Part Three | The Collapse: The Inner Circle Turns

0:00 It's the morning of November the 9th, 2022. Nassau in the Bahamas. Somewhere across town from the penthouse where Sam Bankman Freed has just lived through the worst week of his life, a team of professionals sits down to do the simplest thing in the world of finance. They open the books. These are not Sam's people. These are CZ's people. Binance people. The due diligence team from the biggest crypto exchange on earth. The rival. The giant that just one night earlier agreed in principle to buy FTX whole and rescue it from a bank run. But a rescue like this has a condition. And the condition is the look.

0:46 Before Binance writes a check that size... Binance gets to check the books. Real books this time. All of them. And so they look. They look at the real numbers. Not one of the seven versions Carolyn Ellison built for the lenders back in June. Not the serene public story Sam had been telling the world for years. The actual books of FTX. And Almeida Research. The two companies Sam Bankman Free built side by side in the same building with the same people. quietly sharing the same money. What those men find in the books that morning ends the rescue before the day is out. Because you can't unsee an $ 8 billion hole. You cannot unsee customer deposits. The money of teachers and truck drivers and kids with their first paychecks wired out the back door in the code to a trading firm. However Binance phrases it when they make the announcement, and we'll get their exact words soon, the meaning is plain. There's no company here to save.

1:51 There's a crater and a story. By nightfall, the deal is dead. By the end of the week, the empire is in bankruptcy court. And within a month, the most trusted man in crypto is in handcuffs. But now listen, because this is the thing I need you to understand in this episode. The men with the calculators were never going to be the ones to finish Sam Bankman Freed. Numbers don't testify. People do. And the people who would finish him, the people who would walk into a federal courtroom, raise their right hands, and take him apart piece by piece, document by document, memory by memory, were not strangers from a rival company. They were his roommate, his girlfriend, his engineer, his inner circle. Welcome to Exposed, Scandalous Files of the Elite, the Bankman Freed Series, Episode 3, The Inner Circle Turns. Hey, everyone, and welcome back to Exposed, Scandalous Files of the Elite.

3:09 I am your host, Jim Chapman, and thank you for coming back for episode three of our Bankman Freed series. Now, if you remember where we left off last time, and again, if you haven't heard parts one and two, go back and start at the beginning. because this thing builds like a freaking house. Last episode, we opened the books. We put the number on the back door, a secret line of credit set at $ 65 billion written into the code of FTX for Almeda Research. We followed the customer money out the back door to the lenders, to the ventures, to the Bahama real estate, to the politicians. We sat down with Carolyn Ellison in June of 2022, where she built seven versions of the truth. and Sam chose which fiction to send. We watched Sam Trebucco, the co-CEO, walk out of the door in August. We stood on the balcony with Singh in September while he did the math on an $ 8 billion hole. We even met mom and dad, and we heard the estate calls the whole thing. a family business. And then in November, it all collapsed in public.

4:17 CoinDesk published the leak balance sheet on November the 2nd. CZ tweeted on the 6th. The customers ran. Sam typed FTX is fine on the 7th while it wasn't. And on November the 8th, Binance signed a letter of intent to rescue the whole thing. And we left you on that one single night of hope with CZ's team about to open the real books. Well, they opened. And today, we live through what happened next. The nine days coming to their end, the bankruptcy, the arrest, and then the part of the story I've been waiting two episodes to tell you. The part where the U.S. government doesn't beat Sam Bankman Freed with accountants, it beats him with his best friends. And as always on this show, we build it out of the documents, the filings, the indictment, the pleas, and a month worth of sworn testimony that I have read until my Eyes have crossed. That's the ground we stand on. Quick thank you before we dive in. If you're a Patreon supporter, thank you so much. I could not do this show without you. Totally understand it if you can't join us on Patreon. But if you can, please check us out. Patreon.com slash Exposed Podcast Files. Commercial free early releases. and all kinds of other things. Check that out, and let's get into it. And we're going to start out in the morning of November the 9th.

5:40 The books are open, and one day, that's how long the rescue lived. Binance's people spent roughly a day inside of FTX Finances, a day of due diligence. And by the end of it, they had seen enough. Binance walked away from that deal and they said why out loud for the whole world to hear. Quote, mishandled customer funds. That was their phrase, mishandled customer funds. And they pointed to the regulatory investigations that were opening up around the company, and they pointed to the regulatory investigations that were opening up around the company beside them. The biggest exchange in crypto looked at the second biggest exchange in crypto for one day and concluded, wait a minute, this ain't a business, it's a crime scene. Wrap your head around the speed of that. On November the 8th, Sam Bankman Freed was being rescued by his greatest rival. And the story Sam is telling himself is that he's gonna survive. Diminished? Maybe.

6:42 But alive? On November the 9th, the rival reads the books and they run. No negotiation, no haggles. They just freaking run. And with the rescue dead, the dominoes just fall in line. One a day, like they've been set up by a very patient hand. Let's go to November 10th and the Bahamas. And y'all know that the Bahamas were chosen because they have very friendly rules. However, they do freeze the assets of FTX Digital Markets, the bohemian arm of that company, and Sam, to his own staff, to the people who would hitch their lives to him, he meets with his staff and offers what he would consider empathy. He tells them he's completely and deeply sorry.

7:30 Deeply sorry. $ 8 billion of customers' money is gone. The company is a crater. And the boy who would give it all away is, quote, deeply sorry. November the 11th, 2022. This is the day it becomes official in a courtroom on paper where this show lives. FTX files for Chapter 11 bankruptcy in Delaware. And not just FTX. FTX, and Almeda Research in roughly 130 affiliated companies. The whole sprawling empire, all of it, into bankruptcy court all at once. Sam Bankman Freed also resigns as CEO. Now, y'all, in the spring of that same year, this was a $ 32 billion company.

8:17 Its founder was on magazine covers. He was being called the future of finance. And by November the 11th, It's in bankruptcy. From $ 32 billion to a case number in about nine days of public collapse. And into this wreckage walks a new character. The last man you'd expect. And maybe the most important man in this whole episode. A lawyer. A turnaround specialist. The man the system sends in when a company doesn't just fail, but fails dirty. And his name is John J. Ray III. And if that name rings a bell to you, it should. John Ray is the same man who cleaned up Enron. And what he found when he started digging through what was left of Sam Bankman Freed's empire? Well, let's get into it. But first, I'm going to tell you about John Ray for a minute.

9:11 Because you need to understand who the messenger is before you hear the message. John J. Ray III made his reputation in the ashes of Enron. That's the energy giant who's collapsed 20 years before was the biggest corporate fraud story in American history up to that point. Ray was the cleanup man. When a company dies and the money is missing and nobody can find the books, John Ray is who the court calls. He has seen, professionally, the worst corporate behavior in modern America. He has walked through Enron. Nothing shocks this man. Nothing. Until FTX. So while Ray's team was digging through the wreckage in those first days, finding a company with essentially no trustworthy books, no controls, nothing, Sam Bankman Freed was doing something pretty extraordinary. He was talking.

10:03 On November the 16th, he direct messages with a reporter. Messages Sam would later claim he didn't realize were on the record. And I'll let you decide how much of that you believe. Sam said the quiet part about the whole halo, the whole philosophy, the whole earning to give brand we'd spent part one of this series looking at. When he was asked about it, Sam called it, and these are his own words in his own messages, quote, this dumb game we woke. Westerners play. Sit with that. The philosophy that built the armor, the story that made investors and journalists and members of Congress trust him with billions. In his own private words, at the end, a dumb game, we spent all of part one asking whether effective altruism was a belief or a To decide that with, y'all, the defendant just testified against himself in his own DMs.

11:01 So decide accordingly. Then came November the 17th. Ray files what's called a first day declaration in the bankruptcy case. The new CEO's sworn account of what he found when he took over. And I'm going to read you the sentence that matters word for word, because in a series built out of documents, this might be the single most devastating document of them all. John Ray, the Imran man, the man who has seen everything, wrote this, quote, Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here. Unquote. Never in his career, this man from Enron, not quote, this was bad or quote, this was sloppy, a complete failure of corporate controls, a complete absence of trustworthy financial information. Now understand what that means for the customers, because this is the human part under the legal part. It means there were no reliable books to even tell you what was owed. Sam Bankman Freed's empire, the safe one, the grown-up one, the one with the Super Bowl ad, kept its finances in worse shape than a lemonade stand. A lemonade stand had a cigar box and a notebook. John Ray couldn't even find a notebook. So by the middle of November 2022, here's where we stand. The company's dead. The cleanup man from

12:31 Emron is telling a federal bankruptcy judge it's the worst mess of his career. The founder is DMing reporters that his life philosophy was a dumb game, and the customers, millions of them all over the world, are staring at screens wondering if they'll ever see a dime. What Sam Bankman Freed does not yet have in the middle of November is handcuffs. Those are coming in December on an island, the night before he was supposed to sell his story to Congress. So let's go to December 2022. Sam Bankman Freed is still in the Bahamas. He's still living in the penthouse, the luxury resort community in Nassau, where the whole inner circle had lived and worked. And he still is, in his own mind, a man with a story to tell.

13:19 In fact, he was scheduled to tell that story on December the 13th. He was supposed to testify remotely before the House Financial Services Committee in the United States Congress. the same committee he dazzled a year earlier. He had a statement prepared. He was going to explain himself to the U.S. government on the record in his own words. And that prepared testimony exists, by the way. It would later became public. And it's a fascinating document because it is the defense Sam Bankman Freed never got to deliver. Because on December 12th, The day before the hearing, Bahamian police acted at the request of the United States and they arrested Sam Bankman Freed at that penthouse. Now, let that timing kind of sit with you. 24 hours. before he could sit down in front of Congress and tell his version, the version where he's a well-meaning founder who made mistakes in a storm, the handcuffs came out. Whatever else you think about the U.S. government, understand they were not interested in Sam's version being the first draft of history.

14:25 They had their own document ready. And on December the 13th, the day Sam was supposed to testify, the U.S. attorney for the Southern District of New York unsealed an indictment instead. U.S. versus Sam Bankman Freed. Eight counts, wire fraud, security fraud, commodities fraud, the conspiracy to commit them, money laundering, campaign finance violations, the whole architecture of the alleged scheme laid out in the government's language on the government's papers. And the same day, the Security and Exchange Commission and the Commodity Futures Trading Commission, they filed their own civil suits on top of it. Everybody in Washington who once lined up to be photographed with this man was now lining up to prosecute him. Sam does fight extradition for about a week. And then on December the 21st, he gives it up. He waives extradition and the United States flies him home in custody to New York. Now, Here's the part of this story that still gives me chills. I've read it a dozen times. While Sam Bankman Freed was in the air, while he was flying from the Bahamas to New York to face eight felony counts, something was happening in a federal courtroom in Manhattan that he had no idea about. Something had been arranged in secret over the days before between the U.S. government and two people who knew Sam Bankman Freed's machine better than anyone alive.

15:57 His co-founder, And the woman who ran Almeda, Carolyn Ellison, and Gary Wang, they were already in that courtroom's orbit. And by the time Sam's plane touched down, that inner circle had already started. to turn. December the 21st and the 22nd, 2022, the news breaks and it's an absolute thunderbolt. Carolyn Ellison and Gary Wang, they have pleaded guilty and both of them in federal court. Ellison pleads guilty to seven counts and they are revealed. publicly for the first time as cooperating witnesses for the United States government. Now, understand what a guilty plea with a cooperation agreement means to a case like this, y'all, because it is the whole ballgame. It means each of them stood up in court and they admitted to this crime, admitted it in their own words, each admitted to the customer fund theft in court. And in December of 2022, while Freed was still on a plane telling himself he could explain it all, And in exchange for their pleas and their truthful testimony, testimony against Sam, they would get credit at their own sentencings.

17:07 But their fates now depended on one thing. How fully, how truthfully, and how devastatingly they testified against the man at the center of all of this. And think about who these two people are. Because we met them at the beginning of this series, and I need you to feel how close they were. Gary Wang... was Sam Bankman Freed's MIT roommate, his fraternity brother, the quiet coder who built the machine in the back door of this system with his own hands. Carolyn Ellison, the CEO at Almeida, she was also Sam's on-again, off-again girlfriend, the woman who built the seven balance sheets and kept the memo of, remember, everything Sam was freaking out about? Those are not disgruntled employees.

17:55 These are two human beings on Earth who could walk a jury through the scheme from the inside because they were on the inside. And within about six weeks of the collapse, both of them belong to the prosecution. Now, contrast that with what happened to Sam in the same 48 hours, because the contrast is the theme of this entire podcast in one picture. Sam is arraigned in New York. and Sam goes home. Not to a cell, home. He is released on a $ 250 million personal recognizance bond. $ 250 million bond. At the time, the largest federal pretrial bond in American history. And who signs for it? Well, you guessed it. His parents, Joseph Bankman and Barbara Freed, the two Stanford law professionals who along with two Stanford colleagues.

18:50 And the conditions send him to house arrest at his parents' house in Palo Alto, California, on the Stanford campus. where he grew up. And could you just picture that? The lieutenant who pled guilty is looking at federal prison. The CEO of Almeida who pled guilty is looking at federal prison. And the man at the top of it all, the man the indictment said directed everything, is sleeping in his childhood home in one of the richest zip codes in America because two law professors and their colleagues signed a piece of paper. Elite protection, y'all. It doesn't get drawn any clearer than that. I'm not saying the bond was illegal. It's the system working the way the system works for people with houses and names and signatures worth a quarter of a billion dollars. I'm just saying ordinary defendants in ordinary courtrooms, they don't get the door held open for them. And everybody in America knows it. in the circle. wasn't done shrinking for Sam. On February the 28th, 2023, the third man falls. Neshad Singh, the engineer from the balcony, he pleads guilty too. And in his plea, Singh admits his part, including the part I covered in episode two.

20:07 His role as a straw donor in the political money operation. Donations made in his name out of the same customer money he had done the terrible math on. Three of the four people closest to the machine, Wang, Ellison, and Singh, have all now pleaded guilty and lined up with the government. Three friends, three guilty pleas, one defendant left. And again, Sam Bankman Freed, he's sitting in Palo Alto in his parents' house waiting for a trial now scheduled for October with three people who know everything preparing to testify against him. But Sam still had a move to make in the summer of 2023. And it involved the private writings of Carolyn Ellison, a diary. So Carolyn Ellison, the cooperating witness, seven guilty pleas hanging over her own head, waiting to testify, had kept private writings, personal writings, the kind of thing a person writes for herself about her work, her feelings, her relationship with Sam. And on July the 20th, 2023, excerpts from those private writings appear in the New York Times. Now, how does a cooperator's private diary get to a newspaper? Well, prosecutors told the court they knew exactly how. They accused Sam Bankman Freed of leaking it, of feeding Ellison's private words to the press to intimidate her. to shame her, to poison the well before she ever took the stand, to tamper with his own trial's star witness. from his

21:41 parents' house while hanging out on the largest bond in federal history. Now, Sam's side disputed the government's characterization. And I want to be fair, the way we always are in this show, but fair is a two-way street. And here's what happened on the documents. On August 11, 2023, Judge Louis A. Kaplan, the federal judge who would preside over the trial, he held a hearing and he made a finding. And he found probable cause to believe Sam Bankman Freed engaged in witness tampering. And Judge Kaplan revokes his bail. Revoked it. The $ 250 million bond, gone. The house in Palo Alto, gone. Sam Bankman Freed was taken into custody and sent to MDC Brooklyn, the Metropolitan Detention Center, a federal jail where he would stay preparing for the fight of his life from a cell through his trial.

22:39 And if that sounds familiar and you're like, wait a minute, I've heard that before. You absolutely did. That's where Diddy was in the 30 plus episodes I did on the Diddy series. And yes, they conversated with each other in MDC Brooklyn. But back to it, I want you to think about that arc, y'all. Because I don't know if I've ever seen a defendant snatch defeat like this. In December, the system handed this man the most generous pretrial deal, in my opinion, in American history. Go home, be with your family. prepare your defense in comfort. And by August, he had lost it. Not because the government outmaneuvered him, but because per federal judge findings, he just couldn't leave the damn witness alone. The man who believed the rules were suggestions learned that at least one rule you must stick to. You do not touch the witnesses. And there's one more plea to tell you about. On September the 7th, 2023, a guy by the name of Ryan Salami, a top FTX executive, the political money man on the Republican side of the aisle, he pleads guilty as well to campaign finance conspiracy and running an unlicensed money transmitting business. But here's what makes Salami different than everybody else in this story.

24:03 Ryan does not cooperate. He has no deal to testify. No testifying against Sam in his world. And here's the twist that makes it even stranger. Per the record, Salami was the one who had actually tipped Bahamian authorities to the fraud back on November the 9th of 2022. This is essentially the man that blew the whistle. on his end, and still, when his own turn came, he pleaded guilty and kept his mouth shut about Sam Bankman Freed. Never able to wrap my mind around why. So as we head into October, here's where everything stood. Wang. cooperated. Ellison cooperated.

24:48 Singh cooperated. Salami, guilty, but he didn't cooperate. And Trebucco, the guy that left in August of 2022, he was never charged. He was never even asked to testify. And at the defense table, alone at the center of it, the boy who would give it all away was about to watch his three closest people in the world take the stand, one at a time, and tell the truth about him as they understood it. The trial of the U.S. v. Sam Bankman Freed opened the first week of October 2023 in a federal court in Manhattan. And it is a fight. It actually starts on October the 3rd. And October the 4th, both sides stand up and tell the jury what the case is. Two stories. They can't both be true, right?

25:36 And everything in the next month is an argument about which one the documents support. The prosecution's opening is the story you have been listening to for decades. Three episodes now. Per the government's account, Sam Bankman Free built his empire. Again, the prosecution's words. I want you to hear them. He built a house of cards on lies. The customer's money was taken. The back door was real. The balance sheets were fiction. And the man who did it is sitting right there in a suit now with a haircut at the defense table. And the defense's opening is completely different. And they're telling Sam Bankman Freed acted in good faith.

26:17 He was a young founder in over his head in a hurricane of a market. Mistakes were made and the market broke. And if you're looking for the person who really ran Almeida into the ground, look at Carolyn Ellison. who the defense team suggests ignored Sam's advice and mismanaged the trading firm. They painted the founder as the victim of circumstance and the CEO of Almeida as the real problem. Good faith or a house of cards? That's the trial. 12 jurors get to decide that. And the government calls its witnesses in an order that tells the story all by itself. And they start with the man who built the machine. And that was Gary Wang, who took the stand on October 5th and 6th. And if you'll remember, this series began, part one ended with his voice. And what he told the jury is the sworn detailed version of everything we covered in parts one and two. He walks them through the code, the special flag, the allow negative feature at Sam's direction, the $ 65 billion line of credit, the insurance fund, and understand the weight of Wang in that chair. He's not an enemy. He's not a rival.

27:32 He's not a prosecutor with a theory. He is a man describing his own work, work he pleaded guilty to and putting his best friend's name in the direction of it. The defense can argue interpretation. They can argue intent. But the code is the code. And the man who wrote it just told 12 people exactly what he built and who told him to build it. And the government would call that a star witness. Carolyn Ellison testified across October's 10th, 11th, and 12th, and I'm just going to tell you straight up, by the time she steps down, the trial is over. And everybody in that courtroom knew it. She is, on paper, the worst possible witness for Sam Bateman Freed for one simple reason. She was in the room for everything. She ran Almeida. She took calls from the lenders. She built balance sheets. She lived in that penthouse world. And she was in an off-again, on-again relationship with the defendant himself.

28:37 Under oath, in front of the jury, she doesn't hedge. She doesn't soften. She doesn't protect him. Her testimony, in her own words, comes down to one sentence. And mark this one in the back of your brain. Because it is absolutely the sentence of the trial. She said, quote, he directed me to commit these crimes. He directed me. Not, we decided. Not, shit happened. He directed me. Per her testimony, Sam instructed her to use FTX customer deposits to repay Almeida's lenders. Sam reviewed the seven balance sheet versions and Sam chose which fiction went to Genesis. And those balance sheets, the actual documents, go into evidence in front of that jury.

29:26 The fiction made paper. Her memo comes in too. Remember, things Sam is freaking out about? The list she kept in real time while public Sam smiled for cameras. And then she explains the philosophy. And this is where part one of our series comes home to roost. Y'all remember that trap door I warned you about in Effective Altruism? The idea that if the mission is good enough, the means stop mattering? Ellison testified that was Sam's actual operating system, that in his view, the ends justify the means. In the ordinary rules, rules against lying, rules against stealing, they don't carry their usual weight when the expected value math said the gamble was worth it. The woman who knew him best, translating his worldview for 12 strangers... I asked you in part one whether the philosophy was a belief or a brand. Ellison's testimony suggests a third answer. It was really a permission slip. Then comes Nishad Singh, October the 16th through the 18th. And you already know his centerpiece because we open part two standing on it. The Balcony.

30:43 September of 2022, the $ 8 billion number he had worked out himself, the confrontation, the despair. He testified he felt suicidal in that season. And the part that damns him and Sam both was that he stayed. He kept working. And he admits on the stand to the straw donor donations made in his name. In part two, I told you his story from the documents. Here in part three, you get to hear from the man under oath in his own voice. And the jury watched a witness describe discovering a fraud and standing on a balcony with the man running it and going back inside. Now, the government fills the frame around them and they call a guy by the name of Adam Yadita to the stand, who was a friend of Sam's from way back. He was a developer at FTX. And he testified he was a man who quit when he realized customer deposits had been used by Almeda. Also called was FTX's own general counsel.

31:46 He took the stand. A forensic accountant named Peter Easton walked the jury through the money itself, traced dollar by dollar out the back door into real estate, investments, and donations. Remember those buckets from part two I talked about? They were proven up in the courtroom. with an accountant's paper trail, in theory, became a checkbook ledger, basically. And that ledger became a verdict. So by the time the government rests, here is the shape of things. Three insiders, three guilty pleas, one consistent story told from three different chairs inside the same penthouse. The code, the sheets, the balcony, all of it pointing to the same man. Every lawyer in America would tell you what the defense should do at that moment.

32:35 You put on a short case. You argue reasonable doubt. And above all, above all, you keep your client off the witness stand. Because the one thing worse than the jury hearing Ellison's version is the jury hearing Sam's trying to explain himself live under cross-examination where he can't delete that tweet. Sam Bankman Freed's lawyers knew that. Everybody knew that. But Sam Bankman Freed, he takes the stand anyway. On October the 26th, 2023, he raises his right hand. He swears to tell the truth. He sits down in the witness chair in his own trial. Now, I want you to understand the psychology of that decision. Because it is the most Sam Bateman-freed decision in this entire podcast. This is the man who had spent a decade talking his way through every room he had ever been in. Congress?

33:33 Charmed him. Investors? Charmed him. Journalists? Charmed him. In Sam's experience, and remember, his whole life from Stanford's campus on up, Every door had been open to him. Talking was the master key. Talking had never failed him. So when the moment of maximum danger arrived in his life, Sam reached for the tool he had always worked. And on direct examination, his own lawyer asking the questions, Sam tells his story. Now, per his testimony, he didn't know about the $ 8 billion hole until August of 2022, late a month before everything would fall apart. He said the problems at Almeida, in his telling, were Ellison's. The trading, the management of it, were her crosses to bear, and the whole catastrophic machine was a series of honest mistakes by a founder moving too fast. The good faith founder, the opening statement, now in place. the defendant's own voice. And then the cross-examination begins.

34:37 October the 30th and 31st. And y'all, it is an absolute disaster. Here's why cross-examination is where Sam Bankman Freed was always going to die. On a podcast, in an interview, in a hearing, you control the frame. You charm. You filibuster. You move on. On cross, the prosecutor controls the frame. And this prosecutor had... receipts, Sam's own words, his public statements, his interviews, that deleted tweet. FTX is fine. Ad sets are fine. The one from November the 7th produced in court like a stone tablet. Question after question pins the sworn testimony of October 2023 against the confident public statements of 2021 and 2022, and the jury watches the two Sams collide and the man who never stopped talking the man who talked his way into congress into 32 billion dollars onto a super bowl starts answering questions with three words over and over dozens of times per the trial account and guess what that was quote i don't recall i don't recall y'all From the smartest man in the room.

35:55 From the genius whose mind worked faster and bigger than everyone else's. On the details that mattered, the setting, the conversations, the money, the great explainer could not recall. Think about the jury in that moment, because juries are just people, y'all. And people know things. They know what it looks like when a man's telling the truth and when a man is bullshitting you. They'd spend a month watching witness after witness, people who pleaded guilty, people with every incentive the defense said should make you doubt them answer questions directly. And then they watched the defendant, the man that claimed good faith, unable to recall the center of his own company. The government's case was documents and friends. The defense case was Sam.

36:40 And Sam, in the end, was... I don't recall. On November the 1st, the lawyers closed. The prosecution sums up the house of cards. The defense asked for good faith and reasonable doubt. And then 12 ordinary people, teachers and truck drivers, people, the kind of people who were putting money into that exchange, they filed into a room to decide whether the most trusted man was and crypto was a criminal. Deliberations began on November the 2nd, 2023, in exactly one year. One year to the day after the crypto news site published a leaked balance sheet that started all of this, the jury was deliberating. And guess what?

37:23 Four and a half hours later, the jury is out. Four and a half hours, y'all, to declare a trial that took a month. in a case with seven counts, mountains of documents, and the financial fate of $ 32 billion empire at the center of it. Four and a half hours is not a jury wrestling with doubt. Four and a half hours is a jury that pretty much knew how they were going to rule. And on November the 2nd, 2023, the verdict comes in guilty on all seven counts, wire fraud, conspiracies to commit wire fraud, security fraud, just a slew of shit. One year to the day after that coin desk story. So the boy who would give it all away is now a convicted felon. And all that remains is All that remains in this episode is the number.

38:16 What does a man get for this? Well, the sentencing happens on March the 28th, 2024 in Judge Kaplan's courtrooms. And let me give you the ask first, because... They tell you the range of the argument. The government's sentencing memorandum asks for 40 to 50 years. The defense asks for something in the neighborhood of five to six years, essentially arguing that this was a nonviolent collapse, not a life sentence. Now, the Federal Probation Office, which is the neutral arm that calculates all of your charges and recommends a sentence, they recommend 105 years. And Judge Kaplan, the same judge who revoked the bail, the same judge who watched Sam on the witness stand for three days, Judge Kaplan imposes the sentence. 25 years in federal prison. Three years of supervised release after that, and he had to forfeit $ 11. 2 billion. $ 11 billion! The government accounting of the fraud, more than $ 8 billion from customers, more than $ 1. 7 billion from investors, and more than 1.3 billion from lenders. So 25 years, if he serves it out, Sam Bankman Freed, born on that Stanford campus in 1992, worth $ 26 billion on paper at age 29, will be a man in his mid-50s when that gate opens. That's the end of the case. That's the end of this episode. Almost. Because here's the thing. Here's the strange, disorienting, nobody saw it

39:50 coming thing that was quietly happening in the bankruptcy court in Delaware while all of this was going on. The estate. John Ray's people. Remember him? The cleanup crew. They had been digging through that crater for over a year. They had been clawing back real estate and investments and stakes in other companies, including a stake in an AI company that had grown enormously. valuable. And the pile they recovered had grown past what anybody expected, past $ 16 billion in assets by the estate's accounting against $ 11 billion in claims.

40:31 And so, Floating out of that bankruptcy court came a sentence no one expected to hear in the Sam Bankman Freed story. A sentence his lawyers, his family, and Sam himself from a prison cell would soon be saying everywhere they could. The customers are getting paid back at 105, 110, and 120% of what they were owed. Which raises the question, The question Sam's defenders put at the center of everything now. The question I'll leave ringing in your ears as we close this episode. If everybody got their money back, if the customers were made whole every time with interest on top, then what exactly was the crime? And why is Sam Bankman freed sitting in a federal prison for 25 years?

41:25 Hold that question because it has an answer, a real one with an asterisk in it the size of a Bitcoin. And it's the whole subject of the final episode. And that is going to do it for episode three. I'll be back tomorrow with episode four. We'll wrap up this series. Thank you so much for listening. And until next time, For Exposed Scandalous Files of the Elite, I am your host, Jim Chapman. Much love.