Iâd look at pp. 5-12 of the linked sentencing memo for customers, pp. 15-18 for investors/âlenders for the governmentâs statement of the offense conduct. The jury merely utters guilty /â not guilty on each count, it does not provide detailed findings of fact. Judge Kaplan heard all the evidence as he presided at trial, and can rely on his own factual findings at sentencing under a more-likely-than-not standard. Of course, that is just a summary; Ellison alone testified for ~3 days.
Basically, SBF & FTX falsely represented that the customer assets were segregated from FTXâs own assets and would not be used by FTX. Yet Alameda regularly took large sums of money out of accounts holding FTX customer funds, and the âallow negativeâ feature allowed it to borrow ~unlimited money as well. This was not limited to funds made available to customers through the margin lending program.
At various points discussed on pp. 9-11, SBF directed Alameda to âborrowâ more money from FTX despite knowing it was underwater at the time. For instance, at one point SBF directed Ellison âto use FTX customer funds to repay loansâ (her words), despite knowing that Alameda was $11B in the hole and was already âborrowingâ $13B in customer funds (p. 11). About $4.5B more in customer funds was used to pay Alamedaâs lenders as a result (p. 11). In short, I donât think the narrative presented in the linked post is backed up by the trial evidence.
(The last sentence in the response refers to this post.)
Note that the linked document was written by the prosecution, and is therefore presumably a biased summary of the evidence.[1] The defense equivalent (presumably with the opposite bias) can be found here.
I want to quickly address a couple of points of disagreement I have with Jasonâs take. (Please donât take this to mean that I accept the restâthereâs a lot I disagree withâI just donât have time to respond to it all right now.)
For instance, at one point SBF directed Ellison âto use FTX customer funds to repay loansâ (her words)
This is misleading. The complete line from Ellison is, âI understood that he was telling me to use FTX customer funds to repay our loans,â then she proceeds to explain how she inferred this.
At no point in the trial does she say that he explicitly instructed her to touch customer fiat deposits.
About $4.5B more in customer funds was used to pay Alamedaâs lenders as a result
The defense doesnât seem to think so. âCaroline testified to you that what happened was, Alameda âwould have to take the money from our line of credit to pay the lenders.â And thatâs at transcript page 763. And I asked her, Well, if thatâs true, if the lenders were being repaid off the line of credit, wouldnât the amount of the line of credit go up? She said, Yes, it would. And I said, How much did it go up by? Oh, 5 to 10 billion. But when you look at the actual data that was pulled by Dr. Pimbleyââand thatâs Defendantâs Exhibit 617ââyou see that in fact the line of credit did not go up during the period when the loans were being repaid. In fact, it went down for much of the period.â
Note that I am quoting the source I identified and summarized, which in turn quotes the trial transcript at page 675. As I noted, the prosecutionâs statement here is a summary written for the trial judge who heard all the testimonyâwhether the memoâs use of that quotation was fair in that summary depends on all of Ellisonâs testimony at trial. In particular, the prosecutionâs memo was not meant to stand alone as proof beyond a reasonable doubt of SBFâs guilt of the charges. That had already been established by the juryâs verdict. I donât think âread the trial transcriptsâ was a helpful answer to Michaelâs original question which led me to post the comment.
For those of us who are not inclined to spend days reading over the transcripts, I would note that the jury convicted SBF on all counts with only four hoursâ deliberation, the experienced district court appears to have bought ~0 of the defenseâs positions at sentencing, and the media coverage does not suggest many (if any) of the journalists and legal analysts who carefully followed the trial bought SBFâs protestations of innocence either.
Moreover, in my view what one would have to believe to find SBF innocent here is simply implausibleâe.g., that he was that of the loop about multibillion dollar cash flows that he failed to grasp what should have been obvious from the conversations established by the testimony and documentary evidence, that he honestly believed ~all of the material public statements he made about how FTX operated and Alamedaâs relationship to it, that he was so misinformed about how much non-customer money FTX had that he could direct Ellison to have Alameda âborrowâ billions and billions of it without understanding that much of that was coming from customer funds, etc.
I think all that justifies a strong starting point that everyone else got it right, and it would take a lot of convincing analysis of ~ all of the prosecutionâs evidence to move the needle on that.
that he was so misinformed about how much non-customer money FTX had
+ the customer money FTX had that the customers explicitly consented to be loaned out, through margin lending or staking?
He might not have been well-informed about how much this was. Itâs a number that changes by the minute. But maybe he would have a general idea, and enough to know that what he was asking for was more than customers would have consented to being loaned out.
whether the memoâs use of that quotation was fair in that summary depends on all of Ellisonâs testimony at trial
And I think it was not fair because as far as I can tell, that quotation was the strongest piece of evidence the prosecution had that SBF directed Ellison to use customer funds in an improper way.
I think all that justifies a strong starting point that everyone else got it right, and it would take a lot of convincing analysis of ~ all of the prosecutionâs evidence to move the needle on that.
I agree. I donât expect anyone to take my word for it on the basis of a couple of anonymous comments. But Iâm trying to make a start on this forum because I am someone who is âinclined to spend days reading over the transcriptsâ and much else besides and given the conclusions Iâve come to, Iâm not sure what else to do.
@Jason left an answer here, referring to this sentencing memo:
(The last sentence in the response refers to this post.)
Note that the linked document was written by the prosecution, and is therefore presumably a biased summary of the evidence.[1] The defense equivalent (presumably with the opposite bias) can be found here.
Jason comments on this here to argue that it probably isnât that biased.
I want to quickly address a couple of points of disagreement I have with Jasonâs take. (Please donât take this to mean that I accept the restâthereâs a lot I disagree withâI just donât have time to respond to it all right now.)
This is misleading. The complete line from Ellison is, âI understood that he was telling me to use FTX customer funds to repay our loans,â then she proceeds to explain how she inferred this.
At no point in the trial does she say that he explicitly instructed her to touch customer fiat deposits.
The defense doesnât seem to think so. âCaroline testified to you that what happened was, Alameda âwould have to take the money from our line of credit to pay the lenders.â And thatâs at transcript page 763. And I asked her, Well, if thatâs true, if the lenders were being repaid off the line of credit, wouldnât the amount of the line of credit go up? She said, Yes, it would. And I said, How much did it go up by? Oh, 5 to 10 billion. But when you look at the actual data that was pulled by Dr. Pimbleyââand thatâs Defendantâs Exhibit 617ââyou see that in fact the line of credit did not go up during the period when the loans were being repaid. In fact, it went down for much of the period.â
Note that I am quoting the source I identified and summarized, which in turn quotes the trial transcript at page 675. As I noted, the prosecutionâs statement here is a summary written for the trial judge who heard all the testimonyâwhether the memoâs use of that quotation was fair in that summary depends on all of Ellisonâs testimony at trial. In particular, the prosecutionâs memo was not meant to stand alone as proof beyond a reasonable doubt of SBFâs guilt of the charges. That had already been established by the juryâs verdict. I donât think âread the trial transcriptsâ was a helpful answer to Michaelâs original question which led me to post the comment.
For those of us who are not inclined to spend days reading over the transcripts, I would note that the jury convicted SBF on all counts with only four hoursâ deliberation, the experienced district court appears to have bought ~0 of the defenseâs positions at sentencing, and the media coverage does not suggest many (if any) of the journalists and legal analysts who carefully followed the trial bought SBFâs protestations of innocence either.
Moreover, in my view what one would have to believe to find SBF innocent here is simply implausibleâe.g., that he was that of the loop about multibillion dollar cash flows that he failed to grasp what should have been obvious from the conversations established by the testimony and documentary evidence, that he honestly believed ~all of the material public statements he made about how FTX operated and Alamedaâs relationship to it, that he was so misinformed about how much non-customer money FTX had that he could direct Ellison to have Alameda âborrowâ billions and billions of it without understanding that much of that was coming from customer funds, etc.
I think all that justifies a strong starting point that everyone else got it right, and it would take a lot of convincing analysis of ~ all of the prosecutionâs evidence to move the needle on that.
+ the customer money FTX had that the customers explicitly consented to be loaned out, through margin lending or staking?
He might not have been well-informed about how much this was. Itâs a number that changes by the minute. But maybe he would have a general idea, and enough to know that what he was asking for was more than customers would have consented to being loaned out.
And I think it was not fair because as far as I can tell, that quotation was the strongest piece of evidence the prosecution had that SBF directed Ellison to use customer funds in an improper way.
I agree. I donât expect anyone to take my word for it on the basis of a couple of anonymous comments. But Iâm trying to make a start on this forum because I am someone who is âinclined to spend days reading over the transcriptsâ and much else besides and given the conclusions Iâve come to, Iâm not sure what else to do.