad that he fucked up doing some unrelated shit.

If I was on a jury where the defendant pulled that, I would want to go up and punch him in the face. Tiffany was restrained. Her notes said she only wanted to slap him.

In that case, it's even funnier because the defense knew the prosecution had all of those things before he was even asked those questions.

After interacting with professional managers with degrees from supposedly illustrious institutions for years during my career, I don't see a good basis for this expectation. What is more fascinating is how the professional management class, as incompetent as they are, have managed to gain the reputation of wisdom and competence in the collective subconscious.

Edit: I remember my wife telling me this during her time as an Advocate's Devil.

Great interview (available as podcast and on YouTube)

https://www.intelligencesquared.com/events/the-rise-and-fall...

I don't think it's lack of wisdom but rather pathological hubris and a God-Complex. I've met kids like SBF at MIT. Very smart but at some point they think the rules don't apply to them. The've never failed before so why would they start now. After all, he was like the youngest billionaire, rich parents, good grades, top schools. Everything has gone his way so the thought of admitting failure was out of the question. The defense also took this weird strategy of painting SBF as incompetent manger who had no clue what his subordinates were up to. Who knows, maybe that will get softer sentencing.

TBH I wouldn't be surprised if he gets out after 2-3 years on "good behavior". those political donations have to count for something. He very well may have the last laugh.

I think there were potentially two problems. First, for the previous 10 years, lying and taking massive risks actually did work for him: Even if some people became disillusioned and stopped buying what he was selling, he could just walk away from them and start working with people who would.

Secondly -- well, what else could he have done? It's a bit like back when we saw those AIs playing Go or Starcraft or whatever at the point where it was clear they were going to lose: They'd just start making random moves, because terrible moves had as much chance of winning as "minimize loss" moves.

There's an interesting article I read which is half book review, half critique of SBF and "Effective Altruism" (EA), that has some interesting connections[1]. Basically, EA encourages "cost / benefits utilitarian analysis" thinking; every time SBF lied (or committed fraud), he could tell himself that it was actually moral because it maximized some other good towards thinking people somehow. It also encourages poker-type gambling in some circumstances, where it makes sense to take a bet where you lose 75% of the time, as long as the potential payout is larger than 4x.

And if that article's reading is right, FTX actually had a profitable business. All they had to do was sit back and take x% of trades and they would have been fine. But that wouldn't have been a huge massive multiple that SBF was looking for, so he went in for a bunch of poker-style bets with his customer's money -- ultimately in the name of making more money to give that money away. (And he did actually give a load of money away, even when it didn't make financial sense to do so.)

SBF's choices were:

1. Accept that you're going to jail for a long time no matter what, and try to minimize the damage. Maybe you can cut your jail time in half.

2. See if you can weasel your way out of it. Maybe your jail time is a bit worse, but maybe you don't get any at all.

First of all, he'd always been able to do #2 so far, so why would this time be any different?

Secondly, #1 means a huge emotional downside for current SBF; #2 only means a potential downside for future SBF. The attitude he got into, where he screwed everyone else in favor of "current SBF", carries over into screwing "future SBF". So there's a sort of poetic justice to it.

[1] https://www.lesswrong.com/posts/AocXh6gJ9tJC2WyCL/book-revie...

Why did he take the stand at all?

Which is exactly what representatives from Facebook, Google and Microsoft did on trials and when being questioned by congress

SBF did not do himself any favors with his smug attitude that caused the judge himself to scold him several times during his examination. If he was a little more remorseful I could’ve seen some more leniency but the Judge did not like his attitude from what I could read following his testimony.

Meh. This is society taking revenge on an individual by locking him up and offering him no chance for redemption. Maybe that's the best form of "justice" we can do for now, but let's not celebrate it too much.

A few token condemnations for the headlines is all it takes.

edit: Also seeing 110 years, TechCrunch said 115 here: https://techcrunch.com/2023/11/02/sam-bankman-fried-found-gu...

Because it doesn't look like justice. It looks like revenge. The US justice system doesn't mete out justice, it provides revenge.

Under a punitive justice system like we have in the US—sure. It doesn't seem to have improved anything at first glance, though.

Lastly, these messages always fall a little flat to me. The justice departments always go after and nail these fraudsters that have little actual power and then make a big stink about it. Sam Bankman-Fried, Elizabeth Holmes, Billy McFarland, etc. are all nailed to the cross. Yes, they committed clear and damaging actions of fraud and other crimes. But higher level fraudsters, like those in industries that are much more protected and in positions of actual power and influence, do not get touched. For example, Steve Cohen gets to own the New York Mets yet he clearly committed insider trading for years, if not decades (https://www.youtube.com/watch?v=1szayJV505M). Several of his high-level employees were convicted, but he remains untouched. There's other examples of people like this that are actually intelligent (unlike Bankman-Fried, Holmes, etc.) but still sociopathic, and they are able to weasel themselves into tight nets of power such that the justice department doesn't or can't touch them.

https://www.wsj.com/articles/sam-bankman-frieds-dirty-politi...

But considering that he was found guilty on all accounts and after the mess he was making during the trial, his sentence will most likely be no good news for him.

He is also kind of being made an example of to encourage more due diligence in the industry. Being bad at business is one thing, but handling billions without basic risk management is basically gambling with customer funds.

My understanding is she was convicted for financial bits, not harming people.

I feel like for the most part Holmes had theoretical effects on people – tests that were fraudulent, but where an equivalent standard test was done at the same time, and so most likely everything was caught. I think the time she got made sense for the level of fraud, but thankfully I don't think her actions ended up being actively harmful to individuals (other than her employees) in almost all cases.

SBF on the other hand has conducted a significantly larger fraud in monetary terms, and caused many individuals to lose significant amounts of money. In a way I'd say these are bigger real-world effects. I think it's possible to conclude that he had a substantially bigger negative impact on the world than Holmes did, and therefore feels reasonable that his sentence will reflect that.

My guess is that he’ll get something closer to Bernie Madoff’s sentence than Elizabeth Holmes. She at least was pregnant at the time of sentencing and her defense was seemingly successful in painting her business partner as the puppeteer.

If you add up all of the crimes SBF was convicted of, the max could be 110 years. It isn't that simple. Sentencing is a complicated thing that could be replaced with a simple spreadsheet. Instead, judges have to do the calculations by hand with charts and checklists.

Madoff was sentenced to 150 years.

He's never going out of jail in his life. Sentencing is expected to be harsh, remember he had his bailed revoked for witness tempering!

On top of that, he's been convicted on 7 counts, but there's another trial in March 2024 for other felonies. He will spend the rest of his life between prison and the tribunal.

Both his parents are likely to be sentenced to jail as well.

I don't care if he does zero year, one year or 100 years. It's not as if he was a killer representing a serious menace on society. With what he did nobody will want to hire him, not even as an accountant for a small town's tennis table club.

Sure, he's a despicable person who was using stolen money to rent private jets to have amazon shipments sent to him in the Bahamas and he didn't hesitate to lie in court by pretending it was all the fault of his co-conspirators (co-conspirators who pleaded guilty btw) but all that counts is that now he's not going to scam people anymore.

The two private jets he bought, the luxury houses in the real estate in his parents name (another trial coming for his parents btw), his scamming company all have been seized.

The supposedly "billionaire kid genius", his parents, and his effective altruism guru (who bought a $15m mansion using stolen funds donated by FTX and who was part of the Alameda scam) all got exposed.

The true color of these people has been revealed.

It's game over.

Allegedly, a lot of the squandered FTX funds went to Alameda, his other company where he made similar bets, except they didn’t work out.

"So this guy is guilty right?"

(10x other Jurors) "Agreed".

(That one "For Fairness" Juror) "I dunno, we're sending this guy to jail for an awfully long time. I think we need to think it over a bit longer."

"Fine, Lets get pizza".

* 4 hours later *

"Okay, we thought about it some more. He's guilty right?"

(11x other Jurors) Guilty.

-----------

At least, I'm amused by the thought of a "reverse 12 Angry Men" style setup, where everyone agrees upon the same premise (that a quick decision is a bad idea for everyone), but the additional time thinking changed nothing.