SBF Trial – Closing Summations – 1 Nov 2023

THE COURT: Good morning, everyone. Everyone can be seated. The defendant and the jurors all are present.

A word to the jury about schedule. You are going to hear closing argument today. We may finish them entirely today or we may not. That depends on how the day goes. If we don’t, they will be finished tomorrow morning. In either case, you will get the case tomorrow morning for decision. If anyone would have a problem, should the need arise, in staying beyond 4:30 tomorrow, please let me know in a note this morning and what the nature of the problem is, because it may become appropriate to ask you to stay late tomorrow if there is no verdict. I am not suggesting there should or shouldn’t be.

My operating assumption, which I will confirm before I ask you to stay, if I ask you to stay, is that you would get dinner on the government if you stayed. I don’t vouch for the quality, but you would be entitled to dinner. And I think we might be able to provide car services if you stay to a certain hour. But I’m holding myself available for Thursday night if that would be helpful. As for Friday, I’ll keep you posted as the day goes by, and indeed maybe even tomorrow.

We are now going to hear the closing argument on behalf of the government. Mr. Roos.

MR. ROOS: Thank you, your Honor.

Almost a year ago, thousands of from people from all over the world who had deposited money with FTX started withdrawing their funds. With each day the withdrawals grew. Millions of dollars turned into hundreds of millions of dollars, which turned into billions of dollars. Thousands of people were trying to withdraw their investments, their savings, their nest eggs for the future, but their withdrawals weren’t being processed. Money wasn’t being returned.

And as those customer withdraw requests froze, they were overcome with anxiety. With each additional click of the withdrawal button, their dread turned to despair. Their money was gone. FTX was bankrupt. Billions of dollars from thousands of people gone. As the dust settled and bankruptcy proceedings began, and FTX ceased to exist, a series of questions emerged. Where did the money go? What happened? Who is responsible?

Now that you have seen all the evidence and heard all the testimony, you know the answers to those questions. Who was responsible? This man, Samuel Bankman-Fried. What happened? He spent his customers’ money and he lied to them about it. Where did the money go? The money went to pay for investments, to repay loans, to cover expenses, to purchase property, and to make political donations. This was a pyramid of deceit built by the defendant on a foundation of lies and false promises, all to get money, and eventually it collapsed, leaving countless victims in its wake. That’s what happened.

That’s where the money went. The defendant is responsible. I am going to ask you to think about these questions this morning and throughout the rest of your time, including into your deliberations. Where did the money go? What happened? Who is responsible? We have been at this together for a little while now, for over a month, and you have heard from a lot of witnesses, and you have seen a lot of documents and spreadsheets on your screen, and you’ve been playing close attention. We have seen that.

This is our opportunity to walk you through all the evidence. I am not going to go through every document. You have seen a lot of it. But it’s our opportunity to talk with you about how it all fits together.

Let’s start with a few straightforward facts that aren’t in serious dispute at this point.

The first is that there is no serious dispute that thousands of customers from all over the world put billions of dollars on FTX and that the exchange at least said it was holding billions of dollars of customer deposits when it collapsed.

Second, there is no serious dispute that customers believed that their deposits were theirs, for them alone to use. And you remember five weeks ago now the first witness in the case, Mark-Antoine Julliard, who flew here from London, he told you that having his money used or borrowed by someone else — and these were his words — was not something he signed up for. 

And it wasn’t just customers. The defendant’s public statements, FTX’s ads, FTX’s policy documents and its terms of service all said the same thing. And advertisements like the ones we saw with Tom Brady or Larry David. FTX said it was the safest and easiest way to buy cryptocurrency. And in its terms of service FTX said that assets are the property of its customers and do not belong to FTX. In its policies FTX said that customer assets, both fiat and cryptocurrency, are segregated, that customer funds do not represent the property of FTX, and that customer assets are held in trust.

Employees and investors all testified that they believed the customer deposits belonged to the customers, that they could not be taken or used or borrowed, and you heard about the reaction of employees when they learned that FTX customer deposits were being used. Adam Yedidia quit within a half hour. Can Sun resigned. So did Christian Drappi. The defendant’s partners in crime said the same thing. Caroline Ellison, Nishad Singh, Gary Wang, their understanding was that customer funds were not allowed to be used by FTX or Alameda or anyone else. They believed it was wrong and illegal. It didn’t matter if it was a customer, an investor, a lender, an employee, or a coconspirator. It was a universal view from the witnesses you heard. Customer funds belong to customers and could not be used.

Third, there is no serious dispute that around $10 billion went missing. The evidence you saw, and we will talk about it again, shows that there was a huge difference between what FTX’s system said they were supposed to have for customers and what FTX actually had for customers. Billions of dollars missing in cryptocurrency, billions of dollars missing from bank accounts, and there is no serious dispute about that. Fourth, there is no serious dispute about where the missing money went. Professor Easton traced the money. The missing billions went to pay for investments, stock-share buybacks, real estate purchases, donations, trading expenses, and loan repayments.

The clear uncontradicted evidence shows that the defendant was responsible for these giant investments, for stock repurchases, for real estate purchases, for political donations.

Over the last month you have heard evidence about Bitcoins and Blockchains, antiliquidation and auto deleveraging, computer code, and so-called Korean accounts, about a lot of other concepts. Here is the thing. This is not about complicated issues of cryptocurrency. It’s not about hedging.

It’s not about technical jargon. It’s about deception, it’s about lies, it’s about stealing, it’s about greed.

What is the dispute in this case?

One of the disputes is whether the defendant knew. That’s what they have said. The evidence that the defendant knew that he was spending FTX customer money, though, I submit, is beyond dispute. The core dispute in this case is whether the defendant knew taking the money was wrong. That’s the core question.

And the answer is clear. He took the money. He knew it was wrong. He did it anyway.

Because he thought he was smarter and better and he that he could figure his way out of it, he could walk his way out of it and talk his way out of it, and today, with you, that ends. You have sat through this trial. You have seen the evidence. And, very simply, when you apply your common sense and look at the evidence, you see the defendant schemed and lied to get money, which he spent, and now it’s gone. You see over and over and over again he and his company were telling customers their money would be protected, and they were using it at the same time for whatever the defendant wanted to use it for. And you see over and over again from his own statements, from his own conduct that he knew what he was doing was wrong. There is overwhelming guilt, overwhelming evidence of the defendant’s guilt.

Before we dive into the evidence, let me say something about the fact that the defendant took the stand in this case. He didn’t have to testify in this trial. He has a right not to do that, and he doesn’t have a burden to put on any evidence. The burden is on the government, and we embrace that burden. But the defendant did take the stand, and he told a story, and he lied to you.

Did you notice how on Friday his testimony was smooth, like it had been rehearsed a bunch of times? He testified for hours about things that don’t really matter for the case, like what the Epsilon Beta House at MIT was like, or background about Jane Street or the layout of Alameda’s first office in an Airbnb, or the reasons they moved to Hong Kong and then left Hong Kong again, or why he picked the Miami Arena as the one to brand. This was the CEO, who was able to define on Friday 50 terms on direct examination and had a perfect memory.

But let’s talk about how the defendant’s testimony looked on cross-examination. He was a different person. Suddenly on cross-examination he couldn’t remember a single detail about his company or what he said publicly. It was uncomfortable to hear. He never said he couldn’t recall during his direct examination, but it happened over 140 times during his cross-examination. He had to be asked and reasked. He looked away. He lied about big things, and he lied about little things. He asked for terms to be defined that he used freely on direct examination a day earlier. He approached every question like up was down and down was up, and you saw how he listened to the testimony in this case. He came up with a tale that was conveniently put together in a story that excluded him from the fraud.

The story the defendant told you was that he didn’t know what was going on and didn’t think what he was doing was wrong, and that was a lie. Over three days he took the stand and he lied. Because to believe the defendant’s story, you would have to ignore all the evidence you saw at this trial. You would have to ignore the testimony of the defendant’s partners in crime, his deputies, Caroline Ellison, Nishad Singh, Gary Wang. You would have to ignore the documents, the secret spreadsheets, the flow of money. You would have to ignore the financial records. You would have to ignore the defendant’s own statements. You’d have to ignore his lies, lies that he told before FTX’s bankruptcy and afterward. You would have to believe that the defendant, who graduated from MIT, who ran two billion-dollar companies and who was testifying before Congress, was actually clueless, and he had no idea what was happening at his own company, and he had no idea what he was doing was wrong.

But you sat through this trial and you know none of that is true. You don’t have to wonder what the defendant would say if he thought you weren’t listening. You already know. You know because you heard it from his coconspirators, because you saw the secret documents, because you paid careful attention to the evidence in this case, to the difference between his public statements and his private ones, and all of this shows that the defendant is guilty beyond a reasonable doubt on each and every one of the charges. Here is the plan for this morning. We are going to talk about the evidence and focus on those questions, where did the money go, what happened, who was responsible. Then I am going to talk a bit about some of the defense arguments you heard in this case. And, finally, I am going to talk briefly about the charges.

Let’s start with what happened. I am going to talk to you about what the evidence shows happened. What does the evidence show? The defendant took money, and he took cryptocurrency, and he took it from FTX customers who were told that their assets would be kept safe and segregated. That’s fraud. It’s stealing, plain and simple. Before there was FTX, there was Alameda. That was the defendant’s trading firm. You see it on the screen. He was the 90 percent owner.

{snipped – court technical difficulties}

MR. ROOS: Thank you, your Honor. The defendant is Alameda. He was Alameda. He was the 90 percent owner. He was publicly its CEO until 2021. He was the chairman and sole member of Alameda’s board. And when Alameda made a profit, it was the defendant who profited. Now, Alameda didn’t have investors. Instead, it borrowed money in order to make its investments. And the way Alameda had money to do cryptocurrency trading was by taking out loans. Alameda was always looking for more sources of capital, meaning more money. Then the defendant founded FTX, a cryptocurrency exchange you have heard a lot about, where customers can buy and sell cryptocurrency, and FTX would earn money by just taking a fee on those customers’ trades. Once the defendant founded FTX and started getting customer money, he thought he had a new source of money to take for Alameda.

Here is the testimony of Caroline Ellison. The defendant, quote: Said that FTX would be a good source of capital, and he set up the system that allowed Alameda to borrow from FTX. That’s from the transcript at page 654. I am going to be quoting from some of the witnesses’ testimony this morning. So if you want to see it, write down the transcript cite. It’s in the bottom right corner by their testimony and it’s also something I’ll say out loud.

The same goes for some of the government exhibit numbers. I am going to say some of them out loud, particularly some of the most important evidence, and if you want to see it, just make a note. The defendant tells Ellison that FTX would be a good source of capital, and then he sets up a system that would allow Alameda to borrow from FTX. When Ellison said, borrow from FTX, what she was referring to was borrowing from FTX customers using their deposits.

Now, the defendant set up two secret ways through which Alameda could take or borrow customer money. You heard about that from Caroline Ellison. You heard about it from Gary Wang. You heard about it from Nishad Singh. They were each the defendant’s friends and his coconspirators, his partners in crime. Each of these witnesses testified that they stole customer money at the defendant’s direction, and they described the ways he told them to do it. 3 Let me just take a step back for a second. That means that if you believe even one of those witnesses is telling the truth about this, the defendant is guilty.

I’ll say that again. If you believe even one of these witness’ testimony, Ellison, Wang, Singh, about the way customer funds were stolen by the defendant, that is fraud, and you should find the defendant guilty. Let’s talk about what each of the witnesses said about the secret ways set up at the defendant’s direction for taking customer money. Here is how Ellison described the secret ways they were able to take FTX customer money: Quote, we had access to an essentially unlimited line of credit on FTX, and we received FTX customer funds directly into our bank accounts as part of FTX’s fiat deposit system. This is from her testimony at page 644 of the transcript. By the way, an unlimited line of credit is just a way of saying unlimited borrowing of customer funds. It’s unlimited stealing. Now, there were two ways that they were able to take customer money, by withdrawing it from FTX from its cryptocurrency wallets in unlimited amounts, and by taking it out of the bank accounts that received those customer deposits. Ellison also told you who was responsible for the setup, the defendant.

Quote: He was the one who set up the systems that allowed Alameda to take the money, and he was the one who directed us to take customer money to repay our loans. That’s at page 645 of the transcript. And Gary Wang said the same thing when he testified, that the defendant directed that Alameda be given these secret special ways of taking customer money. Let’s talk about in more detail those two secret systems the defendant set up to give Alameda the ability to take customer money.

First, Ellison told you that one of those secret ways was what we just read as an essentially unlimited line of credit on FTX. What was she referring to? She was referring to the way Alameda had an ability to borrow unlimited amounts of money on FTX, withdraw unlimited amounts of money from FTX, and run up a giant negative balance. Each of the defendant’s deputies described this secret system. Let’s talk about how unusual, how different, how risky the defendant’s secret setup was. Before we talk about how the secret system for taking customer money worked, let’s talk about what borrowing was like for a typical customer, a customer without those special secret privileges, like the ones you heard about during this trial. You heard that a major selling point of FTX was the way it managed risk. It was a safe exchange.

And the key to that is what they called the automatic liquidation engine. The defendant marketed this to his customers and to his investors as a way that customers could trade safely on FTX and trust FTX instead of like another cryptocurrency exchange. And customers had to maintain an overall positive balance on the exchange. They had to post what has been called in this case collateral or security or assets to the exchange. They had to put it on the exchange before they could borrow money for trading. That’s how it normally worked. If the customer’s collateral held by FTX went down in value, and the customer’s overall account value went down, either to zero or close to zero, then under the normal system, FTX’s risk system, its automatic liquidation engine would kick in and it would close the account. And you heard from a bunch of the witnesses about this. This was the standard system. This was the way they contained risk.

When the defendant was on the stand, he tried to make this whole thing sound a lot more complicated and full of exceptions and weird procedural rules. But as the CEO of FTX, it was a lot simpler, and this is exactly what he told the public and his customers. This is his statement before Congress: FTX’s risk-management program requires that digital-asset collateral be placed on the platform itself, rather than pledged, but not delivered to the platform. So it has got to be placed, not just pledged. And the reason is to ensure that the platform has immediate access to the collateral for purposes of managing market risks. And to borrow money from the exchange, well, a customer had to opt into that spot-margin system which, as I mentioned, requires that they put their collateral up before they borrowed. And the defendant said this was necessary for customers to have prefunded collateral deposits, not simply credit extensions. That was how typical customers were allowed to borrow money through FTX.

So to take a step back, there is a system in place, a standardized advertised system, a system that the defendant testified about before Congress. It’s straightforward. You got to put your money up before you want to borrow money. The reason is, so that if the value of what you are doing on the exchange goes down, there is security for them to take to make sure you don’t create a massive hole. It was a system that was subject to rules, with limits on borrowing, with requirements where the collateral be kept. This wasn’t a secret. This was in the defendant’s public testimony and public statements; secretly, though.

Secretly the defendant gave Alameda a different way of borrowing customer money, a system that only existed for Alameda, that wasn’t subject to the same rules as other customers, that wasn’t subject to the same limitations, designed to keep customers’ money safe and reduce risk. These secret rules, as you know, as you learned, allowed Alameda to borrow billions of dollars without 7 collateral on the exchange, to rack up multimillion dollar, billion dollar negative account balances without any risk of being shut down, to being liquidated through FTX’s risk system, the very same system that the defendant was publicly saying would keep customer money safe. Let me pause here for a minute again.

The company that the defendant had publicly said was completely separate and free from conflicts of interest was secretly able to take billions out the back door of FTX, and the defendant knew it. And the way you know he knew it is because he set up a system, a public system for everyone and a secret system just for Alameda. We are going to talk more about that. And he directed others to make it work that way. The defendant directed Gary Wang and Nishad Singh to program the secret way of taking customer money right into FTX’s computer code. Starting with the computer code, you heard from Wang that at the defendant’s direction a feature was added to the code that permitted accounts to go negative, and the naming was not very creative. It was called allow negative. And the defendant had it turned on for just one customer’s account, Alameda. Here is the code history that shows the code allow-negative code was added for just one customer’s accounts, Alameda. Here is Alameda’s account on FTX.

This is the database information. And you can see this allow-negative feature far in the right side, in the red box, was turned on. Now, Wang testified that this feature was added to Alameda’s account at the defendant’s direction. While there were originally some potentially sensible reasons for some of the code editions, Wang saw that very quickly the defendant started using this feature right here. This is, by the way, Government Exhibit 644. He started using it to allow Alameda to borrow more money than it had. And to ensure that Alameda was able to withdraw essentially limitless amounts of money, the defendant also had Wang give Alameda a gigantic line of credit. This is that same exhibit again, Government Exhibit 644. This is the screenshot of the code and it’s just in black and white right there, a $65 billion line of credit right on Alameda’s account. Wang told you the defendant directed him to set up Alameda’s line of credit this high so they can make unlimited withdrawals. Here is that testimony. Quote: Sam asked us to take it to — Sam asked us to take it to a large number. I took it up to a billion dollars and then the issue happened again.

The issue he’s talking about is where Alameda exhausted its line of credit. And then he asked me to take it up even farther, and I told him I’m taking it up to 65 billion. He said he is fine with that, and I did that. 9 As a result of Alameda’s ability to go negative and its $65 billion line of credit, it was able to run up this massive negative balance, billions of dollars. When I’m talking about a negative balance, I’m talking about an account that’s in the red. It has got a negative sign in front of it, which means it’s in a deficit, it’s in a hole, and Alameda was in a multibillion dollar hole. This presented really a massive, totally undisclosed risk to FTX’s customers. They were told that their assets would be safe. They were told that if a customer’s account would go negative, the way they would be kept safe is by having that customer’s account liquidated or shut down. And what they didn’t know, what you all know but they didn’t know and what the defendant hid from them, is that Alameda had this multibillion dollar negative balance in its account. And Wang testified that that — it was these special features that allowed and caused Alameda to have such a large hole at FTX, and Singh said the same thing. Now what the defendant does — actually, let me put it this way.

What the testimony from these witnesses tells you about the defendant, about the core issue in dispute, is, it tells you the defendant gave special secret privileges to Alameda, knowing it would be allowed to take, to steal customer money. It shows that he knew it was wrong to take money and the way — and this is critical — the way you know that it shows he knew it was wrong to take customer money is, if he thought this was legit to just have a giant line of credit and this allow negative feature and borrow from other customers, why was it so secret? Why not just say, hey, Alameda, by the way, has a $65 billion line of credit? The reason it is secret is because he knows it’s wrong. Now because of these secret features Alameda was not subject to the same rules as other customers. And while there were limits on how other customers could borrow, there were no limits on Alameda’s borrowing. Let me talk about one of those limits on other customers. Other customers were not allowed to withdraw funds advanced from a line of credit. Here is a customer contract prohibiting it. That restriction, though, as you heard, did not apply to Alameda’s borrowing. So while other customers had to have collateral on the exchange, while other customers could not withdraw their lines of credit, it says it right in this contract, Government Exhibit 69, that rule did not apply to Alameda. As a result of these special features, Alameda ran up a huge negative balance on FTX.

This is Government Exhibit 1002. This is Alameda’s borrowing through its accounts that were allowed to go negative. So this exhibit shows what happened in the major cryptocurrencies in those accounts that had that special allow-negative box checked. The box that we saw in Government Exhibit 644, it’s these accounts, and that’s what happened. They went as low as negative $12 billion. By the way, here is another reason why Government Exhibit 644 is critical. This wasn’t typical borrowing, right. We have talked about the spot-margin program. And notice Alameda’s main account. It didn’t even have spot margin enabled. Why that’s important is, it was not participating in the program where typical customers had to opt in and post collateral. It was borrowing the defendant’s way, through the special advantages. It was borrowing through the $65 billion line of credit, not through the spot-margin program. As I said, when we are talking about borrowing here, I just want to be clear, Alameda is taking money off the exchange. Unlike a typical customer, who was doing borrowing to trade on FTX, Alameda was just taking the borrowed customer money off of FTX for its own purposes, to cover expenses or to pay for investments. And Professor Easton gave you some examples. Here is one.

This is Government Exhibit 1017A and 1017B. And we saw some of these exhibits for each of the lenders. It goes 1017A through — I think it’s H. There is one for each lender. And what each of them shows is that Alameda’s special secret borrowing was used to take customer money to repay Alameda’s third-party lenders. This is Government Exhibit 1024. Alameda’s special secret borrowing was used to take customer money to buy back FTX’s stock. 2 This is something — I am not going to go into the details now, because we are going to talk about this further in a bit, but this is another example of using — again, you can see it at the bottom — that allow-negative account to borrow a billion dollars to buy back stock. Alameda had one more secret exception that made everything even riskier. It was exempt from the liquidation system. A liquidation system in some ways is like the giant parachute. It’s what — if an account is getting to a risky position and is about to go bankrupt, liquidation is what stops that process and what stops that risk from turning into some big hole. It closes out the account. But Alameda was exempt. It was not part of that liquidation system.

And what that meant is, it would not be shut down. Its account would never be closed, no matter how negative it got, no matter how risky it became. Here is the proof. This is, again, another piece of the computer code that exempted Alameda from being liquidated. It was added by Gary Wang in 2020, and he testified that defendant directed him to do it. Keep in mind this date that’s on this exhibit. This is important. 611 is the number. Because on cross-examination the defendant admitted to this. This was a stunning moment, I thought, of cross-examination because here is what he admitted.  The question was: In 2020, isn’t it true that you directed Gary and Nishad to change the rules in the code so that the auto liquidation rules that applied to other customers on the exchange would not apply the same way to Alameda? That was the question that was asked of him on page 2659 of the transcript. Here is his answer: I suggested that they make some alteration to it. And he was asked a follow-up. For that purpose, correct? And he said yup. So by 2020, here is the question. So by 2020, you knew that Alameda had distinct rules for liquidation. That was the final question here. And what was his answer? Yeah. 2659 of the transcript. On cross-examination he admitted to knowing about that code change. He admitted to knowing that Alameda had distinct rules for liquidation. That’s a concession that he knows that Alameda was exempt from the rules that applied to all the other customers. What was the result of Alameda’s secret exemption and privileges on FTX? You know. The defendant took billions of dollars in customer funds, leaving an enormous gap between what FTX said it had in customer money and what it actually had in cryptocurrency wallets. (Continued on next page) 23

MR. ROOS: And this is important. This is covered in Government Exhibit 1051, which we’ll see in a bit, but it proves that FTX didn’t have anywhere close to the amount of money to cover customer deposits, because of these secret privileges. Now the defendant took the stand and denied that he knew everything about these special features, like that the total size of the line of credit was 65 billion, and he denied that he was told about some of the code features, but he admitted to you that he was the one who directed Gary and Nishad to change the code to prevent Alameda from being liquidated if its overall account was negative; and he admitted to you that he was the one who told Gary and Nishad to increase Alameda’s line of credit. He even admitted that he knew Alameda was using a line of credit to borrow billions of dollars. Let’s talk about what that means. Knowing that Alameda was using its unusually large line of credit to take money from FTX, that means that the defendant knows, he knew that Alameda was taking money from FTX customers. He was taking money from FTX customers when he was saying something totally different publicly, when he was lying publicly, and that makes him guilty of fraud. Now he told you he never queried the FTX or AWS database, or looked at the code.

Not only is that farfetched and completely not believable that as the CEO, he was 5 unfamiliar with the computer code that ran the website and the database that had all the transactions for the website, it’s also irrelevant. He told his deputies to exempt Alameda from the rules that applied to other customers, to increase borrowing limits, and that’s fraud. It’s stealing. You also know that the defendant was deeply familiar with these special features and how they were used to take customer funds because of the documents in this case. This is Government Exhibit 5. It’s an excerpt.

This is a spreadsheet created by the defendant. It’s important. He admitted during his cross-examinationóóand he had to, because of this. Google metadata. You remember the brief witness from Google who introduced metadata evidence for certain documents. Metadata evidence is like the data information about when documents were created or saved or viewed. And the Google metadata shows that the defendant was the sole creator of this spreadsheet, Government Exhibit 5, and that he made it in early September 2022. And in this spreadsheet it lists out all of the lines of credit. You can see them. Now that’s important, because look at these numbers that are on here, and the email addresses. This is not the type of thing you can memorize, right? It’s not the type of thing where you’re like, I’m going toóóI’m going to commit to memory, 65,365,999,994. And then do that for a thousand  different lines of credit. The way he has this is because it’s coming from the database. And right there is Alameda’s line of credit. And that also shows you that he wasn’t telling the truth when he said he couldn’t see any of these things. By the way, did you notice how the exact same number that’s on the defendant’s spreadsheet, Government Exhibit 5, also is the exact same number in the screenshot that we’ve looked at, Government Exhibit 644? But again, it shows you, he’s able to view these things. What the defendant’s spreadsheet also showsóóagain, this is Government Exhibit 5óóis that he knew Alameda’s balance sheet was in terrible shape without the money he had stolen, without the secret $65 billion line of credit from FTX. The number here that’s key is the net.

That shows how much money Alameda had without its line of credit. And negative 5 billion right here, that number at the bottom, is actually sugarcoating the situation, because without the FTTóówhich are those coins that the defendant created for his company, which couldn’t actually be turned into cashóóthe balance of Alameda’s main account, he knew, was negative 10 billion. So the defendant plainly knew that because of Alameda’s giant line of credit, it was able to and did borrow billions. Those billions came from FTX customers. The defendant mentioned a few times when he testified that FTX made a billion dollars in revenue, before expenses.  When Alameda was borrowing billions, it was right off the FTX platform, and it was borrowing 10 billion or so, 5 billion, 10 billion. Simple math tells you it’s coming from customers. 1 billion revenue, 5 billion borrowing. Like whose money do you think you’re taking? Right? It’sóóif you areóóif there’s only 1, at most, 1 billion to take and you’re borrowing 10, that means it’s coming from the other people who have put the money on the platform. That’s not your money; that’s customer money. This alone makes the defendant guilty of fraud.

Now compare what the defendant told FTX customers to what was actually happening. The defendant told customers that his exchange operated one way that was trustworthy, that it had the liquidation engine, that it kept customer money safe, that it keptóóand then simultaneously, he had this hidden, massive exception to that rule that put everyone’s money at risk, and allowed him to steal customer money. You heard a lot about the fiat liability and the use of customer fiat deposits. We’re going to talk about that. But keep this in mind. If you conclude that the defendant stole customer money using these code features that I’ve just described, you can and you should find him guilty on that basis alone. It doesn’t matter what happens with those fiat deposits because he’s just ripping money right off the FTX exchange. But that wasn’t all. You did hear the evidence about the fiat deposits, and this is a reason also, all by itself, to  find the defendant guilty of fraud. He had customers send their bank deposits, their money, fiat deposits, directly into Alameda’s bank accounts, and then he spent it.

Here’s how Ellison described it. “We received FTX customer funds directly into our bank accounts as part of the FTX fiat deposit system.” Ellison explained to you that long before she was Alameda’s CEO, the defendant set up a system to receive FTX customer deposits into bank accounts that belonged to Alameda, and a lot of those deposits came through this entity that we’ve heard some about called North Dimension. The defendant was involved in opening that account. He signed the application. That is his name right there, as the principal officer. This is Government Exhibit 1348. So he knew. Once FTX customers’ deposits landed in Alameda’s bank accounts, they were used as a source of free cash. This is Government Exhibit 1050. In some ways, the picture here just tells you everything, right? Professor Easton traced the money. Rather than holding the customers’ money in custody, it was moved all around, commingled, mixed, spent, transferred from one account that received customer money for customers to operating accounts, to FTX accounts, to out the door to all sorts of expenditures, to the defendant’s own company called Paper Bird. And that’s because, as Ellison told you, the defendant said they could use the money to fund Alameda.

There was a sort ofóóthere was this funny part of the cross-examination yesterday that stuck with me, which was a point when my colleague was asking the defendant: So who moved the money if it wasn’t you? Like, who thought they could do this? And we went through this list of names, and it was these low-level people. And so the theory here is that somehow the lowest levels of people, I guess, just moved and took $8 billion. That’s not credible, right? That doesn’t make sense. That doesn’t line up with the evidence. The evidence showsóóthat we’re about to go throughóóit was the defendant, right? And that makes sense. He owned it, he was the boss, he set up the system, he was FTX’s CEO, he was Alameda’s CEO when this got started, he was the sole chairman of the board. He’s the reason why the money is moving in crazy directions like this. And how did they use those fiat deposits that came into Alameda’s bank accounts? Here’s an example. They used it onóóa hundred million dollars in real estate in the Bahamas, they used it on investments like buying Robinhood shares. And what was the result? The result was billions of dollars that Alameda spent and owed back to FTX customers. This chart, Government Exhibit 1004, tells the story. The black line, FTX’s systems said there were over 10 billion in fiat deposits with Alameda. But in reality, it was the green line, and that’s because the defendant and his co-conspirators spent the money, and that’s why there’s this giant gap in the middle, hole. I want to be clear about something.

Nothing about how FTX customer fiat deposits were taken or borrowed resembled anything close to the system that the defendant had put in place that permitted typical customers to borrow money from FTX. This was not margined borrowing, right? It wasn’t even through the system. The defendant admitted that yesterday. He was asked questions: Was this margin trading? Was this margin trading? There was no collateral posted here. This wasn’t even Alameda’s special secret line of credit. This was all off the exchange, off the books. And during cross-examination, when the defendant was asked whether he could name any other customer that accepted FTX customer deposits besides Alameda, he couldn’t name a single one. Alameda was exceptional in that regard, and the way it was exceptional is that it was allowed to take these deposits and use them, because, as Ellison said, there was an additional source of capital for the defendant’s agenda. Common sense tells you it was the defendant who set up these systems. Let’s think about the other options. It couldn’t have been Ellison alone. She never worked at FTX. She didn’t have any way to give Alameda the special ability to withdraw money from FTX, right?

She didn’t have the access to go into the computer code. And because she didn’t work at FTX, she also didn’t have the ability to set the wiring instructions to send the customer deposits to Alameda. And of course when this whole system was set up, the defendant is the one who was both the CEO of FTX and of Alameda. Caroline was just a trader. So it can’t be her alone. And then on the other hand, you’ve got Gary Wang and Nishad Singh, and they could not have acted alone without the defendant. They worked at FTX, but they didn’t have any role at Alameda. Wang was a minor owner but had no real role in the business. He had no involvement in the spending. He was sometimes given documents to sign, but as he testified on direct examination, cross-examination, and redirect, he didn’t even know what the documents were for. And Singh didn’t even ever work at Alameda. He had no role with the company. So it couldn’t have been them alone. They didn’t have access to the money to spend it. Now the defendant, he lied to you when he pretended he didn’t know Alameda was spending the customer fiat deposits.

He told you that he was the CEO of Alameda when this started and never gave a single employee any guidance on safeguarding or segregating FTX customer fiat deposits. And four witnessesóóAdam Yedidia, Caroline Ellison, Gary Wang, and Nishad Singhóóall told you that in June of 2022, they discussed with the defendant that Alameda’s liability to FTX for spending FTX customer fiat deposits was 8 billion. But the defendant, Summation – Mr. Roos 2 he claims that he just had no idea about this fiat deposit, just had no idea about the liability, no idea about the accounting structure that was then in place, until September, or was it October, or was it the end of October? That’s just simply not remotely credible. The truth is that there was just one person who had a motive to set up the system to give Alameda the secret special ability to borrow money from FTX customers. Who had control? These are the questions. Who had control of FTX in order to give Alameda secret access to customer money? And who had control at Alameda to spend that money? There’s one personóóthe defendant.

He set up a system; he directed a system where Alameda could borrow unlimited amounts of money, without any limits, without a requirement that the collateral be on the platform, without any restrictions on withdrawing the money, and without any chance of liquidation; and he set up another system where Alameda would receive customer fiat deposits directly and it could use that money without any restrictions. And just to take a step back about thinking about what the alternative explanation is, so somehow, two different sets of peopleóóbecause there’s no other overlapóótwo different sets of people come up with two different systems that both happen to give the defendant’s company secret access to money. That’s got to be the alternative explanation.

And you know that’s not credible. The defendant knew what he was doing was wrong. He tried to tell you he thought this was actually permissible to use the fiat deposits, but his testimony flew in the face of what every customer who testified says they thought how their money was treated. And you know that because of the things he said publicly that were totally inconsistent with what he was doing in secret. So one of the ways you know he was lying, one of the ways you know he knew what he was doing was wrong, was while the defendant was secretly giving access to FTX customers and spending it, he was saying something totally different to the customers, to the investors, to the public, and to the United States Congress. He was lying to the public, and he told those same lies on the witness stand. Let’s start with the advertisements. He ran ads saying FTX was safe. “The safest and easiest way to buy and sell cryptocurrency.”

He told Congress and the public that by “logging in to the customer’s account at FTX, the customer can immediately view the types of assets they own, held in custody by FTX.” And that last part is critical. He said, they can view the “assets they own, held in custody by FTX.” And that wasn’t true. When customers logged in to their accounts, they saw a balance. Behind the scenes, the money wasn’t there. That in and of itself is a lie. A customer logs inóóthe first customer witness we saw in this case logged in and saw a number Summation – Mr. Roos 4 that represented his balance, and that wasn’t real. That was false. And that was a lie. It had been taken off the exchange. And here’s the proof of that. This is the chart I was talking about earlier. There was a huge deficit, a huge hole on the exchange. This is Government Exhibit 1051. And it shows you what customers thought they had. That’s the black line, right? This is what customer balances were on the exchange. But what they actually had was the yellow line. What was actually there was something totally different. Billions of dollars different. And the difference between the black line and the yellow line is the hole. And this proves that the defendant was lying publicly because he was saying one thingóóthat we held the assets that you own in custodyóówhen in fact something totally different was going on. Now the defendant had said he wasn’t aware of some of the stuff that was going on, and he lied when he said that.

He said something like, it was messy accounting and that was on my list of priorities. So, I mean, give me a break. That’s a lie. If that was true, that they had messy accounting, like he claimed, then why did he tell Congress that “FTX regularly reconciles customer trading balances against cash and digital assets held by FTX”? Regularly reconciling means comparing. Regularly reconciling trading balances against cash and assets held would have told the defendant, did tell the defendant, Summation – Mr. Roos that there was a huge, significant hole, right? Go back an exhibit. If the defendant is regularly reconciling 5 balancesóóthat’s the black lineóóagainst, as he said, what money they hadóóthe yellow lineóóhe knows that there was a huge gap.

He knows that. And when he’s saying everything is fine, after saying, we regularly reconcile, he’s lying. And that tells you that he knows what he’s doing is wrong. Now yesterday morning on redirect, the defendant came out and he said that he thought it was okay for Alameda to use customer fiat deposits, and that’s a claim that not a single witness besides the defendant has made in this case, right? Universally, they’ve said this was a bright red line. You cannot touch that money. No one thought it was okay. And the truth was that the defendant, he knew that Alameda was not allowed to use that money, and again, the way you know it is because he said something totally different to Congress. Twice, the defendant told Congress that when an intermediary like Alameda receives customer assets, they must ensure there was “no delay in returning customer funds upon request, and no shortfall where an amount lesser than the value of that customer’s assets can be returned.” And he told Congress that to ensure that happens, it’s important that there be “a restriction on the custodian”óóso that’s Alamedaóó”a restriction on the custodian, including, for example, a restriction on the use of customer assets to finance other business expenses and initiatives.” Think about that last part of his testimony here. He’s saying the third party, the intermediary that receives the money, there must be a restriction on it on using customer assets to finance other business expenses and initiatives. And if you’re thinking, well, that sounds familiar, that’s because the defendant did exactly the opposite. He used customer assets to finance other business expenses and initiatives. But privately, in secret, you know he knew exactly what was going on and he knew it was wrong. We’ve talked a lot about all the special advantages and secret privileges that Alameda had.

The defendant knew how wrong and unfair these privileges were to every other customer on the exchange, how these privileges flew in the face of everything he said about trust and safety on the exchange. So he lied about it, to cover it up. And what was the defendant saying about the relationship between FTX and Alameda? Throughout his time at FTX, the defendant was saying things publicly like, Alameda is treated just like everyone else. He tweeted that. “Alameda is a liquidity provider on FTX but their account is just like everyone else’s.” He was quoted in articles as saying that Alameda is a wholly separate entity. And he told CNBC that he “worked to eliminate conflicts of interest,” and that he doesn’t run Alameda anymore, and that Alameda is a “neutral piece of market infrastructure.” Those were lies. Privately, the defendant knew that Alameda had all sorts of special privileges and features on FTX. It wasn’t wholly separate, it wasn’t just a piece of neutral market infrastructure, its account was not like everyone else’s. Unlike any other customer, Alameda had the $65 billion line of credit. It was able to do unlimited amounts of withdrawals, make unlimited amounts of borrowing, have its account go negative, not post any collateral, not be liquidated, not be shut down. Its borrowing wasn’t just through the spot margin program. Much of it wasn’t even on FTX. If customers knew that the defendant had directed these special privileges for its own affiliated company, they would have run for the exits. It would have been clear as day that their money wasn’t safe, that the defendant was treating their deposits as his personal piggy bank by funneling that money to Alameda.

And so the reason he made these public statements is to conceal what he was doing, because he knew what he was doing was wrong. You know these were deliberate lies. He told customers that backstopping customer assets was primary within weeks of using customer money to repay his debts. He told reporters that Alameda was totally separate in September, when he was internally freaking out about the close relationship between FTX and Alameda. And at the same time, in September Summation – Mr. Roos 2022, when he wrote this spreadsheet, Government 8 Exhibit 5óóthis is the spreadsheet we were looking at a little bit ago, where the defendant listed out all of the lines of credit and listed out Alameda’s line of credit as 65 billion, and the next closest as 150 millionóóthis is the same time he made those statements to Bloomberg and to CNBC; the same time he said, they’re totally separate, treated like everyone else, neutral market infrastructure. And you saw an example of a line of credit agreement that VIP other customers used. And those customers had to sign these documents, and there was of course a limit on how much they could borrow. And it was only as much as their line of credit.

And they were prohibited from withdrawing it. So no other customer had a setup like Alameda. And as Alameda was using this line of credit to spend billions on loan repayments, on investments, and on expenses, it had nothing to do with their trading at FTX. So from this, here are the key points: (1) Alameda had a special feature, a secret advantage over other customers, and it certainly was not treated like other customers; and (2) the defendant knew about it at the same time he was making public statements. So you sat through this trial, obviously, and you’ve seen a lot of examples of the defendant saying something publicly different than what he was doing in secret. And what Summation – Mr. Roos 9 does this say about his intent? Right? Because that’s one of the key questions.

To view FTX as safe, secure, custodian of their money, that’s what he was projecting publicly. He wanted it to be viewed as a trustee. These public lies also, though, show his criminal intent. The fact that he was saying things publicly that were different than what he was doing privately shows he knew what was going on behind the scenes wasn’t okay. So next I want to talk about some of the details of where the money went and who was responsible. But before I do that, let me ask your Honor if you want to take a break right now or later.

THE COURT: Sure. Fifteen minutes. (Recess) (In open court; jury not present)

THE COURT: I take it there were no issues with the changes in the charge overnight, correct? Mr. Cohen?

MR. COHEN: No, your Honor.

THE COURT: Mr. Rehn. MR. REHN: That’s correct, your Honor.

THE COURT: Okay. Let’s get the jury. Mr. Roos, time estimate?

MR. ROOS: I think I’m about a third of the way through, but in terms of time, I’ve now lost track of time with our variousóó

THE COURT: I suspect you have company. Okay. Summation – Mr. Roos (Jury present) 0

THE COURT: Okay. The defendant and the jurors all are present. You may continue, Mr. Roos.

MR. ROOS: Thank you, your Honor. So the defendant directed that these systems be put in place that allowed him to take FTX customer money, and then once the systems were in place, there were points in time, points along the road, where the defendant was presented with a choiceóócome clean or double down. And every time he chose to double down, to take more criminal steps to dig the hole in customer deposits deeper. And so what we’re going to do now is I’m going to talk about six moments in time.

And here are the first three. But six moments in time in 2021 and 2022 where the defendant was presented with a choice about coming clean or doubling down and digging the hole deeper. And each time, he indisputably knew the financial situation at FTX and Alameda, and he knew that he would be spending customer money, and each of these times, he took the path of doing the wrong thing, he took the criminal path, and so that’s what we’re going to talk about. And No. 1, the first reason is the defendant’s purchase, his buying back of stock from Binance using customer money in 2021. So starting in the middle of 2021, back when FTX was Summation – Mr. Roos 1 started, the defendant sold some of FTX’s stock to a company called Binance, which was run by this guy on the left. And fast forward two years later, FTX and Binance, according to the defendant, are rivals, and the defendant hated the fact that his rival owned part of FTX, so in 2021, the defendant wanted to buy out Binance. And buying out Binance or buying back Binance’s ownership of FTX stock was expensive. Binance had about $2 billion worth of FTX’s stock.

And so remember what the defendant said about how much money in revenue they were making at this pointóóabout a billion dollars. That’s only half of the $2 billion that he needs to buy back FTX’s stock from Binance. They didn’t have enough money to do it. But the defendant kept telling Caroline Ellison it was really important to him to buy back Binance’s stock. He saidóóand this is testimony. He said to her, and this is what she said to him: “We don’t really have the money for this, we’ll have to borrow from FTX to do it.” And he said this in response: “That’s okay, I think this is really important, we have to get it done.” Let me say it again. This is from pageóóby the way, this is from page 668 of the transcript. She says, “we don’t have the money, we have to borrow it.” And what she’s talking about is taking it from FTX customers. And he says, “that’s okay, we have to get it done.” It doesn’t matter how much he wants to do it; if they’re talking about money from customers, Summation – Mr. Roos 2 it’s clear as day the defendant knows that they’re stealing and committing fraud.

And that’s exactly what they do. This is Government Exhibit 1024. To pay the $2 billion to buy back the stock shares, they used the billion dollars they had and then a billion dollars of customer money from FTX. And this came out of that main Alameda account with the “Allow Negative” turned on and the $65 billion line of credit. This has nothing to do with the members of the settlement team that he was saying were in charge of spending fiat deposits. This wasn’t margin trading. This was just taking money straight out of an account with a negative balance that had a special privilege so that he could pay the nearly $2 billion he needed. And notice what the defendant said and what he didn’t say when he testified about this. He admitted that there was a stock buyback, and he admitted the amount of money he used, but he was totally silent about the specifics. He didn’t say anything about the conversation with Caroline Ellison, and that’s because it was bad for him. Bad for him because they were using FTX customer money. Way back in 2021óóand this is important.

The timing here is important. Way back in 2021, well before there was market turmoil that caused problems, way before all the events the defendant testified in 2022, when he bought back these shares, they didn’t have those issues. So when he was asked about the buying back of the shares, the Summation – Mr. Roos 3 defendant gave a vague answer. And remember what his answer was? It was, he didn’t know exactly which entity bought back the shares. And he didn’t want to say who bought back the shares, and the reason he was vague and didn’t give a straight answer when he testified is because the truth on this one is particularly inconvenient for the defendant. And this is the critical document. This is Government Exhibit 317. It’s an email, and it’s from the defendant, okay? And it’s him saying transfer the money to buy back these Binance shares. And let me just point out something about who’s on this email.

No one from Alameda, right? They’re not even copied. It’s the defendant who’s leading this effort. And that tells you everything you need to know about this. He’s the one, and he knew exactly where the money was coming from. It wasn’t like there were settlement people who were doing this process. It was him. He took about a billion dollars of customer money, without his customers knowing, and when FTX did not have all the money it needed to do this buyout. This wasn’t something that he needed to do to make the exchange run, this wasn’t the result of bad luck, this wasn’t the result of, you know, some hedging gone wrong. This was a deliberate decision. This was him spending money that he wanted to spend. And remember why he did it. He said this was “really important to me.” He was confronted with the question by Ellison, we have to spend customer money, and he said, “that’s okay, this is really important to me.” So that’s how you know the defendant knowingly took FTX customer money and intentionally committed fraud.

He knew this wasn’t permitted borrowing, because it was not a way that was allowed on FTX. He did it because it was really important to him, because he really cared about this rivalry. And when he was given the choice of not buying the stock back that they couldn’t afford or digging a deeper hole by taking more customer money, what did he do? He decided to double down, to take more customer money, to make that Alameda account more negative, and when the question about this was put to him on the witness stand, he had no answer for it. That’s the first moment to think about. When you deliberate, that’s a moment in time to think about, when the defendant was presented with a choice and he chose to double down, he took a criminal act, and that tells you everything you need to know about his knowledge and his intent. Here’s the second moment in time, the second instance when the defendant was given a choice and yet again he decided to double down. And what I’m talking about now is a period in the fall of 2021 when Alameda was already borrowing customer money and was financially not in good shape. But the defendant was greedy. And when he was presented with a choice again of coming clean or doubling down and digging the hole deeper, you know what he did. He kept digging. And this is the second point in time that you can see where the defendant indisputably Summation – Mr. Roos 5 knew about the financial situation, indisputably knew that they were taking customer money, and then did it anyways. And that shows you that he knew what he was doing was wrong.

So here’s some background. In the fall of 2021, the defendant sends Caroline Ellison what he calls the 10th Percentile Scenario, which Ellison told you is something like a scenario that could plausibly happen, isn’t so likely to happen, but you have to take seriously because it might happen. And here’s the question the defendant puts to her: What happens in a scenario where cryptocurrency prices drop and a bunch of our investments lose money, and what would happen if in the meantime, we spend $3 billion more on investments? So it’s like this scenario he’s mapped out. And in everyday terms, this is like: What would happen if I brought a brand new sports car that’s really expensive and then at the same time the economy got really bad and at the same time I also lost my job? This is like his version of: What is this thing? And she, because everyone loves spreadsheets, does a spreadsheet, and she makes a spreadsheet for the defendant that addresses this question: What are Alameda’s assets and liabilities? And this is another critical document in the case. This is one to think about. Government Exhibit 36. And the name of this is NAV Minus Sam Coins. A funny name. It’s net asset value, or NAV, minus the Sam coins, which are the coins, like FTT, that he created. So what’s our financial picture without the Sam coins? And this is something that she shows the defendant, and he admitted during his testimony that he saw it. That’s at page 2458 of the transcript.

So let’s look at what the defendant saw when he looked at this spreadsheet back in 2021. So right off the bat, Ellison has a calculation for the defendant of what Alameda’s value is without the Sam coins, NAV Minus Sam Coins. And the Sam coins, by the way, are FTT, Solana, Serum. And the reason they’re doing the NAV minus the Sam coins is because those coins are not so easy to sell. We heard like tons about this in this case. They’re not very liquid. There’s not a market for them. If you try to sell them, they’re not easilyóóthere’s not like a buyer out there who wants to buy $3 billion of the Sam coins. And so they’ve got a value, but that’s just on paper. In real life, you can’t actually sell these things for that much. So her estimate for what their finances are without those Sam coins is what looks like, you know, as written, as $2700, negative 27, but we know these are all in millions, so what that is is negative 2.7 billion. They are negative 2.7 billion at this point in late 2021. And then Ellison adds up the assets and liabilities at the time, and here’s what the defendant saw. They’ve got 8 billion in assets, and 9 billion in loans. So math, 8 minus 9 is negative 1, and so they’re in the negative.

At this point he’s already able to see in late 2021 that Alameda has more loans than it has assets. And let me just pause here for a second and mention that throughout his testimony, the defendant was saying these things like, ah, at the time we had tens of billions, we had a NAV of 40 billion, and that was funny number accounting and just plain bald-faced lies. And when you think about it, think about where is the evidence that those were actually real numbers, where is the balance sheet that says those numbers, where is the balance sheet that says those numbers with assets that they could actually use or sell or spend, there isn’t any. And there are stillóóby the way, these are still billions, very large numbers, but the point is, they’re in the red. And then there are these two lines on here that say “FTX borrows,” and Ellison told you, “that referred to the amount of FTX customer deposits that were currently on the exchange and that were available for Alameda to borrow.” Let me translate that. By “available. . . to borrow,” what she’s talking about is FTX customer funds that are available to steal, right, and spend however the defendant wanted. So the defendant is looking at the situation with Caroline, he sees that they’ve got more loans than assets, he sees they’re in the red. And I don’t want to pass over this like it’s just some random number.

When they’re talking about borrowing from FTX, they’re talking about borrowing customer money, and this number here, 3 plus 4, is how much customer money exists there. It’s like how much money is in the bank Summation – Mr. Roos 8 that you could potentially rob. This is like the target right here. 3 plus 4 is 7. This is how much money we can take. And so this is the conversation: Here’s how much money we could take to potentially spend. And then the next question the defendant asks Caroline, which is right in the spreadsheet, is: What happens if the economy gets worse and how does this change with another 3 billion of venture investments? Right? ‘Cause this was his question. This was: What happens if the economy gets bad and then I want to buy that new sports car? And there isn’t a dispute over this. During his testimony, the defendant admitted that the point of this spreadsheet was to consider more investments for Alameda, coming out of customer money. So, look, you don’t have to go to MIT to know that if you have more debts than you have money and you want to spend more money, you’re going to be in more debt. So when the defendant had more debts than assets and the only available money was this FTX customer money, where is the $3 billion for investments coming from in this scenario? And the answer is: Customers.

So Caroline does the math, where she takes this current financial picture and she assumes the economy gets bad and crypto prices drop and then assumes $3 billion more in investments, and she told you her math told her spending 3 billion on investments was a really bad idea because they could already not afford 3 billion without spending customer Summation – Mr. Roos 9 money. How did the defendant respond? He said he wanted to go ahead with billions of dollars of venture investments anyways. So when you’re thinking about the defendant’s mind-set, think about that. Think about how he’sóóhow she’s like, so financial picture is not so good, also, we’re going to spend $3 billion more and I think that’s a really bad idea, and he says, I hear what you’re saying and I want to go ahead with it and do it anyways. And this is easy math for him. He knows where the money is coming from. It’s coming from customers. And he knows it could be a really bad situation where they don’t have the money for the customers, but he spends it anyways. Now when the defendant was questioned about this document, did you notice how he evaded talking about what the document was actually about? He commented on some notes about FTT and the note about hedging, and he just totally glossed over what the spreadsheet was about, which was about how they were in a poor financial position and did not have the money to pay for new investments.

And that was a deliberate decision by him when he testified. It was deliberately evasive and it was a misdirection. And that tells you howóówhy this spreadsheet is important. It shows that he knew they were using customer funds, and the way he reacted to this piece of evidence shows you that he knew what he was doing was wrong. Okay. So they have this moment in time. They talk about this spreadsheet. They see the potential financial Summation – Mr. Roos 0 picture. The defendant says, let’s spend the money. And he goes on this spending spree that would rival someone that had just won the lottery, except he had not, obviously, won the lottery, he had stolen billions of dollars. And so what does he spend the money on?

Professor Easton told you he spent the money on this $30-plus million penthouse apartment for him and his friends and his co-conspirators to live in. And he spent the money on a $16 million house for his parents. And it totaled 100 million on real estate. And all that came from customer money. There’s no real dispute that the money that was used to pay for this real estate was coming from customers. And by the way, when the defendant was asked about these property purchases, when he testified on direct, he told you another half-truth. As you can see, what he told you was, it was that FTX paid for these, and that was only half the truth. When you look at it, the money came directly from FTX, but where did the money originally come from? It was passed through a bunch of accounts, and it originally came from Alameda. And where did the money originally come from to Alameda? From customers. Why would he tell you it came from FTX without acknowledging the true source if he thought it was okay? So the defendant also spends billions during this period on investments. Right? And this was the plan. He bought hundreds of millions of dollars of stock in Robinhood, Summation – Mr. Roos 1 and here’s the analysis by Professor Easton. Almost all of it was customer money. He transferred that stock from Alameda to a company he controlled called Emergent Fidelity Technologies. And this is Government Exhibit 200.

This is another important document. And look who does this sale of all of Robinhood shares held by Alameda to Emergent Fidelity Technologies. The defendant, as the chairman and sole member of the board of Alameda. This is all the defendant. He spent that money. And did you notice how he responded when he was asked about this particular document on cross-examination? He was, again, evasive. First, he wasn’t sure which board of directors this was referring to, then he couldn’t recall what Alameda entity this was about, then he didn’t want to admit that he was the sole member of the board of directors of Alameda, then it wasn’t until he was asked whether he became a director by mistake or accident that he acknowledged that he was the sole member of the board. The reason he didn’t want to talk about this document is because this was a handshake with himself, right? It’s incriminating. Because it shows a transfer of hundreds of millions in stock bought by Alameda using customer money directly to the defendant. Just him, no one else, right? It’s a handshake deal with himself.

And that tells you everything you need to know about the defendant’s intent. He also spends 300 million on investing in K5, and almost all that is customer money. And this is Government Summation – Mr. Roos Exhibit 56. It’s the payment confirmation for that K5 2 investment, and it’s signed by the defendant. It proves he’s responsible for this spending. Remember it was the defendant who really wanted to invest in K5. Nishad Singh told you about how he told the defendant it was an awful idea, but the defendant wanted to invest with these guys becauseóóthe guy who ran K5 because he hung out with celebrities, took the defendant to dinner with famous people and made connections. Now the defendant claimed, looking at this picture, that he just happened to bump into these people at the Super Bowl, but right after the defendant got back from the Super Bowl, he wrote to Nishad and others that the guy who ran K5 was “probably the most connected person I’ve ever met and we can get from them essentially infinite connections.” So he was celebrity chasing. And he liked it. He liked the vibe of all this, he liked the connections, and for him, it cost about $300 million.

And he didn’t have that $300 million, so he took that money. And there was other spending we saw evidence of too. Genesis Digital, the crypto mining company; Anthropic, the artificial intelligence company; Dave Inc., that online bank. I’m not going to go through all of these. But during Professor Easton’s testimony and during the defendant’s cross-examination, he admitted that he was involved in all these transactions. Let me just pause here and note that the defendant Summation – Mr. Roos 3 made a big point of saying that yes, he made these investments, but he really only wanted to do some of them if Alameda also hedged. Right? And let’s just be clear about this. Wanting to hedge these investments, that is not a defense. The defendant was gambling with customer money. And whether he thought these were sure bets or safe bets or risky bets or almost sure bets, or that he was going to win more money back in the long run, it doesn’t matter. When he took the money and he played roulette with it, he was stealing.

I expect Judge Kaplan is going to tell you just that. He’s going to instruct you on the law, and what he says controls. I’m not going to read you the detailed legal instructions that Judge Kaplan does, so you should defer to everything he says. What he says trumps what I say about the law. So I expect you’re going to hear that if you wrongfully take someone else’s money, even if you think you might later be able to put it back, that’s still fraud. The defendant here was greedy. He wanted to spend money. He wasn’t satisfied with what he had. This was like a person who just doesn’t like the financial situation but otheróóbut rather than living with what he has, he went out and took more money. And all the dollars he spent on real estate and on investments and other things are reasons you know the defendant is guilty. The third point in time that I want to talk to you about, where the defendant had a choice and doubled down and Summation – Mr. Roos 4 dug the hole even deeper, is the discussion the defendant had with his co-conspiratorsóóhis friends, the people who were his roommates in June 2022óóabout Alameda having a $10 billion negative balance and then how he told Ellison to repay Alameda’s lenders, spending billions of dollars more in the process. And this was another critical moment in the defendant’s scheme. He knows the financial situation. He knows they’re deeply in the red. And he decides to use more customer money, knowing what he’s doing.

So let’s walk through that. To set the scene at this point in time, it’s May or June and cryptocurrency prices have dropped, and Caroline Ellison is looking at Alameda’s balances and she sees they may be insolvent, out of money, and the defendant is looking at Alameda’s balances at this time too. And you heard from several witnesses that the defendant would sit at his computer and would constantly have it open on six monitors, a page showing Alameda’s balances. And even when the defendant was questioned about this, he ultimately admitted that, yeah, he had a balances page on his computer, but it was just an auto open. But he also told you that Ellison would routinely send him Alameda’s balance sheets and that he was reviewing them. So he knew the financial situation at the time. He sees Alameda’s balances are not good. And he gets more bad news. Alameda’s lenders now want their money back, because the market is going down.

Here’s an example. This is Matt Ballensweig from the crypto lender Genesis. He’s messaging the defendant and Caroline on June 13th, and he says, basically, we need our loans back. Here’s one of those messages. He writes, “We’re going to increase the OT loan pull backóó”which is open term loan pull-backóóand he’s looking for $400 million back. And he wants to know the ETA on 250 million. So they’re under the gun. They’ve got their lenders asking for money. And you heard a similar thing from Zac Prince, who was the CEO of BlockFi, who testified on one of the Fridays that we sat. And he made similar demands for the loan paybacks. Ellison told you they were getting loan demands back from all the lenders. And so the defendant knows that: (1) Alameda’s balances are not in a good place; and (2) they’re about to get even worse because all the lenders want those loans repaid. By the way, this is literally the scenario that the defendant and Ellison had talked about a few months prior, right? A scenario which was like, our balances are not so good, we’ve got more loans than assets, and what happens if the market gets worse, and we’ve spent $3 billion, and now here they are. So he knew something like this could happen, and then it happens. And then he’s presented with another point in time where he has to make a choice, and again, he’s got two Summation – Mr. Roos options. Option one is what you heard some other 6 cryptocurrency companies did. Zac Prince told you about it. The market got bad and they closed up shop; they couldn’t repay their loans. (Continued on next page) 6

MR. ROOS: One option for the defendant was come 7 clean, face the consequences, and he didn’t pick that option. The other option was double down, more lies, dig the hole deeper, spend more customer money when it came to repay. And he doesn’t stumble into this. He gets his coconspirators together. He says: Let’s figure out Alameda’s balances. Let dig in, figure how much debt it has, how much money it can pull together. And you heard from each of the witnesses about this, right. All three of them testified about this moment in time. So this is a very important moment in which the defendant has a criminal conspiracy where they know what the financial situation is, and then he makes another choice to do something wrongful. Here is Caroline Ellison’s testimony. The defendant asked Caroline, Gary, and Nishad to put together a spreadsheet showing Alameda’s balances on FTX. She makes an initial version and then Gary and Nishad revise it. Here is what that looks like.

This is Government Exhibit 50. This is a very important document. It’s one you have heard a bunch about. And this is the balances sheet calculation for Alameda in June of 2022. Taking a look at this exhibit, you immediately can see that Alameda has a lot of negative balances, including almost 3 billion negative in its main account. It’s right there. Right there on the spreadsheet it has that fiat@FTX Summation – Mr. Roos 8 account. You can see, even after that bug correction we heard about, it has an $11 billion negative balance, in addition to the fact that the spreadsheet showed the defendant that Alameda had a gigantic negative balance on FTX and it showed the defendant that it had a — that it had a fiat liability that was very large and it showed the defendant had an overall negative balance that was very large. Gary tallies up that balance. That’s the number right there. They are over negative 11 billion. This is all in Government Exhibit 50. So Gary told you that without Alameda’s FTT that Alameda’s balance gets even higher as negative — by higher, I mean more negative, even more negative, to 16 billion. So Ellison also makes an additional analysis.

This is the same exhibit. And it’s a tab in the spreadsheet where she calculates how much customer money they have taken to this point, and here is that calculation. The tab is called balance sheet by liquidity. And one of the numbers on here which the defendant sees is how much they are borrowing in customer money from FTX. The number is 13.25 billion. Here is what Ellison said about it. That represents 13.25 billion. That represents money that Alameda was borrowing from FTX customers. So it’s right there in the spreadsheet. The defendant sees it. And there is another key piece of information on the spreadsheet. It’s this. USD 13,000, 3,000 minus 10,000. What Summation – Mr. Roos 9 does that number mean? Ellison told you.

Those are the total assets that were held by FTX at the time. So they, customers, had deposited 13 billion and only 3 billion was available at FTX. The other 10 billion, that minus 10, that’s what they borrowed on FTX. So this spreadsheet, Government Exhibit 50, is very important and from it the defendant knows the following: 1. Alameda has a total negative balance of $11 billion; 2. It has borrowed over $13 billion in customer money; 3. Around 3 billion of that is by going negative on FTX in its main account. And there is another 10 or 11 by taking fiat deposits. Finally, 4, as little as a quarter of the customer money is actually on FTX. This shows there was a gigantic hole. This spreadsheet is a key piece of evidence because it basically shows you everything you need to know about the defendant’s conspiracy, and what’s so important about it is that he and his coconspirators all work on it together.

It’s absolute proof that he knew in June 2022. Now, you have at this point heard about the defendant — you have heard the defendant testifying about this meeting and this balance sheet. He told a very different story. He acknowledged there was an issue with Alameda, and he even acknowledged that Gary and Nishad and Caroline did a spreadsheet, but then he just skipped the discussion of the spreadsheet. He didn’t talk about Government Exhibit 50 in his direct testimony at all. And the reason he didn’t want to talk about it is because looking at the exhibit would tell you he was lying during his testimony, that he knew clearly from the exhibit exactly what was going on with customer money, he knew where Alameda’s balances were, he knew how much had been borrowed, he knew what was left on the exchange. You know that the defendant was lying about this meeting because you heard from the three other people who were not just in the meeting but were his friends, his closest confidants. I think the defendant described him as the numbers 2, 3, and 4 people.

And they all have testified about this meeting. But there is another reason you know he’s lying about seeing this or knowing what’s going on, and that’s because we were able to go back and get the metadata for this document. You heard something about the metadata in this case, but I don’t think you folks actually saw the metadata. We are about to look at it now. Metadata, like I said, is just the information from Google that tells you information about who viewed the document, and we can use that metadata to determine whether the defendant’s version of what happened is right or whether all three of the cooperating witnesses gave the right testimony — sorry — testified about what happened. Here is that metadata, and it shows you the truth is exactly what Nishad, Caroline, and Gary testified to. The defendant viewed this spreadsheet on June 14. That means he saw that fiat@ account. He saw Alameda’s huge negative balance, he saw Caroline’s calculations, and he saw how much money he was missing. The metadata fully corroborates what the witness has told you, and it completely undermines everything the defendant said about this. By the way, this is Government Exhibit 50.

The metadata is called 50M. There is more. The witnesses also told you about a Google meeting they had over their computers to discuss the spreadsheet. Here is Nishad Singh’s testimony. He said during cross-examination, actually, that I know that she, Caroline, sent it, meaning the spreadsheet, to me, Sam, and Gary. I’m sure that the four of us got on Google Meet and worked on it, like investigating it. One Google Meet, one long discussion over Google Meet. Here is the evidence that happened. This is a Google Meet record for June 14, 2022. And you can see the people who joined the meeting, the Google Meet are the defendant, Caroline, Nishad, and Gary. Here is the really important part about this. Who started this Google Meet? The defendant. How long was he logged into this meeting? 17,000 seconds, which is a little under 30 minutes. So when the defendant was on the stand and was Summation – Mr. Roos 2 testifying that he didn’t look at this and didn’t know what was going on, that was a total lie. He was studying it with his coconspirators. He viewed the document. That’s what the metadata shows, that’s what the witnesses said, and he had a 30-minute-long meeting to discuss it.

How did everyone react to Alameda’s negative balances? You heard that they were pleased to learn that there was no bug and that the negative balance was 11 billion and not negative 20 billion. It was negative 11 billion and not negative 20 billion. But they still knew this was a big problem. Here is an example. Ellison testified in June 2022, we were in a bad situation, and she was mostly concerned that if anyone would find out, everything would come crashing down. The defendant was thinking the same thing. He had seen Alameda’s balances. He knew its financial position was getting worse. He knew that Alameda’s lenders wanted their money back. So he knew that everything could come crashing down if the truth came out. Let me pause here for a second and just note something about the relationship between these four people: The defendant, Ellison, Wang, and Singh. By June 2022, you heard the evidence in this case. By June 2022, they are sitting in a room and on a Google Meet and looking at the negative balances, and they have a long history together at this point. I am not just talking about friends or as roommates or as people who were dating.

I’m talking about a long criminal history together. Remember, the defendant had directed Nishad to backdate documents to inflate revenue a whole year earlier. The defendant and Ellison have already stolen money to pay Binance to get those shares back, and they had paid a bribe. That all happened a year prior. They had all lied to auditors by this point. The defendant had told all three of his deputies, transfer a giant negative MobileCoin loss to Alameda to hide it. He had Nishad and Gary maintaining that fake insurance fund number. So they have got a history together, right. They are used to at this point doing crime together. And so the reason that’s important is, Government Exhibit 50 is actually shockingly explicit in how it lays out what they are doing, what they owe. But there is also and I expect you are going to hear this from Judge Kaplan, a level of history and comfort level, and that’s why these folks can speak in innuendo, in code, they can avoid labeling things explicitly because they have a long criminal history together at this point.

I told you that the defendant had a choice to make in June 2022, and at this moment he decides what to do. He doesn’t decide to give up. Instead, he knows they are in a bad place and he decides to double down, when Alameda is already in Summation – Mr. Roos 4 significant debt, and repay lenders. And Gary Wang was asked this directly: Where was the money coming from to repay those lenders? And his answer was: Either from Alameda’s FTX account or from Alameda’s accounts elsewhere, but, either way, the money — all the money came from FTX customers. Caroline Ellison said the same thing. They knew where the money was coming from. So did the defendant. He obviously knew because this was his company. He was checking the balance sheets, he was having his people work on the spreadsheet project, so he knows where the money is coming from. Then it is him, the defendant, who makes the call to repay those lenders. Here is Ellison’s testimony. It was Sam’s decision. So Ellison testified that the defendant continued to direct her to repay loans.

He was telling her to use customer funds to repay our loans. Wang said the same thing. He turned to Caroline, meaning he, the defendant, turned to Caroline and said that Alameda can go ahead and return the borrows to lenders who loan Alameda’s money. We are asking for it back. That’s what they did. Here is two documents, two exhibits we have looked at already. They pay back the lenders using customer money. It’s in black and white. And it comes out of Alameda’s account with that big negative balance. It’s customer money. Overall, of the $6.5 billion they used to repay customer money, 4.5 — of the 6.5 they used to repay lenders, Summation – Mr. Roos 5 4.5 was coming from customer money. This is Government Exhibit 1018 Let me just put this in context. We heard multiple times over the course of this trial that there was somewhere between 9 and 12 billion in cryptocurrency on FTX in the summer of 2022. So when Alameda takes 4.5 billion off of FTX to repay lenders, they are taking between half and a third of all of the cryptocurrency on FTX, right.

Let me say that again. They are taking as much as half of the cryptocurrency that is supposed to be sitting in the wallets to repay their lenders. As the owner of Alameda and the CEO of FTX, that’s something the defendant clearly knew about. But according to him, half the money from his exchange is gone, and he doesn’t know. According to him, Alameda has to pay back almost all of its loans, has to pay out $6 billion, and he doesn’t know where it’s coming from. And, according to him, he is not checking Alameda’s bank accounts, he is not checking their balances, he’s not checking the fiat@ account. He can’t see any of this. None of it adds up. If you were to believe the defendant’s testimony, it would have to be that somehow each of these people who reported directly, his 2, 3, and 4 people, knew about Alameda’s balances, knew where the money was coming from. That just doesn’t add up that he doesn’t. Do you remember what he said when my colleague asked Summation – Mr. Roos 6 him? He claimed that the people he supervised told him to stop asking questions. He claimed that even though he had been concerned, he was worried that Alameda was insolvent.

He was asking them to check the balances. There is this bug in the system. He claimed that the people who reported to him were like, stop asking questions. And then, even though he had cancelled his trip to D.C. and he was worried that maybe Alameda was insolvent, he just didn’t follow up, and he doesn’t now remember what ended up happening. I think his answer was, I can’t recall. There were four witnesses in this trial that said they talked to the defendant about Alameda’s massive negative fiat@ balance in June 2022: Yedidia, Wang, Ellison, and Singh. When the defendant testified that he didn’t learn and couldn’t remember, that was a lie. And the reason he’s lying about that is because this is a moment in time where he clearly knows that Alameda is using FTX customer money, and he lied on the stand because he knows it’s wrongful and totally inconsistent with everything he said publicly. Let me make one last point about what happened in June and why it proves the defendant knew what he was doing was wrong. Here is what the defendant does in May and June of 2022:00:00 May 13. FTX publishes terms of service that say: Summation – Mr. Roos 7 None of the digital assets in your account are the property of or shall or may be loaned to FTX Trading. Promise to FTX customers. June 13. Genesis and other lenders asked the defendant for loan repayments. June 14. The defendant has the spreadsheet project, and they look at all of it, and they see the negative balances. He sees they are in the hole. He makes the decision to repay the money anyways. June 16. Repayment happens to places like BlockFi and Genesis using customer money. Then here is the revealing part. June 23.

The defendant’s congressional testimony that we have already looked at where he says: Whoever is in control of customer assets cannot be misallocating or misusing those assets. Then June 27 he tweets: Backstopping customer assets should always be primary. What this sequence tells you is that the defendant went out in public, promised them, we are not using your money, it’s safe. Then in June he needs money, so he’s taking his customers’ assets. And then if that wasn’t enough, he has the audacity within a week to go before Congress under oath and go on Twitter and tell his customers, his victims, that he’s not using their money, that money, protecting their money is his top priority, and when the defendant is doing that, when he is Summation – Mr. Roos 8 taking their money secretly and then within a week is out there publicly lying about it, that tells you he knows what he’s doing is wrong.

The next moment in time is June 2022, when the defendant works with Caroline Ellison to send a fake balance sheet to Alameda’s lenders. This is another moment where the defendant made a deliberate decision to double down on this fraud. So what happened? We have been talking about June. And after Alameda repays its lenders and spends billions more in customer money, the defendant wants to take out new loans, because he hasn’t had enough of spending money already, so he goes to Genesis and BlockFi and others, but there has been changes in the cryptocurrency market and prices have fallen and some of these companies have gone out of business, so as third-party lenders they asked for new balance sheets, and now he is presented with a situation that he has to make a decision in. No lender who actually knew the state of Alameda’s balances were ever going to lend them money, right. It was 10 billion plus in the hole, and that was before they repaid their loans, and then he spent a few billion dollars more repaying the loans, so they are deeply in the red, totally under water. This was very clear to the defendant. Caroline comes to him and says: I think it looks bad. I don’t think we can send this to Genesis, talking about their Summation – Mr. Roos 9 balance sheet. Do you agree? And he says: Yeah, that sounds right. Here is Alameda’s real balance sheet in June 2022, Government Exhibit 44, the main tab. What’s the reason they can’t send this to Genesis and other lenders? Ellison told you it showed that Alameda was in a very risky position, borrowing around 10 billion from FTX and with about 5 billion of its loans to FTX’s executives. Where does it show that? Here. Exchange borrows: 9,900.

That means, according to Ellison, Alameda had borrowed 9.9 billion from FTX customers. Here, related-party loans. That was 4.5 billion in loans to the defendant, Wang, and Singh. According to Ellison, it might make it look like Alameda was effectively giving or funneling money to FTX executives. So at this point the defendant knows Alameda is deeply in debt. He knows they borrowed customer money, he knows that it’s in the billions, and he knows they have made billions in loans to FTX executives. So the defendant had to make a choice, and this is another critical point, and he decides to lie yet again. He told Ellison that she should prepare some alternative ways of presenting this information and setting this thing up, ways to conceal things in their balance sheet. So Ellison creates seven alternative balance sheets, and here is that. This is Government Exhibit 44. It’s another critical document to think about. The main tab here is the real balance sheet, and then there are seven alternative options.

The alternative options hide Alameda’s borrowing of FTX customer funds and the big loans to the executives. By the way, this spreadsheet is so obviously for the defendant, because why would Ellison just be doing this solo? In what world is a person making eight alternative balance sheets for themselves and not be shared? She makes seven alternatives because she knows someone else is picking an alternative and that person is the defendant. So she testifies then that Sam said we should use alternative 7. He said alternative 7 looked like and that she, Ellison, should send that one to Genesis. The difference between the real balance sheet and the fake alternative 7 balance sheet is obvious. Here they are side by side. And what’s missing from alternative 7? Exchange borrows, meaning borrowed or stolen customer money. 10 billion is missing. What else is missing? Related party loans for 4.5 billion. Remove from the spreadsheet.

The defendant picked alternative 7 because it concealed the evidence of his fraud. And in case there was any doubt about the defendant’s involvement in this, here is the metadata on this document. Government Exhibit 44M. It shows it was shared with the defendant and he viewed it on June 19, 2022. He took a look at it just hours before it went out the door to lenders.

If you have a balance sheet for your own private 1 viewing and then you make it an external balance sheet to send to your lenders, that’s fraud. And if you have two balance sheets and they are totally different, then you — clearly you have one too many balance sheets. And if you prepare seven alternative balance sheets and you are like, hey, let’s go with alternative 7, that’s definitely the best one of how we stole $10 billion, that is definitely fraud, and you know that from your own common sense and life experience. The CEO of one of the lenders who testified in this case, he said lending crypto isn’t that different from other types of lending, so imagine you knew someone who wanted to get a mortgage or a small business loan, but before they walked out the door to go to the bank, they said, you know what, let’s come up with an alternative statement of my financial position, one that doesn’t make my debts look so bad, makes them look smaller.

Let’s actually come up with seven alternatives, and then let’s pick the version that makes my debt seems the smallest, and let’s give that to the bank. You would obviously say to them, using your own common sense and life experience, no, you cannot come up with alternative versions of your finances and give them out to go get a loan. Well, the defendant, he did just that. He picked the alternative 7. He told Ellison to send it to their lenders to get new loans. She sent it out. It went to Genesis. It went Summation – Mr. Roos 2 to BlockFi. It went to other lenders. We looked at examples, their balance sheet. Here is Government Exhibit 17. It’s the false balance sheet that went to Genesis. Here is Government Exhibit 419. It’s the false balance sheet that went to BlockFi. Ellison told you all these were false because they all omitted those key parts that the defendant wanted to hide. As a result of sending out those fake balance sheets, they got new loans. This shows it. Over a billion dollars in new money came in. That’s new money that the CEO of BlockFi testified they never would have loaned had they been — had the truth been revealed.

So this is another important moment because it tells you everything about the defendant’s knowledge and his intent. From just looking at the balance sheet, the defendant has to know that they have been using customer money, both FTX customer crypto and fiat deposits, because it says it. He sees Alameda doesn’t have much money in its bank account. It says 500 million in the bank, just a fraction of what it owes, and he sees without its — without those long-term investments, which he can’t sell and can’t get out of, they actually have fewer assets than liabilities, so he knows they are borrowing customer funds.

The spreadsheet also tells you that taking and spending billions of dollars of customer funds is wrong. Why else would the defendant want to remove from Alameda’s balance Summation – Mr. Roos 3 sheets these figures, right? It’s not like he is removing even every liability. Like if it was just about minimizing liabilities, which by the way would still be a crime, but if it was just about that, he would remove all of them, but he removes a specific one, and the one he removes is the one that says, I’m stealing money from FTX customers. So there is no confusion or uncertainty about what his mental state is. He is picking the one that is revealing that they have a fraud, and that’s why he is sending out a doctored balance sheet. Now, we heard the defendant’s story about this. This time at least he admitted to seeing the spreadsheet. But his testimony was extremely vague and evasive.

Remember he said he got the spreadsheet with the main tab and seven alternatives, and he had to admit that because he has seen the metadata proving it. But what did he tell you? He said that he doesn’t remember any of the details. He can’t remember for sure which tab he looked at. He can’t remember if it had seven alternatives. And he just went with one that seemed reasonable. Think about this explanation for a moment. Remember, the defendant admitted that he was just warned this month that his company might be on the verge of bankruptcy, and then he gets his balance sheet for it and it has all these alternatives, but he wants you to believe that he only just Summation – Mr. Roos 4 looked at one of them and it just happened to be alternative 7, and that he didn’t ask Caroline any questions, and then they just sent it out. It’s not plausible. He has got no explanation for the spreadsheet because it’s really incriminating evidence and because the metadata shows that he viewed it.

There is no innocent explanation for having eight alternatives to a balance sheet and then picking one of the alternative ones that omits the key crimey fraudy parts of the balance sheet. The next moment in time where the defendant presses forward with his fraudulent scheme that we are going to talk about is September. He has a conversation with the same people. They have discussed Alameda’s negative balances and then he, again, made a choice to spend more customer money. So it’s another reason you know the defendant knew what he was doing, knew that it was wrong, and then proceeded forward. So in September 2022, the defendant knew that Alameda was borrowing billions of dollars from FTX customers. In June, the period that we just looked at, he saw these numbers on spreadsheets. He knew they had just borrowed more from lenders.

They had just repaid money to lenders also. And by September 1, he knows the number is $13.7 billion. How do we know that? Government Exhibit 90. This is another important document. This is an internal balance sheet from September 1, 2022. It shows that the defendant — right Summation – Mr. Roos 5 there it shows that Alameda is borrowing 13.7 billion from FTX. There is no dispute the defendant saw this. Not only did Ellison tell you he saw it, but, again, there is metadata that shows it. By the first day of September he knows that Alameda is negative. 13 or 14 billion, right. Keep this date in mind. This is September 1. We are going to talk about what happens next in September. Notably, this is an exhibit that the defendant just skipped over. He didn’t even have an explanation for it. By the way, remember, when the defendant claimed Caroline’s spreadsheet usually had multiple tabs, well, there is no additional tabs on this one. It’s just one tab and it says it right there, right on its face, FTX borrows 13.7 negative, so he knows in September.

A few days later, on September 7, the defendant sends Wang and Singh a Google Doc about the pros and cons of shutting down Alameda, and it’s Government Exhibit 18. Here is the key line in this document. Really hard to unwind Alameda. What’s that a reference to? When the defendant is writing, it’s really hard to unwind Alameda, what he’s talking about is the fact that Alameda has almost $14 billion in debt of money it took from FTX’s customers. And that’s not reading between the lines. That’s literally what they discussed when the defendant raised this question of shutting down Alameda. Here is Gary Wang’s testimony. He says at pages 449 Summation – Mr. Roos 6 to 450 of the transcript: So I asked Caroline how much Alameda was currently borrowing from FTX, and she said 14 billion. And he was asked whether there was any way that wouldn’t involve the use of customer money, and Wang said no. Because FTX did not have that much money itself. Here is what Caroline said about this when she was asked about Alameda’s ability to repay that 13.7.

She said: We had no way to repay it. That’s page 823 of the transcript. Here is what Nishad Singh said at page 1403 of the transcript. He learns that Alameda is borrowing 13 billion from FTX. And Caroline Ellison tells him, Gary, and the defendant over a Signal chat that it is impossible to close out Alameda’s borrowing because of the size of the hole. How did the defendant respond to all this? Here it is. Gary was asked just that question. Ellison says Alameda was borrowing 14 billion. Do you recall the defendant responding with any message of surprise? And Gary’s answer was no. No. He was not surprised when Ellison said they were nearly 14 in the red because he already knew it. He was the one who designed the systems. He was the one who had directed the spending. He knew it from over the summer. He knew it from the prior year. He knew it from the internal balance sheets he was getting in September. He knew it from the balance sheet he got six days before. So Wang told the defendant the hole was too big to shut down Alameda. And what did the defendant say? He said: Acknowledged, acknowledged. No pushback, no request for clarification, no like, well, what hole are you talking about or what do you mean? No confusion. He just acknowledged it. Here we have another conversation where you have three witnesses who all said the same thing. They all said — they talked about a giant hole, between 13 and 14 billion, and that’s why they couldn’t shut down Alameda. And the defendant sat through this trial and he knows that’s the witness’ testimony, and he knows they are saying he is part of that conversation, and there is too much evidence for him to say, I didn’t know what was going on. I wasn’t involved. What does he say about it? Well, keep in mind at this point we know that the defendant — he admitted this, that Alameda is only doing like 3 percent of the market making on FTX, so he knows he can’t say at this point the reason we didn’t shut down Alameda was because Alameda — the reason we didn’t shut down Alameda is because Alameda was too important to FTX. That’s not a realistic or credible argument at this point. He knows that. So he didn’t say that.

What he said was, quote: He did not feel confident he had gotten a clear reason why. So he was asked, what’s the reason? He says, I’m not confident I got a clear reason why. Just think about this explanation. The defendant wrote a five-page memo that includes six numbered points for Summation – Mr. Roos 8 why to shut down Alameda. The metadata shows he worked on this for hours, and it has got several subpoints and it has got a list of alternatives and it has got the pros and cons and it has got a two-page-long tweet string of what he would tweet out if he announced Alameda being shut down.

But his testimony is that Gary and Caroline and Nishad came to him and said, we can’t do this, and then without any reason he just dropped it. That’s not a credible story. That night the defendant and Nishad speak on the balcony and Singh asked the defendant — this is at page 1407 of the transcript — what about what Caroline said today? And Gary said today that there is a 13 billion borrowed and we can’t pay it all. He put the question to him directly. And the defendant says: Right, that. We are a little short on deliverables. Again, there is no confusion, no question by the defendant. He knows exactly what Nishad is talking about. He says right, that. He is not surprised. He is not confused. He has known for months. And he says: We are a little short on deliverables. And this, by the way, is quite an understatement for a $13 billion hole, but it’s still a damning concession.

He knows there is a hole. He knows they can’t fill it if the customers want their money back. We are a little short on deliverables. And then the next thing he says is critical. He says: Summation – Mr. Roos This has been taxing me for some 5 to 10 percent of my 9 productivity for this year. What is he saying? He is saying that this has been weighing on him because he knows that Alameda cannot repay this debt and that FTX is at risk, which means he is at risk of having his fraud be exposed. That’s what is weighing on him. And Nishad says: This is going to be doing a lot more damage to me hitting me a lot harder. And the defendant says: Yeah. I was worried about that. It might have been a mistake for me to circulate that document this morning.

People are going to freak out. They have stolen the money. Nishad sees the giant hole, and he is freaking out, and the defendant knew they were stealing the money too, but he wasn’t freaking out as much as Nishad. You know the reason why is because he was already comfortable with the situation. He had already known about it for a long time and it was his decision to take that money, so he has come to terms with it. He wanted to use the money. He did use the money. He had the arrogance to think he could get away with it and just raise more money from other investors or come up with somehow. When people like Nishad started freaking out about it, he said the mistake here wasn’t, we by accident took the customer money.

The mistake here wasn’t, I thought we could use the customer money. The mistake was telling Nishad about it. That tells you everything you need to know about what the defendant was doing, why this was deliberate, and why what he was doing was wrong. This is another place where we heard a different story from the defendant. He admitted that he talked about Alameda’s liabilities, but he was very vague about what actually was discussed in the conversation.

But you know that Nishad’s explanation, his testimony is corroborated by another witness, because you heard from Can Sun. He was the last witness before our break. And what he told you is, he told you about a conversation that he had with Nishad before FTX went bankrupt, as it was collapsing. Here is what Can Sun said that Nishad said to him right before the collapse. He said that he had found out about the hole, basically that Alameda was taking FTX customer assets in September 2022. He said that he confronted Sam directly about it, and Sam told him back then that it is what it is and there is nothing we can do about it. That’s page 1954 of the transcript. That’s very important. It’s how you know that Nishad is telling the truth about the conversation with the defendant.

And defense counsel may get up and say that Nishad has a poor memory, but remember this testimony from Can Sun. Can Sun told you that he had a conversation with Nishad, right. And Nishad told him, recounted what happened, and this happened long before Nishad ever met with the government, long before he Summation – Mr. Roos ever testified here. It’s a prior statement by him, a 1 statement before, according to the defendants, he didn’t have any reason to change his story, and that tells you, that’s evidence for you to consider when you are evaluating his testimony. Now, what happened next is predictable.

Caroline told you that throughout 2022, she was in a constant state of dread, and she was worried imagining every day what might happen. Nishad told you that he was blindsided and horrified that FTX had turned out to be so evil, that spending anything after September was necessarily digging the customer deficit hole deeper continuing the crime. But what did the defendant do? Again, he doubled down. Here is the proof. This is a spreadsheet of all sorts of investments the defendant was doing, and look at these two: 250 million to Modulo Capital on September 26, 45 million to Skybridge on September 7. Those are hundreds of millions of dollars after Nishad confronts him, after he tells him to stop spending customer money, and the defendant keeps doing it. And notice the names on the spreadsheet. The names on the spreadsheet are the defendant and people who he said reported to him.

They are not Caroline, they are not Nishad, they are not Gary. It’s the defendant who is doing the spending. Here is the proof it was the customer money. This is Summation – Mr. Roos 2 Government Exhibit 1033. Professor Easton testified that, on September 26, a payment to Modulo Capital came exclusively from customer money. Here is Exhibit 314. It’s a Slack message in which the defendant says he wants to make that payment to Modulo. Here is Government Exhibit 350. This is the contract signed by the defendant committing 250 more to Modulo. This is all the defendant is doing. The same is true for that payment to Skybridge. This is Government Exhibit 1028. It proves the Skybridge investment was paid for with customer money. Here is the proof it was the defendant’s doing: Government Exhibit 201. It’s the investment credit contract signed by the defendant as founder of Alameda Research ventures. One more. This is part of Alameda’s ledger. And in September and October 2022, there are millions of dollars going out to Sam Bankman-Fried. That’s Government Exhibit 141A. Below that shows that at least some of that money went to political donations.

That’s Government Exhibit 1089. Here is why that’s so important. This is a really important point, and think about the timing. September 1, the defendant sees a balance sheet listing Alameda’s borrowing of customer money at 13.7 billion. September 7, he proposes shutting down Alameda, talks to his coconspirators. They all talk about how there is a giant hole. Nishad confronts him on the balcony. He’s Summation – Mr. Roos 3 freaking out. He tries to get the defendant to stop spending money. He tells the defendant: Every dollar you spend is customer money. The same day he spends $45 million on Skybridge. Ten days later he transfers $10 million out to himself. September 26 — September 22, transfers $4 million to himself. On September 26, transfers $250 to Modulo for his investment. Finally, October 3, he transfers 6 million more for a political donation. In the month of September he knows Alameda is massively in debt, he knows it doesn’t have the money, he knows they are taking from customers, and he knows what he’s doing is wrong. That’s all that you need to know to find him guilty.


The last moment in time I want to talk about is November. In November, the defendant tells more lies, including false tweets to try to keep customer money. Now, you remember in November customers started withdrawing their money from FTX as a pace faster than the defendant had seen before. Everyone was nervous, and the defendant and his coconspirators were nervous, not just about the pace of the withdrawals, but what could happen as a result of all the withdrawals. Their fraud might be exposed. Here is what Ellison said. She was terrified. This is what she had been worried about for months. When she was Summation – Mr. Roos asked if they could repay she said: We could not. 4 Now, the defendant knew he had a problem. He was doing the math and watching the withdrawal numbers and wrote a Google Doc on November 6 with notes about the current status. And this is a very important document, Government Exhibit 21. Here is what he wrote. They had, quote, enough to process about one-third of remaining client assets. Let me repeat that. He writes, the defendant writes: We have enough to process one-third of remaining client assets. In other words, they are missing two thirds of the money. But the defendant had a plan, a criminal plan, fraudulent, and this alone is a basis to convict him. Here is his plan. Send a confident tweet thread. That’s what he calls them. What does that mean? Nishad told us, quote: A very confident and therefore misleading statement or false statement about FTX’s financial condition. The point here, folks, was to stop getting people to stop withdrawing their money. Now, Nishad told the defendant he was, quote, not comfortable with this.

He said: No, no way. Recusing myself. He didn’t want a part of it. And the defendant acknowledged in a kind of annoyed way, and then he proceeded to tweet. Here is what he has tweeted, and you have now seen this tweet a bunch of times. You know it well. Government Exhibit 866. The first tweet on November 7 says: FTX is fine. Assets are fine. Every witness said this tweet was false or Summation – Mr. Roos misleading. 5 Here is Gary Wang. Was the tweet accurate? No. Why not? FTX was not fine. Assets were not fine because FTX did not have enough assets for customer withdrawals. Here is Nishad. Was that accurate as of November 7, 2022? No. We had determined definitively that FTX had a hole. So this first tweet was plainly a lie. It was a confident tweet to fool customers into not withdrawing their money. Look. It wasn’t just the defendant’s coconspirators who knew this was false. The defendant knew this was false, and we know that from the time. Notice when he sends this tweet that assets are fine. It’s on November 7 at 7:38 a.m. That’s after he has written internally that they only have one-third of the assets they need.

So compare those, 866, Government Exhibit 866, to Government Exhibit 21. Here is another example. At 3:08 a.m. on November 7, the defendant sends a list of possible assets that they have in the small group Signal chat. And here is his math. He estimates there are 12 billion in customer assets they need to meet, but he is only able to come up with that number at the bottom, 3.9 billion. So he has got a difference, and there it is, a deficit, a hole of 8.1 billion. Remember the time. This is at 3:08 a.m. on November 7. What does he do four hours later? Tweets. He’s missing 8.1 billion, according to his own chat, and he says, Summation – Mr. Roos 6 assets are fine. FTX has enough to cover all client holdings. This is yet another case where the defendant took the stand and said something totally that was contradicted by the evidence. He sat there and he said he only realized there was a hole on November 8. But you have seen his own Signal messages now. You have seen his own Google documents. You know that was not the case. Defendant didn’t stop there. This is his second tweet: FTX has enough to cover all client holdings. We don’t invest client assets, even in treasuries. That was false.

Gary Wang testified this was not true because FTX did not in fact have enough assets to cover all client holdings and because FTX was lending client assets to Alameda. Caroline testified that the tweet was not true because FTX only had 4 billion to cover 12 billion of client holdings. Nishad testified that the tweet was even more false than the last one, that FTX did not have enough to cover client holdings. What was the result of the defendant’s lies? FTX customers didn’t withdraw their money. Here is what one customer said. He was relieved after seeing the defendant’s tweets.

He found it reassuring. Another customer told you that after seeing the defendant’s tweets he felt comfortable to just sit and wait. That’s what the defendant had intended. He sent a Summation – Mr. Roos 7 confident tweet thread, a series of false tweets to lull his victims into leaving their money, to convince them that everything was fine, assets were fine, while the wall was coming crashing down. The fact that the defendant lied on Twitter to convince people to not withdraw their money is really important for two reasons. The first reason is, it shows he had criminal intent. He knew the situation and he lied. He knew he had only a third of the money, four out of 12, $8 billion hole. He knew that before he tweeted, and then he tweeted anyway. It wasn’t an accident. It wasn’t a misunderstanding. He had intended it. The second reason, these are important, is I expect Judge Kaplan will tell you that if after obtaining money, like customer deposits, the defendant participated in a scheme to keep the victim’s money by making false or fraud representations, that is, to retain it, that can be a scheme to defraud. So when you find the defendant made these false tweets, that alone is a reason to find him guilty of fraud. There is one more thing I want to talk about briefly for November, and that is a conversation that happens the next day with Nishad Singh as he’s leaving the Bahamas. So he has a conversation over Signal with the defendant. And in that Signal chat the defendant makes an admission. Let’s look on November 8, shortly before Nishad leaves.

He was in a dark place. He was suicidal, as he told you, and he sends a Signal message to the defendant. This is Government Exhibit 480C. So he sends the message and he says: This is Nishad. He says: Wildly selfish of me. But they, the FTX employees, may need to know that there wasn’t a ton of people orchestrating it. I think it makes them more likely to want to be here to help save the situation. What’s the it? The it is the fraud. Nishad is saying to the defendant: FTX employees need to know there wasn’t a ton of people orchestrating this fraud. And Nishad explained this. He said — he testified about it. He said he wanted the defendant to clarify what everyone’s role in this fraud was. He said it was selfish of him because he wanted the defendant to clarify, that he, Nishad, wasn’t orchestrating it. Nishad was saying to the defendant that he should clarify, that is, the defendant should clarify he was orchestrating it. How does the defendant respond? Yup. For what it’s worth, I don’t think that’s super selfish. I think that’s probably correct. There it is. Nishad asked the defendant to clarify that he was orchestrating the fraud, and the defendant says, I think that’s probably correct.

This is an admission to his coconspirator at the end of the conspiracy that the defendant was orchestrating. That is a reason right there to convict him. Notice what he doesn’t say. He doesn’t say: Summation – Mr. Roos 9 Orchestrating what? He doesn’t say: That’s not right. He doesn’t say: Anyone else is to blame. He says: I think that’s probably correct. Keep in kind this context. The context is, this is a Signal message, one of the messages that they have been sending all along to auto delete, and this is one of his closest confidants. It is not a public tweet. It is not an interview. This is a private space between him and his coconspirator over an encrypted messaging platform with auto delete set so he can tell, Nishad, I think that’s probably correct. I told you the questions we were going to answer. They were: What happened? Where did the money go? Who was responsible? We have now answered those questions together, what happened. The defendant was motivated by greed and ambition, and he wanted more money for Alameda, so he set up systems to take the money. We have talked about what he did. We talked about where the money went. It went to investments, to purchases, to expenses, to donations. It was siphoned off. And the defendant is responsible. Your Honor, do you want me to keep going? I’m about to switch sections.

HE COURT: I thought you were. I think we will break for lunch. Ten minutes past 2 we will resume. (Jury not present)


MR. ROOS: I think I’m over three-quarters of the way done. I think I gave the jury a roadmap, and I said the last two parts were a few defenses and the elements. That’s what I have left.


MR. ROOS: I am going to estimate 30 minutes. Could be a little longer.

THE COURT: OK. Thank you. (Luncheon recess) 10

THE COURT: Defendant and the jurors all are present, as they have been throughout. You may be seated, folks. You may continue, Mr. Roos.

MR. ROOS: Thank you. When we left off, we had talked about what happened, where did the money go, and who was responsible, and you now know the answer to all those three questions. Now at the beginning, this morning, I told you there were a few things we were going to do, and the last two were talk about the crimes and talk about some of the defense arguments you’ve heard, and these parts will be a lot shorter. We’ve already covered the meat of it. So let’s get into it. The defendant is charged with seven crimes, and they’re up there on the screen. You can read them. And basically they fall into four categoriesóófraud on FTX’s customers; fraud on FTX’s investors; fraud on Alameda’s lenders; and conspiracy to commit money laundering.

And Judge Kaplan is going to give you detailed instructions on these crimes tomorrow, and you should listen to them closely. I’m just going to talk to you about how some of the evidence you’ve heard fits within these crimes. So let’s turn to the fraud crimes. There are three Summation – Mr. Roos 2 counts relating to the fraud on FTX’s customersóówire fraud on customers, conspiracy to commit wire fraud on customers, and the essence of Counts One and Two is that there was a scheme to defraud FTX’s customers by making false statements to get them to deposit their money, and then by misappropriating or embezzling or stealing that money that had been entrusted to the defendant and his company, the defendant knowingly and wilfully participated in that fraud, and that there were interstate wires that were used as part of it. And that last part just means wires are things like emails, financial transactions that go across states, phone calls. Count Two relates to the same types of conduct but it’s a conspiracy charge, and the essence is that the defendant had agreed with at least one other person to commit the wire fraud, okay? So let’s talk also about Count Six. Count Six is the conspiracy to commit commodities fraud charge. And this is another conspiracy charge, and there are three elements. And they’re up here on the screen. And they’re very similar to the wire fraud elements except for a few distinctions that I’m going to talk about in a few minutes. Here’s the objective of the commodities fraud conspiracy, and you’ll see there are elements that resemble parts of the wire fraud charge.

Again, Judge Kaplan’s going to give detailed instructions on all of this. You don’t need to Summation – Mr. Roos 3 learn or memorize this now. But the key is that there wasóóin connection with the sale of commodities or swaps, the defendant knowingly and wilfully participated in a scheme that involved an artifice of fraud or manipulative device. Now these fraud crimes are what we spent most of the morning talking about, right? We spent the entire morning talking about the false statements the defendant made. We talked about the false pretenses he set up by displaying customer balances while simultaneously not actually having that money behind the scenes. We talked about the relationship of trust he established, how his policy documents indicated he and his company were a trustee of his customers, how they were in a custodial relationship, and how, simultaneously, he was lying about that, how he embezzled and stole that money. And we’ve talked about how the defendant orchestrated the scheme by convincing customers that they could trust him, about how he made lies, about how he directed people, how he made statements and representations, how he moved the money, how he stole and how he misappropriated. And we’ve also talked at length about the overwhelming proof that he knew what he was doing was wrong, that he knew what was happening with customer money, that he had a fraudulent intent, and that he agreed with his co-conspirators. So we’ve already gone through all the evidence that establishes that he’s guilty of these frauds on customers. 

And on this last element that we talked about, about the wires, you saw the tweets, you saw the financial transactions, so that’s met too. Now on the conspiracy charge, conspiracy to commit commodities fraud, for that charge only, there is an additional element, which is that the crypto involved fit the definition of a commodity. And the defendant even admitted that before Congress in 2021. There it is right there. He’s admitting that Bitcoin and Ethereum are two tokens covered as commodities under the CFTC definition. You also heard evidence from Adam Yedidia where he explained that the futures that were sold on FTX were the exchange of risk which resembled what Judge Kaplan will describe to you as a swap. And the other requirement is that some of the conductóóand this is, again, just for the commodities conspiracyóóeither occurred in or affected the United States. And Judge Kaplan will give detailed instructions on that, and follow his instructions. And what I’ll tell you now is that there’s plenty of evidence that in connection with the commodities fraud charge, Alameda was in the United States.

That’s where its bank accounts were; it itself was incorporated there; North Dimension, through which the defendant sold customer fiat deposits, that was set up in the United States and had a bank account in California; the defendant made false Summation – Mr. Roos 5 statements in the United States when he was physically located in Washington, DC; there were customers like BlockFi and Sculptor of the United States. So this requirement is easily met. Counts Three and Four charge the defendant with wire fraud on lenders and conspiracy to commit wire fraud on lenders. And the essence of Counts Three and Four is that the defendant schemed and conspired to make material false representations to Alameda’s lenders, and that he knowingly and wilfully participated in that. And again, they used the wires. And on these counts, the evidence is straightforward, and it’s overwhelming.

I’m not going to spend much time on it because the key document here is that alternative spreadsheet, Government Exhibit 44. That’s the spreadsheet that laid out the real balance sheet and the alternative balance sheets. And you’ve heard and you’ve seen all the evidence that that fake balance sheet was sent to BlockFi and to Genesis and then afterwards they loaned new money. And you heard testimony from the CEO of BlockFi, who told you that those types of representations mattered to them, that they would have not made the same lending decisions had they known the truth, had they known there was a massive borrow from FTX customers, or had they known that the balance of assets and liabilities were different, or had they known that there were these undisclosed loans to executives. So that’s all evidence of why the Summation – Mr. Roos 6 defendant participated in and conspired to participate in a scheme to defraud Alameda’s lenders. And the evidence on that is overwhelming. Let’s talk about Count Five. This is the securities fraud on FTX’s investors. And this is another conspiracy charge. And there are three elementsóóthat there existed a conspiracy to commit securities fraud; that the defendant joined the conspiracy; and that one member of the conspiracy committed an overt act.

And I expect Judge Kaplan is going to tell you that the crime of securities fraud, which now there’s a summary on the screen, the essence of it is that there’s a scheme to defraud or make false statements in connection with the selling of a securityóóso here, FTX’s stockóóand that the defendant knowingly and wilfully engaged in that scheme or conspired to engage in that scheme. And again, this involved the interstate or foreign commerce. So what are we talking about here for Count Five? Again, the evidence is overwhelming. And the primary evidence here is very similar to the other counts. We heard from investors like Matt Huang, who was the first week of the trial, one of the first witnesses; and Robert Boroujerdi, who was one of the later witnesses, I think the last witness in the government’s caseóósecond to last witness. The last witness before the break. They testified about how the representations Summation – Mr. Roos 7 aboutóóand the statements they received about how customer funds were treated, how they were used, were all important to them, and if they had known the truth, they never would have invested.

But the fraud on FTX’s investors is not just limited to those types of false statements. There’s also other frauds that were made on FTX’s investors, and so I just want to highlight those for you. And you’ve heard evidence about this. And one is, for both those investors, you heard that they were very interested in the relationship with Alameda, right? And this is separate and apart from how the customer funds were used. They were interested in whether there was a conflict of interest between Alameda and FTX or the defendant in being involved with both those companies. And the defendant told those investors time and time again that there was no conflict of interest, that Alameda was treated just like everyone else, that they were separate, and those are lies that mattered to those investors. And that alone is enough to convict the defendant of securities fraud, or conspiracy to commit securities fraud. You could even convict him of conspiracy to commit securities fraud without deciding the question of whether he knowingly used the customer money. And of course that evidence is overwhelming, but I make this point because there were so many lies to those investors. Here’s another one. He lied about the revenue Summation – Mr. Roos 8 information. Do you remember this document? And it came up on cross-examination. There was a point in time in 2021 where the defendant wanted the revenues to be over a billion dollars for FTX. And so he had a conversation with Nishad Singh, and they agreed on putting in some revenue, some money, some income, for something called Serum staking, right? And this was of course at the end of 2021, so it’s kind ofóóit’s like the last day of the year. It’s too late to earn a bunch of money. And so they just add these numbers to their balance sheets, to the FTX stat sheets, and we’ve gotóówe saw that.

That was Government Exhibit 51. So they add this fake revenue, and it’s backdated. And Nishad Singh admitted to that. But the defendant initially, when he testified, he said, oh, I wasn’t involved in that, I didn’t know about that, but then on cross-examination, he was confronted with the exhibit you’re looking at right here, Government Exhibit 323. And this is the key. This is signed by the defendant, right? And it’s dated in January of 2021. So the deal goes down, the backdated transaction, at the end of 2021, but he signs this document dated January 2021, and he admitted that on the stand. And what that tells you is he agreed to this backdating, he agreed to trick his investors, and those investors testified that if they knew the revenue numbers or the expenses numbers were different, they wouldn’t have invested. That would have mattered for their decision-making.

They of course would not have invested if Summation – Mr. Roos 9 they had known that the defendant was lying to them, that he was backdating transactions, that he was coming up with phony documents. There were some other points you heard about the investors. The defendant fraudulently concealed the fact that they were shifting some of the losses to Alameda. He concealed the fact that the FTX insurance fund wasn’t so big. You heard testimony early in the case from Gary Wang about how in fact that FTX insurance fund number was a made-up number. They literally just had this random number generator that they used to come up with a fake number for the insurance fund so they could project that out. And that was the same information they were giving to their investors, when they’re saying this is a safe system. So the lies to the investors are pervasive, they mattered to them, they invested, and they lost all their money, and it’s very straightforward, and the evidence is overwhelming.

One last point on this. You remember he moved FTX investor money from FTX to Alameda. And we saw one of the things they spent that money on; that was on real estate. And so this is Government Exhibit 1023, and it shows you all the investors who had their money moved over from FTX, which they thought they were investing in, to the Alameda slush fund. And so he duped investors by lying about this too. And that’s another reason to find him guilty of investor fraud. Summation – Mr. Roos Let’s talk about the last count, Count Seven, 0 conspiracy to commit money laundering. As I expect you’ll hear from Judge Kaplan, there are two ways to commit money laundering. The first way is in essence to engage in a financial transaction that is designed to conceal a source or the nature or the ownership of the money that came from that wire fraud the defendant engaged in. And the other way is by doing a financial transaction over $10,000 that involves the money from the wire fraud. And you’ve got both of those here.

And you’re going to have to be unanimous on at least one of them, but he can be found guilty if you find unanimously that he is guilty of either of them. And he certainly did that here. And I’m not going to spend a lot of time on that because we’ve already this morning walked through dozens of transactions in which the defendant moved money from Alameda’s bank accounts that had customer money to another bank account and to another bank account, and to another bank account, and to another bank account, and they did it for those donations that they were running through Nishad Singh and Ryan Salame, they did it for the investoróófor the investments, where they ran it through a bunch of bank accounts, and so the evidence on this is very straightforward.

And keep in mind, I’m not going to go through all Professor Easton’s charts, but they’re numbered Government Exhibits 1001-1051. That’s the full range. And so if you want Summation – Mr. Roos to look at all his tracing, his analysis of the balances, 1 that’s the range to ask for, 1001-1051. They all show that the defendant stole money and moved money, and engaged in money laundering to conceal the source of the funds. There’s one last requirement which here is called venue. And that just means that acts in furtherance of the crimes need to have taken place in the Southern District of New York, which includes Manhattan. And there was plenty of that in this case. FTX processed wires through Signature Bank, which was located in Manhattan. So is ED&F Man, where those Robinhood shares were purchased. Tareq Morad, who was one of the customers who testified in this case, he told you that the wire to fund the accounts was processed through a Wells Fargo bank in New York. BlockFi and Genesis, which are both lenders in the case of BlockFi, which is also a customer, are in New York. Zac Prince, the CEO of BlockFi, said he got those balance sheets while he was in Manhattan. And customers and investors like Third Point and Sculptor are based in Manhattan. And finally, you know from Richard Busick, who was the FBI Agent who did the cellular tower analysis, he told you that the defendant was all over Manhattan doing meetings with investors, acts in furtherance of his crimes. And that analysis is Government Exhibit 1080. So venue has been met. Those are the crimes the defendant is charged with, and the evidence is overwhelming.


And so in our final minutes together, what I want to talk about are some of the defenses you’ve heard in this case. And like I said, the defense didn’t need to make any arguments. We have the burden, and we embrace that. But when they do make arguments, you should scrutinize them. And I want to focus on just three arguments that have come up in this case. Here they are: the argument that the defendant acted in good faith; the argument that he thought it would all work out in the end; and lastly, this argument that this was somehow margin lending. And so starting with the first argument, I expect Judge Kaplan will tell you that good faith is when someone honestly believes in the truth of what they’re saying or honestly believes the victims were not being deprived of property. And that’s not what happened here. We spent this morning talking about all the reasons you know the defendant knew what he was doing was wrong, and those are all reasons why the defendant wasn’t acting in good faith.

Here’s another reason. We’ve seen this chart before. This is Government Exhibit 1083. The defendant used Signal. Now of course there’s nothing wrong with texting and nothing wrong with encrypted apps. But what the defendant insisted on was auto-delete. He insisted that their Signal chats be deleted. And I expect Judge Kaplan will tell you that if you find that the defendant deleted communications, you can infer Summation – Mr. Roos 3 that he believed he was guilty, that he didn’t have good faith. And so how do you know that was his purpose here? Well, Adam Yedidia testified that when the defendant began insisting that people use Signal and delete messages, he said it was “all downside for the messages to be kept around. And if regulators somehow found out, found something they didn’t like in those messages, that could be bad for the company.” And the result was that when FTX collapsed and people were asking questions, there were no Signal messages before November, and that made it a lot easier for the defendant to claim that he had no idea what happened. And so this is important. It’s in some ways a small point, but in other ways it’s very significant.

He knew what he was doing was wrong. He envisioned a day like today. He knew that some day the regulators would see something they didn’t like. What he means is they would see something that was incriminating. And so he had in mind a courthouse, a courtroom like today, and he didn’t want it to be like that so he demanded that the messages be set to auto-delete. And of course he couldn’t delete everything, but that was the aim here, and that tells you about his intent and that it wasn’t good faith. And you also heard about coded language he used. Ellison told you the defendant would get upset when they used explicit words, so she said things like “FTX borrows” or “the thing,” instead of saying things like FTX customer funds.

And finally, on this topic of good faith, I want to talk about one conversation the defendant had with Can Sun, who was one of FTX’s lawyers, as FTX was collapsing. In FTX’s final days, after one potential investor asked the defendant for “a legal justification as to why the funds were missing, and were at Alameda,” the defendant asked Can Sun to come up with legal justifications. And this testimony by Can Sun all begins around page 1959 of the transcript. Now importantly, at this point the defendant didn’t point to any legal justifications for taking the money. He had none. When Sun asked whether the defendant identifiedóówhen Sun was asked whether the defendant had identified any justifications that he was aware of, the answer was no. And that shows youóóthis is an important point. The answer “No” is important because it shows you the defendant was not acting in good faith. He didn’t have a justification at the time for why he honestly thought this was okay. He posed the question to Sun. He didn’t say, I think I’m allowed to use this customer money, can you please confirm this for me; he said quite the opposite. He didn’t provide any justification. And so then what happens next? Can Sun takes a look at the terms of service and does some other research around the company, and then goes on a walk with the defendant, and during that walk, here’s what Can Sun tells the defendant. He says there was no justification for the funds being missing and taken by Alameda. He says there were theoretical arguments, but none of them were supported by the facts. And what’s important about this conversation is what happened next. It’s the defendant’s reaction is what particularly matters here.

And so he tellsóóSun tells the defendant that while there are some other crypto exchanges that do not make it clear what is the relationship between a user when they deposit funds on the exchange and the exchange, that’s not feasible for us because of our terms of service. They make it very clear that when a user deposits assets onto the exchange, those assets continue to belong to the user. So in other words, Sun is telling him Alameda cannot use customer money. And then, like I said, what’s important is how the defendant responds, because it tells you everything about his good faith or lack of good faith here today. The defendant doesn’t fight him. He agrees with Can Sun. He saysóóand here’s the testimonyóó”he acknowledged.” He “basically said something like, got it.” He “wasn’t surprised at all.” If the defendant actually believed that he was allowed to use customer money, as he claimed when he took the witness stand, why didn’t he say that back in 2022? In this private conversation back in 2022, why didn’t he say what he said up on that witness stand?

He didn’t direct Can Sun to some part of the terms of service. He just acknowledged Sun’s conclusion and didn’t seem surprised. And that tells you he wasn’t acting in an honest Summation – Mr. Roos belief or in a good faith. 6 There’s another part of this conversation that matters and tells you something about the defendant not acting in good faith. And that’s that Can Sun told the defendant that he considered, as one of the theoretical justifications, whether, under Section 16 of the terms of service, which concerned margin trading, whether FTX could have theoretically argued that it could take the customer funds. So that was another theoretical justification that Can Sun raised with the defendant. And Sun told the defendant that he asked Nishad and Ramnik Arora, another employee, to pull some numbers, and those showed that this theoretical justification was not supported by the facts. And how did the defendant respond? Again, this is the key part for knowing about his intent. He acknowledged. “He said, yup, yup. No pushback.” By the way, do you notice how Can Sun’s answer resembled exactly the way the defendant answered? “He said, yup, yup. No pushback.” This tells you that the same time the defendant didn’t think this was part of the terms, at this time the defendant did not think this part of the terms of service allowed him to use customer money. And that’s important, not just for his good faith or lack thereof, but it’s important because of what happens next. After FTX declared bankruptcy, the defendant did interviews. You heard about that during his testimony.

And one of them was on Good Morning America with George Stephanopoulos. And during the interview the defendant is confronted with the exact same terms of service that he spoke to Can Sun about in that private meeting. And Stephanopoulos presses him. He says, “If Alameda is borrowing the money that belongs to FTX depositors, that’s a bright red line, isn’t it?” And Stephanopoulos is gesturing to the terms of service. It says that “digital assets may not be loaned out to FTX. They can’t be loaned out.” So Stephanopoulos confronts him with this. And the defendant takes a long pause. And then he gives a false excuse. He says, “There existed a borrow lending facility on FTX, and I think that’s probably covered in the terms of service.” So the defendant gives Stephanopoulos, on television, the very justification he had discussed with Sun as not being a theoretical justification that worked. And this is a false excuse. And I expect Judge Kaplan will tell you tomorrow that if a defendant gives a false excuse or a false exculpatory in order to divertóóin order to divert suspicion from himself, you may consider that as evidence that he believed he was guilty.

So this is another reason you know that the defendant was not acting in good faith, because he thought he was guilty, and that’s why he lied and gave a justification he knew wasn’t true on television before he was charged with a crime. There’s another defense I want to touch on just very Summation – Mr. Roos 8 briefly, and this is the defense that the defendant has brought up again and again, that he just got unlucky. When he took the witness stand, he blamed everyone and everything.

He claimed the problem wasn’t fromóóthat they didn’t hedge right, that they had bad luck, that FTT prices dropped, that the investments happened to be illiquid, and the defendant claimed that with just a little more time, everything could have worked out, and they could have processed some more withdrawals. And I expect Judge Kaplan is going to tell you that a belief by a defendant, even an honest belief, that ultimately everything would work out fine or that victims wouldn’t ultimately lose money, does not mean the defendant acted in good faith. The crime here was when the defendant took the money, when he made false statements to get that money. What ended up happening later on doesn’t make him not guilty of the crime.

The last argument I want to talk about today is this idea that it was all margin lending. And with every hour the defendant spent on the witness stand, we saw this argument get more and more absurd. Suddenly, any withdrawal off the exchange, to repay any sort of third-party debt or expense, or to buy muffins, this was a margin trade, according to the defendant. And according to the defense opening, the theory, I guess, is that Alameda was also doing these margin loans and that somehow, under the terms of service, they could just rip all the customers’ money because everyone was doing margin trading. And this was an argument that was put out by the defendant after he committed his crimes, after he was arrested. It isn’t supported by any facts. You should reject it.

Here’s what really happened. First things first. FTX customers did not automatically have their money in the spot margin loan program. It wasn’t free money for the defendant to take or borrow. Customers had to opt in. They had to agree. They had to enable margin trading. That’s what we’re looking at on the screen. So if a customer didn’t enable spot margin trading, their money couldn’t be borrowed. One example is the very first witness you heard in the case. He testified that he never enabled spot margin trading. His money wasn’t in the program. It shouldn’t have been taken. And even after a customer opted into the spot margin trading, their money still isn’t in the program. It’s not just there just because you turned on the opt-in. You have to then take another step and lend it out. And that’s what this shows. Customers had to actually click the lend.

Now the defendant called this witness Mr. Pimbley, and he showed some charts of the balances of people who had just opted in. But that didn’t represent what was actually going on. As he conceded during cross-examination, his charts don’t show how much money customers actually agreed to lend out. It just shows the balances of the customers who had opted in, not what they actually lent. The amount that was actually available to be borrowed, the amount that actually had been lent, was a lot smaller. And we can see that from one of Professor Easton’s charts.

Here’s a third problem with the defendant. The main account that Alameda was borrowing through did not even have spot margin enabled. So this whole idea that, oh, they’re just borrowing through the spot margin program, in fact, notice how all of Alameda’s accounts with the “Allow Negative” set were not enabled for the spot margin borrowing. That means none of the accounts that match up to the withdrawals were ones that had spot margin trading. Maybe Alameda had other accounts that had spot margin trading, but the key is these accounts they used to make those gigantic withdrawals of customer money, those were not part of the spot margin system.

And here’s some proof of that. Government Exhibit 1002. It tells you that the giant negative balance is the one that’s coming out of these “Allow Negative” accounts, from 2 to 12 billion negative. And that’s not any borrowing in the spot margin program. And by the way, we’re just talking about stealing money off the exchange right now. Of course we talked this morning about stealing customer money through fiat deposits. And there was tons of spending of customer money on investmentsóóK5, the crypto mining company, the AI company, the donations, the real estate, that all was just coming out of bank accounts. And that is just straight embezzlement. That is theft. That is not borrowing on the spot margin program. That was off-the-exchange borrowing.

Here’s the fourth problem I want to highlight with this defense. Professor Easton told you there was not enough money in the spot margin program to explain all Alameda’s borrowing. What this shows is that from June to November 2022, Alameda had taken between 8 and 12 billion, when there was at most 4 billion in the margin lending program. This is critical. It is literally, mathematically impossible that they could have taken the money from the borrow/lend or the spot margin program. It’s impossible, mathematically, that this could have been a loan, right? And this is the key distinction I was talking about. You have to look at what customers were actually lending out, what was actually available to be borrowed. That’s the key. It’s notóóthe number is not the balances. It’s what was actually being lent out, what was available to be borrowed. And these are in Government Exhibits 1010 and 1011.

Finally, there’s a real problem with the claim that defense counsel made in his opening that FTX could somehow claw back money from unwitting customers who were doing margin loans. Here’s the piece of the terms of service they put up in their opening statement. Nishad Singh testified, after this argument emerged,  he testified that clawbacks weren’t even implemented. The code could never cause a clawback. So how about this. This whole argument of, oh, well, there’s a scenario where you can claw back money because, you know, we socialized the losses, fiction. They actually hadn’t even built the system. It was not in the code. This was not a real capability. This was just, well, we’ll get to it, we’ll tell you what this is.

What Can Sun said, who was one of the authors of the terms of service, he was asked about this, and what I want to highlight is what he said about it. He said he talked about thisóóhe had not discussed the specific provision with Sam, right, but when he talked with Sam about clawbacks, the defendant always made it clear that FTX does not claw back money from users, right? So we have this argument now that’s totally contrary to the defendant’s prior statements. And here’s the important point. At the end, “I just asked you, what’s the reason this is in there? If it’s notóóif they couldn’t even do it, what’s the reason it’s in there?” Can Sun said, “Well, in fact, this provision was drafted mostly for disclaimer purposes, nothing more.” I expect Judge Kaplan will tell you tomorrow that a defendant cannot disclaim away his false statements and lies by putting a provision in a terms of service. And keep in mind these terms of service, they weren’t even adopted until May of 2022, which means there were thousands of customers who never Summation – Mr. Cohen even agreed to this when they joined FTX. Here’s my last thought on this margin defense. 3 When the defendant was asked directly yesterday under cross-examination whether he was saying the big hole in customer funds in November was the result of a clawback, he sort of fumbled for a second. And then he said he wouldn’t describe it that way. He conceded that’s not actually what happened.

This is a distraction. It’s something manufactured after the fact. It’s something that he came up with after everything came crashing down. He came up with it for a day like today, in a courthouse, and you should reject it. You’ve all paid close, careful attention. Let me leave you with this thought. This was a fraud that occurred on a massive scale. Thousands of people lost billions of dollars. Everyday people lost savings, companies went bankrupt, all because of this defendant’s fraud, because he wanted more money to do whatever he wanted with. So when you go back to the jury room, follow the truth. Let the evidence prevail over his storytelling. The defendant, he lied and he stole from his customers; he lied and he stole from his lenders; he lied and he stole from his investors. He’s guilty of wire fraud; he’s guilty of securities fraud; he’s guilty of commodities fraud; and he’s guilty of money laundering. Do justice. Reach the only verdict consistent with the evidence, with the law, and with the truth, that the defendant is overwhelmingly, beyond any reasonable doubt, guilty.




THE COURT: Thank you. Mr. Cohen.

MR. COHEN: Thank you, your Honor.

THE COURT: And somewhere in the next 45 minutes, if you can reach a point that’s convenient to you to stop for the afternoon break. And I’ll also say to the jury, depending on how things are going, I may ask you to stay a little late this evening just to allow Mr. Cohen to finish.

MR. COHEN: Ladies and gentlemen, I want to start by thanking you again for your service in this case. We saw that you took your duties as jurors seriously, and you listened very hard to the evidence as it came in. You’ve all done an excellent job listening to a case about many foreign terms, about crypto and jargon like margin and cross-margining and Bitcoin and so on, in what may have been an entirely new industry for you. And we’re very grateful for you for giving us the time from your lives and your service on this jury and for keeping an open mind. You know, there have been times during this past four weeks when I have wondered what case it is we’re actually trying here. What do I mean by that? Time and againóóand we just heard it this morningóóthe government has sought to turn Sam into some sort of villain, some sort of monster.

They spent an extraordinary amount of time on this. It’s both wrong Summation – Mr. Cohen 5 and unfair, and I hope and believe that you have seen that it’s simply not true, and, more importantly, it’s not a basis on which to decide this case, which is about specific charges in an indictment and specific counts. The government’s core case is premised onóóit’s based on a false premise, which their own witnesses have rejected, that from the very beginning, from jump, FTX was a fraudulent enterprise established by Sam and Gary, Caroline and Nishad, to intentionally steal customer funds from the very earliest days, and that the events of June through November of 2022 were simply a continuation of that fraud. And as we’ll get into, that’s not what the evidence showed here. And that’s why we submit that the government keeps portraying Sam as this villain.

According to the government, everything Sam ever touched and said was fraudulent. Can we pull up the slide. So here we got evidence about Sam’s hair, his clothes, testimony about his sex life, photos of him looking awkward next to celebrities, photos of him sleeping on a private jet; photos of him with big hair, photos of him with messy hair; photos of him holding a deck of playing cards. They started off, first sentence, second sentence of the opening statement, what were we talking about, charges in the indictment? No, we were talking about how he lived in a $30 million apartment and flew on private planes and met with Tom Brady and Bill Clinton. Summation – Mr. Cohen 6 And the list goes on.

In opening, Mr. Rehn gave us a movie opening, where he pointed at Sam, “that man, that man.” We just saw that again in summation, like you’d see in a movie. Every witness who had been his friend pointed to him from the stand, even though we stood up and stipulated, of course it’s Sam. He’s here. Why? Why? For the effect. Why does the government keep doing this? Is it because they want to make him into someone you’ll dislike, someone you won’t approve of and therefore you’ll vote to convict him, rather than making the case about whether the facts do or do not satisfy their burden of proof? You know, Sam’s appearance has nothing to do with how the FTX exchange worked or with Alameda’s trading or asset values, and his appearance and his romantic relationships have nothing to do with whether he’s guilty of the specific counts charged in the indictment. And let us say this, just to get it out of the way. We’ll agree that there was a time when Sam was probably the worst-dressed CEO in the world, and had the worst haircut. And we’ll agree that the evidence in this case showed that Sam would talk to just about anyoneóóany TV reporter, any journalist, any blogger, you name it. And that made his life messy and made things messy as well, but that’s not a crime.

The reason we focusedóóthe reason the government focused much of its case on Sam’s appearance is that every movie needs a villain. And let’s face it, an awkward high school math nerd Summation – Mr. Cohen 7 doesn’t look particularly villainous, so what did they do? They wrote him into this movie as a villain, a bad guy, directing others, who apparently had no free will of their own, to steal billions of dollars. They invited you to overlook the absence of proof that Sam actually committed any of the crimes charged in the indictment, and they relied on that evidence. Just as in a movie, the cooperating witnessesóóand there were five of them, five cooperating witnesses, Gary, Caroline, Nishad, Can Sun, who had a non-prosecution agreement, and Adam Yedidia, who had immunity, in short, the only five people who had direct contact with Sam on the key facts alleged in the caseóóthey went up to the stand and, on cue, over and over and over again, they said, “Sam told me to do it.” Even as to simple things which we would normally think they would admit as of their own free will. And that depiction of him made no sense in the real world, especially coming from these witnesses who were his closest friends, who knew him for years, who had gone to camp with him, to college, who had lived together with him, who’d worked with him for years, starting two businesses, who traveled with him and moved all over the world with him. That’s a lot to do with someone you’re now coming forward and saying is so terrible. And what the government kept leaving out of its movie is the “why.” Why did FTX develop the way it did? Why did Sam  make the decisions he did? And what was he thinking at the time when he was CEO? And in doing so, in not focusing on the “why,” they didn’t fully address whether they carried their burden of showing that Sam acted with criminal intent.

And I’m going to go through the evidence that was presented at the trial, but before I do that, let me just give you a couple of quick examples on this point. If you can put up the last slide. The first slide. The first slide. Okay. Look at the photo on the left. And the government exhibits, numbers are on the slide. This is the one they put up of him shuffling the deck of cards. Of course they never asked any of their witnesses what the significance of it was. They were just trying to imply that he’s a gambler. One of the themes of the case is Sam takes too many risks. He takes more risks than the other witnesses. Well, we asked the “why” question, and it turns out that he’d been shuffling cards to control his natural fidgeting, and he was doing this for years. He didn’t even play poker. And then today we heard on the government’s summation, oh, and during his testimony he looked away. Really? What does that show?

The government asked its witnesses about the change to the code base. We’ll talk about that in some detail in a moment. But they never ask why the changes were made at the time. But why? We did. And what you heard not just from Sam but from the government’s witnesses, that the code changes were put in place as responses to specific events. And they were put in for valid business reasons, not to carry out some grand fraudulent scheme. Another quick example. The government raised the fact with you that because FTX at first did not have its own bank accounts that Alameda received deposits. Alameda did and then this other account in North Dimension.

And in its opening statement, the government told you that in and of itself was a crime, part of the crime. But then what did their witness say? It wasn’t a crime. We understood why they had to do it. We didn’t have bank accounts for FTX so it was fine to receive the funds in the account. And because they don’t focus on the “why,” the government failed to mention in its summation that none of the witnesses at this trial testified that Sam told them or directed them to violate the law or said or did anything that showed he thought he was violating the law. Back in 2019, Sam didn’t say to Gary, hey, we just created this successful company Alameda, I’ve got a great idea, let’s set up FTX so we can use our secret company Alamedaóówasn’t secretóóto steal customer money.

No witness came forward and said that Sam told them to steal customer money or commit crimes. Now in contrast, what we’ve been trying to present to you, and I’ll discuss today, is more of a real-world perspective. And in the real world, unlike the movie world, things can get messy. We know that real life doesn’t unfold like it does in the movies. In the real world, people misjudge things. They make mistakes. They hesitate. They don’t plan for the unexpected. They make good and bad business decisions, and they make mistakes that later on they wish they could have fixed. And Sam explained what really happened and why things unfolded the way they did on his watch. They may not fit the government’s movie of making Sam into a villain, but that’s what this case comes down toóówhat was his intent at the time of the events in this case. And this case breaks down roughly into two periods, two time periods. From 2019 to 2021, the events in this case, the evidence in this case don’t show Sam acting with criminal intent.

The evidence doesn’t support that. In fact, none of the cooperating witnessesóónot Gary, not Caroline, not Nishad, not the othersóóacted during this period like they thought they were doing anything wrong, like there was any business problem at all, let alone wrongdoing. They all were making millions of dollars. None of them left. None of them resigned. None of them notified the authorities or called attorneys, or confronted Sam about what they’re now saying were improper practices. None of that. Because they didn’t think they were doing anything wrong. Instead, up until June 2022, everyone thought they were operating one of the most successful crypto Summation – Mr. Cohen 1 exchanges in the world, which they had built together over the past few years. They thought they’d come up with a better mousetrap for a crypto exchange and customers would be joining in the millions. Now the government suggested during the evidence that all this growth into a company of this size and complexity was because Sam sent out a few fraudulent tweets and got customers to put their funds on the exchange. Is that really what the evidence showed? Rather, the business grew because they all worked very hard together. The business grew because they had excellent products.

And it was an excellent business that ultimately grew and had had hundreds of employees, licenses in many countries throughout the world, and had millions in daily revenue. We asked why these things happened the way they did during this period, and the government doesn’t want to focus on that. As for the next period, second period of the case, that’s the period we all spent a lot of time on in this trial, from June to November of 2022. And here we would submit to you that what we have with the government is really a tale of two different cases. We all know by now that May and June of that year is when what’s been called the “crypto winter” began. Very simply, if you were in crypto at that point in time, all you had to do was look out your window and you were going to see stress and crisis. Businesses failing, businesses going under.

And this was the same time that the fiat@ coding bug was discovered and became understood by FTX and Alameda’s leadership, and we’ll cover that in a bit. And it was also the first time that it started to become clear that Alameda might have been borrowing not only from the info@ account, the main account, the one that Sam observed and checked, but also from customer deposits via the fiat@ account. The government did not establish that Sam knew about these issues until the fall of 2022, because he didn’t. In the period from June to November 2022 is when the governmentóówhen the government’s witnesses we heard from had a different take on what was happening than Sam. In fact, they had a different take on what was happening from each other. Between Gary, Caroline, Nishad, and Sam, everyone had a different view of when they first understood the meaning, the impact of this fiat liability, and what their view was and whether Alameda could have the liabilities as they came due. Sam for his part looked at the situation in the fall of 2022 as a liquidity problem, not a solvency problem. And just to take up quickly something Mr. Roos said at the end of his summation, this wasn’t Sam saying, oh, don’t worry, I just thought everything would work out okay. No. At the time, as events unfolded, Sam perceived this as a liquidity problem, whether Alameda could pay its liabilities as they came due, and as they were due, and as the period unfolded, in 3 hindsight, he may not have been perfect. I don’t think any of them were. He may have hesitated. He may have moved too slowly.

But he always thought that Alameda had sufficient assets on the exchange and off the exchange to cover all of its liabilities. Now the government made a big deal about that. Well, you’re not supposed to consider assets off the exchange. You’re only supposed to consider Alameda’s assets on the exchange in thinking about whether it could meet its obligations. But then in the same way they also say Sam owned Alameda, Sam controlled Alameda, Sam knew what Alameda had. Well, if he owned Alameda, he knew what its assets were, both on and off the exchange, and he knew what could be brought to bear if necessary to pay liabilities. And he also knew that he owned FTX, or was the majority owner of FTX, and it had its own value and its own equity, its own worth that could be used, if necessary, if it came to it, as well as his own personal assets.

And these were differences in opinion, differences in business judgment between Sam and the others about how to value Alameda’s assets, what you could consider, what you couldn’t consider, and how to act, how to act during the period, which now in this caseóóand that’s why I opened with the comment I madeóóthe government has tried to spin into a crime. But the question of whether Sam’s business judgment was reasonable, Summation – Mr. Cohen 4 even if it later turned out to be mistaken, is not a criminal one. And there’s something hanging over everything, ladies and gentlemen, something that Sam mentioned and some of the other witnesses weren’t mentioned at all. FTX did not have a sufficiently built out risk management system, nor did it have a chief risk officer, someone to head up the risk management function. If it had a chief risk officer, wouldn’t she have insisted on fixing the bug when Gary first spotted it, not in 2022 but at the end of 2021? If they’d had a chief risk officer, would it really have taken six more months for Caroline to notice that the bug had grown so large that it was having an $8 billion effect? If they’d had a chief risk officer, wouldn’t she have insisted that the fiat liability issue be handled the minute FTX got its own bank accounts, so the funds didn’t sit there and build up in value?

And Sam told you during his testimony that FTX sure should have had a better built out risk management department, and he’s absolutely right. But again, systems of poor risk management is not a crime. Again, bad business judgments are not a crime. We’ll walk through the November sequence for you in detail later on. And let me justóóbefore I turn to the next part of what I have to say, let me just ask, why are we covering this? We don’t have a burden. We don’t have a burden to offer any proof. We could simply just try to respond to the government’s case. The reason we’re doing this, the reason we’re showing you what we believe really happened, is to show you there’s an alternative way to think about it, fully supported by the proof, and that negates the government’s burden.

It means the government has not carried its burden of proof. Now for the next parts of my summation, I’m going to talk about a few things just to orient you. First, I’m going to talk a little bit about the legal standards you are to consider; then I’m going to go through for you our view of the chronology of what really happened during these key periods; then I’ll make some points about the government’s case; and finally, I’ll have some concluding remarks. Now let me start with the legal standard. Now I should sayóóand I agree with Mr. Roos on thisóóthe only person whose word controls on the legal standards is Judge Kaplan. He will give you the legal instructions. And you, of course, are bound to do what he says in applying the law. But we anticipate that he will give you some of the following instructions, and I want to go through them for you.

If we could bring up slide 3, please. You’ve heard about good faith a lot in this case. At the top you can see good faith is a complete defense to all the charges in the case. The government bears the burden of Summation – Mr. Cohen 6 establishing a lack of good faith. And we expect you will hear that because an essential element of the crime charged is intent to defraud, it follows that good faith on the part of a defendant is a complete defense to the charge of wire fraud. Good faith is an honest belief by the defendant that his conduct was not wrongfully intended. Moreover, a defendant has no burden to establish a defense of good faith; it remains the government’s burden to prove fraudulent intent and the consequent lack of good faith beyond a reasonable doubt. Good faith, as I mentioned, is a complete defense to all the charges in this case. Now what does that mean? If we could go to the next slide. Here are some things that we submit do not establish, do not establish a lack of good faith. If the defendant made mistakes; if he made bad business decisions; didn’t have a risk management department or a fully built out one; if he delayed or hesitated; if there were coding and accounting errors; if he had an honest belief that statements were truthful; or if he didn’t know what fellow executives didn’t share with him or other witnesses were inconsistent. None of those establish a lack of good faith, we submit. If we could move to the next slide.

And all this discussion of good faith is of a piece with the following: In a criminal case, the government bears a heavy burden, which never shifts to the defense. To convict Summation – Mr. Cohen Sam of any count, the government, you must find beyond a 7 reasonable doubt, including that Sam did not act in good faith and he acted knowingly and wilfully, and your verdict must be unanimous. And the Court will instruct you on what it means to act knowingly and wilfully, and you should follow the Court’s instruction. So this burden of proof is very heavy, and is very high. And that’s why the government gets to speak twice. Mr. Roos spoke this morning, I’m going to speak, and then the government gets to speak again. And your first reaction might have been, why do they get to speak twice? Well, that’s why, because they have the burden of proof. It never shifts to the defense. We were not required to do anything. We didn’t have to question a single witness or offer any evidence. And again, as part of the government’s burden, you must be unanimous in order to find Sam guilty of any count. 

MR. COHEN: As you consider the evidence in your 8 deliberations, we ask you to think very carefully about the burden of proof and good faith, and I’ll come back to these in the summation. Another point I want to cover with you which I mentioned in opening four weeks ago is that the government can’t present its case by arguing about facts in hindsight. The focus must always be on what Sam’s intent was at the time, as events are unfolding. That’s particularly relevant here, where we all now know there has been a bankruptcy. We all know what happened on November 11. There is a famous quote from a book which two characters are discussing bankruptcy. One had gone into bankruptcy. One asked the other: How did you go bankrupt?

And he responds: Gradually. Then suddenly. That’s what happened here. Remember that, in the summer of 2022, Sam didn’t know that November 11 would be their last day, that both companies would file for bankruptcy then. Rather, during this period he believed in good faith he was dealing with a liquidity issue at Alameda, and that if he could convert assets to cash and pay back its obligations to FTX and its customers, he could address it. In good faith he didn’t believe the issue was one of insolvency but of liquidity. And what he didn’t know, had no reason to know, was that there wasn’t going to be a near future, that with the Summation – Mr. Cohen 9 continuing market crash and other events going on outside the window, by earlier November there would be a run on the exchange and a crash that ended in bankruptcy. So please keep this in mind when you consider what Sam did in the summer of 2022, when you consider what his intent was. And also the test of whether Sam acted in good faith is not whether people suffered losses and looking back wished they never got involved with FTX or Alameda. For sure, today any customer, any investor, any lender would say that, and we understand that. We understand why they would be upset they suffered losses.

Sam acknowledged that, and he acknowledged a lot of people suffered losses and got hurt, and he felt terrible about it. But that’s not the test. The test of intention is not whether, looking back, Sam was a good manager, whether FTX took too much risk, whether it did or didn’t hedge enough, whether they didn’t have a fully built-out risk management function, or whether he didn’t act quickly enough. That’s not for a criminal case. The test is whether the government has carried its heavy burden of proving beyond a reasonable doubt that Sam acted with criminal intent and not in good faith, and it has not.

Another thing I want to cover before we turn to the chronology is Sam’s own testimony. Very important. Now, Sam testified before you in this case. And as a defendant in a  criminal case he had the right not to testify under our 0 Constitution, but he came forward to testify because he wanted to tell you what happened. And I submit, it’s hard to think of a more stressful situation for a person than that. And the government, we submit, was unfair today in how they described it when they described his testimony. If Sam gave a long answer to a question, they said it was too long. Therefore, you shouldn’t rely on it. If he gave a short answer to a question, they said it was too short and you shouldn’t rely on it. If he gave an answer and he tried to explain it, they said he’s being evasive. Under that standard there was apparently nothing he could say that would satisfy the government’s view of him and would make them not regard it as proper. It was a dynamic — and I am going to talk about that in a moment — that was set up by the government, and you heard it again today in summation. It’s sort of a heads, I win; tails, I lose dynamic in. No matter how Sam answered these questions, we are now being told it was not credible. What really happened? Sam testified, he did his best to tell you what had happened and what he remembered. And unlikely some of the government’s witnesses, he was far from polished. Remember, all the yups and the yeahs he gave in response to questions. Remember the times when he had to stop and close his eyes to think about the questions before he answered.

But he was himself. He was Sam. He told you when he didn’t remember things, when he didn’t remember saying things or doing things, even though he had sat here during the trial, and he knew that other witnesses had claimed he did them. If he was just trying to spin a new — a lie, as the government said, why would he do that? He didn’t. If he remembered something, he told you. If he didn’t remember, he told you as well. And he also told you, by the way, that he couldn’t remember every single word he had said to every journalist or reporter he had spoken to or everything in any written submission to Congress, and we would submit it would be unfair to require anyone to know that. So when you consider his testimony, as part of your deliberations, we ask that you consider it overall, as a whole, and we submit that he did his best to remember and speak to you, he set out his memory as accurately as he could, and he told you what happened and, critically, what he believed in good faith at the time.

Now, let me talk a little bit more about this dynamic we have heard from the government, this sort of heads, I win; tails, you lose dynamic. They spent a lot of time during the case and today portraying Sam as a villain, as a criminal mastermind. We heard today that, in addition to all the other adjectives, he was apparently evil, arrogant, so forth. But Summation – Mr. Cohen 2 then when he did something that perhaps a criminal mastermind wouldn’t do, we heard, well, that doesn’t matter, it’s still wrongful. It’s a different kind of lie, different kind of fraud.

An example. Sam testified before Congress three times and submitted written testimony. Well, if he is the criminal mastermind the government says he is, why in the world would he go before Congress and subject himself to public questioning when he doesn’t have to, when he could be asked just about anything by members of Congress, if the whole idea was that he was running a secret scheme using Alameda to defraud customers. The answer, he wouldn’t. Yet the government goes on about this and says, well, no, no. On this one that’s not what we mean. We mean he is going before Congress because — not because he is trying to hide things from them, because he’s so clever, he is spinning a tale where he is going to go an all of congress and tell a series of lies to Congress that will match what he is saying internally. Does that make any sense? We heard a similar refrain from the government about journalists. If the idea here was that Alameda — FTX Alameda were part of a secret scheme, why in the world would you go out and speak on Good Morning America, in front of millions of people, when you have one of the toughest questioners in the country questioning you and you are there without an attorney, Summation – Mr. Cohen 3 without an entourage, and you don’t even know the questions beforehand. You wouldn’t.

Another example of this heads, I win; tails, you lose approach to the evidence. We heard a lot in this case from the government about what I would call risk analysis, and the basic theme was Sam took too much risk. And I guess that by itself is a crime. So whenever Sam was contrasted with Gary or Nishad or Caroline or someone else, we were told, look at the risks, look at the risks the other witnesses pointed out, and Sam didn’t agree with them. Sam decided to do something or not to do something. He took too much risk. Therefore, he committed a crime. And we saw that just in today’s summation, when Mr. Roos talked about an event at the end of 2021, when Sam was considering whether to make a venture investment, an additional venture investment, and he asked Caroline to do an analysis of this, and he asked her to make certain assumptions.

That’s called the 10 percent percentile document we looked at. Now, given how the government has approached this case, we can be sure if Sam hadn’t asked Caroline to do that, we would be hearing today, look how reckless he is. He considers a new investment of $3 billion and doesn’t do any analysis, doesn’t ask anyone to do any analysis. Now he asks her to do an analysis, and he also asks her to make very specific assumptions, pretty close to a doomsday scenario, and on those assumptions she recommends Summation – Mr. Cohen don’t do it. He considers it, decides that we are not in 4 doomsday and decides to do it. Who is right? Who is wrong? It doesn’t matter. They each had business judgments of whether to take that risk at the time, but Sam is not agreeing with Caroline, happened to be Caroline in that case, but it doesn’t mean he was acting with criminal intent. It meant they had a difference in business judgment. One last example of this heads, I win; tails, you lose formulation.

We heard about September 2022, and I’ll get to that in the chronology. And you will recall one of the events in September 2022 is that Sam sent a message to Gary and Nishad about whether to continue with Alameda in business, and it’s the memo that’s entitled, we came, we saw, we researched. And you heard Sam testify that he was putting it out there to start a conversation about whether they should close Alameda. And there is a lot of back and forth between Gary, Nishad, and Sam, and later Caroline is added to the conversation, where there is a different channel with her on it, and they ultimately decide not to close Alameda. If Sam is a criminal mastermind and Alameda is the key to the fraud to stealing customer money, why would he be the one proposing to close it in the first place? Why would he be the one starting this conversation? Answer: He wouldn’t. Because that’s not what he was doing. So with some of those thoughts in mind about how to think about the evidence and how to think about what happened, Summation – Mr. Cohen 5 let me now turn to the first period we have identified, the period from 2019 to 2021.

One thing I thought was just absolutely striking in the government’s summation today is not one word was mentioned about the business that was built here, the business of Alameda, the business of FTX. To hear the government tell it, four people got together, decided to steal money using Alameda as a vehicle, and went on and created these businesses, but that’s not what the evidence showed here. The evidence showed that they were legitimate, valid, innovative businesses, and they were legitimate, valid, innovative businesses in a new and changing world, the crypto world. You heard from Sam that he joined the crypto world because it was new and growing rapidly and it offered an opportunity for a math nerd like him. And you heard from him that because it was new, it was a place where someone who didn’t have extensive business experience could start, and you heard how Alameda started.

Maybe we could put up the next slide. There is a whole story here of the building of a legitimate business that the government never touched on, and it’s relevant because it goes to what Sam’s intent was at the time, and it’s relevant because it shows how he thought later about things like the code base, which we will talk about. You heard from Sam that he worked at a company called Jane Street, which I think is undisputed in this case was a highly regarded trading firm. He left Jane Street and he basically wanted to create in Alameda a Jane Street for crypto, a crypto trading company, and he set out to do that. And, by the way, one of the ideas he got from working at Jane Street was that you could fund this company by taking third-party loans because that’s what he had seen at Jane Street. So throughout most of the period in question, this period and later period, Alameda at any given time had 8, 9, 10, $12 billion of third-party loans from companies like Genesis and BlockFi. It had capital that it could use later on to make expenditures.

And then you heard how, in 2018, Sam and Gary started to build what would become FTX. The focus was to build a futures exchange. That’s why they named it FTX, which, unsurprisingly, was short for futures exchange. And Sam and Gary saw that the crypto industry didn’t have any sufficiently good exchanges for trading futures on margin. Here is Sam’s testimony of why he started the business. This is not someone setting out to create a fraud. This is Sam. We thought we might be able to build the best product on the market in exchange that would combine the elements that we thought were best for traditional financial products with the elements we thought were best for the crypto Summation – Mr. Cohen ecosystem, that it could move the ecosystem forward. 7 So this was not two guys, Sam and Gary, setting out to commit a fraud. They saw a legitimate, important financial opportunity, and they went for it.

Building FTX was an enormous undertaking. They worked all the time, and they had to build the exchange from scratch. They had no off-the-shelf solution to use, and they were productive and they were innovative. Other exchanges required customers to have separate accounts for each of their cryptocurrencies. FTX came up with a way to allow customers to hold all their digital assets in one account and buy and sell them seamlessly. FTX introduced cross margining, which we heard a lot about, which essentially meant that customers could trade at the same time across different currencies. If you owned Bitcoin and you owned Ethereum, you could trade at the same time. This was another major innovation. Let’s focus now on margin, margin trading. Understanding how margin trading worked on FTX is a key, we submit, to understanding what Sam did and, critically, what he thought at the time. FTX permitted customers to trade futures, it is called a futures exchange, and buy and borrow crypto on margin. What did this mean? This meant that the way margin trading worked at FTX, customers would borrow other assets posted to the exchange.

These were on the exchange — these were assets on the exchange posted by other customers. There was no other place for them to come from. That means that every customer trading on margin is using and relying on assets posted to the exchange by other customers. It wasn’t that there was just one limited pool that FTX had and that would limit margin trading. Customers were always borrowing essentially from each other. And at FTX, the way it was set up, margin customers could use the funds they borrowed from the exchange for any purpose. At the time no one thought this was a problem because the customers who borrowed funds on margin had to post collateral to support their borrowing. And if a customer’s position lost money, which means risk of going down, the collateral could be used to liquidate their position before it went under water.

There is nothing wrongful about margin trading. There is nothing wrongful about saying that in margin trading at times one customer is borrowing from another customer. That’s how it works. And you recall we had testimony from Dr. Pimbley, who did an analysis of the data, and he concluded that 80 percent of the assets on FTX were margined assets used in futures trading. 80 percent are in this margin trading where customers are always borrowing other customers’ assets. We can take that down.

Now, as FTX developed, Alameda did play some legitimate business roles. Nothing wrong with that. I mentioned that in our opening statement and the evidence supported that. To bring it full circle, if we can have the next 9 slide, Alameda had three legitimate business relationships with FTX. It was a customer on the exchange, which it was permitted to be. It was a market maker, and that was critical because when FTX began, it was a new exchange. It didn’t have any other market makers. If it couldn’t provide liquidity to its customers, it wouldn’t have grown at all. So Alameda stepped in and performed that role. As well, Alameda served as a payment agent. We have heard this in the evidence many times already, that at the beginning FTX couldn’t open its open bank accounts and that funds were received in the Alameda account and the North Dimension account or the North Dimension account, and the government’s own witnesses told you there was nothing wrong with setting that up. If we could look at the next slide. Here is what a customer saw. If you want to open an account with FTX, you are going to have to wire funds to Silvergate Bank, to an account for the benefit of North Dimension. There is nothing secret here. Customers were told what was going on.

These roles that Alameda played in the early days, in particular, were very important for FTX to get started and launched as a business. Over time, as FTX became more successful, other market makers came in. So by the end, by 2022, it was handling less than 5 percent of the market maker volume. But in the beginning, when you needed liquidity and when you needed customers, because without customers you wouldn’t have a business, this was an important role that Alameda played, and there was nothing wrong with hat. Putting this all together, Sam and Gary and the others created in just a few years a very successful crypto exchange. Remember that Sam told you that he thought, when he started FTX, his chance of succeeding was no better than 20 percent. Yet, against all these odds, in just a few years they built two highly successful innovative companies worth billions. Let’s go back to the slide about the time period.

Let’s talk about FTX’s growth and Alameda’s growth because what happened in this first period, particularly towards the end of 2021, is critical to understanding what was in Sam’s mind as he went into 2022, and in particular as we went into the crypto winter in May and June of 2022. Gary Wang testified that FTX in this period handled $15 billion in trades and 3 million in revenue per day and that the exchange had 6 million accounts. That’s Mr. Wang’s testimony at transcript 553. And you learned that from the attorney, Can Sun, that FTX was licensed in jurisdictions all over the world. That’s transcript at 1974. And Zac Prince, the CEO of BlockFi, the lender BlockFi who we will get to in a moment, he told you that of all the exchanges that have been founded in this period, FTX, among the hundreds, was one of the few that mattered. Along the way FTX created and launched its own exchange token called FTT.

We heard a lot about FTT in this case. And the government has suggested and argued that FTT was somehow a fake token, not a real asset, not real collateral. That’s not what the evidence showed. The evidence showed that, by the end of 2021, FTT had grown in value. It was worth 30, 40, $50 per token and it had its own market cap of about $10 billion. That’s at transcript 2372. The government wants to portray FTT as fraudulent, but that’s not what happened. It was traded on multiple exchanges, not just on FTX. Other exchanges having nothing to do with FTX traded it. It was accepted as collateral by sophisticated third-party lenders, just like BlockFi. And Mr. Prince told you in his testimony that FTT was one of the top cryptocurrencies that he would accept as collateral for loans. All this happened quickly, and FTX grew enormously. You learned that, in the last investment round in 2021, and early 2022, FTX International was valued at $32 billion and FTX Summation – Mr. Cohen 2 US was valued at $8 billion.

And if you look — bring the timeline back up — go back, again. If you look at, starting in the middle of the page, on July 2021, there is a series of fundraising rounds. There is a series B round in July, then the B1 round, and then the C round. What is that? That’s outside investors investing in FTX because they believed in the business, investing billions of dollars as a valuation of 32 billion for FTX International. Just to complete that, you heard from Ms. Ellison in her testimony that even though she has certainly many negative things to say about Sam, and we will get to that, and many negative things to say about what happened, particularly in the June to November time period, she told you that as of July — year end July 2021, Alameda financials were not misleading. So based on building the business, nonmisleading financials, it did these three fund raisings at this high valuation. You also learned toward the end of this period that Alameda was also — had also grown and was successful and it was worth tens of billions of dollars in net-asset value. And this means that as we came to the end of 2021, it was Sam’s view that, given this high valuation of both companies, that Alameda could easily cover any of the expenses or liabilities that it was reasonably likely to incur, either through its own value, its own revenue and profits, or its third-party loans. Summation – Mr. Cohen 3 And he also came into the year with the view that FTX was highly valuable, and he could sell its equity, if he needed to, to generate liquidity, and he personally also had a high value, was by that point a millionaire, billionaire, and he could put his personal wealth to use to resolve any issues on the exchange if necessary. That’s what he believed as we came into the year. Your Honor,

I’m at the 45-minute mark.

THE COURT: OK. Is this a convenient spot?


THE COURT: We will take 15 minutes. (Recess)

THE COURT: Let’s get the jury. (Jury present)

THE COURT: The defendant and the jurors all are present, as they have been throughout. You may be seated, folks. Mr. Cohen, you can proceed as soon as the jury is all seated.

MR. COHEN: Thank you, your Honor. Ladies and gentlemen, when we broke I was just about to talk about the spending, some of the spending that was done by FTX and Alameda. And, again, this is another example, we submit, of the government trying to show you the movie of Sam the villain. But the business expenses that were incurred and Summation – Mr. Cohen 4 paid for were entirely normal for a company of FTX’s size and complexity and its business model, as well as Alameda, and this is perhaps best encapsulated by the evidence we all reviewed together about sponsorships.

This is a really good example of the government trying to prove its case by hindsight. You recall Sam told you about a sponsorship that FTX did of the arena in Miami, the FTX Arena. The government in its presentation said, aha, this is a perfect example of what we are seeing, ladies and gentlemen. FTX bought that with customer funds. But, in fact, Sam testified, and the evidence about the world going into 2021 was that FTX had a multibillion dollar valuation, it had a billion dollars a year in revenue, and certainly had more than enough assets and revenues and profits to pay for such expenses.

So the government said, aha, this is a great example of using the fiat@ funds improperly. Of course the evidence in the case was clear that not Sam, not any of the others knew about the fiat@ issues until mid 2022. Then the government says, well, it doesn’t matter. This is yet another example of Sam being reckless in his spending or spending too much, and that’s what Mr. Nishad testified to when the government went through this with him. You saw that when they went through the actually facts and the evidence of what went on, the government had Nishad Summation – Mr. Cohen 5 tell you that the total deal for all sponsorships was 1.13 billion for one year. That’s transcript at 1334, on Government Exhibit 343 at row 72. But it turns out that wasn’t true. FTX never paid that amount. The sponsorship wasn’t for one year. It was for 19 years, as shown on the chart. The government — and FTX was going to pay Miami, the arena, over a period of 19 years, and in the first year for the naming rights it was going to pay about 19 million or 14 million. Now, certainly that’s a lot of money. We are not saying it’s not. But relative to the size of FTX and relative to the size of its marketing expense, it was a reasonable investment, and Sam told you that FTX spent about 10 to 20 percent of its revenue on marketing, which is less than he believed their competitors spent.

This was no different than having a field in New York being called Citi Field or suites at Yankee Stadium called Delta Suites. There was no evidence of a crime. We also heard a lot about the properties in the Bahamas that were purchased. But the real issue is, again, the why. Why did Sam purchase these properties? Why did FTX purchase them? Sam was clear on this in his testimony. The Bahamas real estate was corporate housing for FTX employees. It had to convince skilled professionals to uproot their lives and move their family and friends to the Bahamas to work for FTX.

He saw these properties as a valid business expense for FTX. It’s one thing to look for a resort in the Bahamas for a week or weekend, finding long-term housing that appeals to workers who could otherwise be at Google or Facebook is quite another, and no one in FTX thought the company’s investment in the real estate was a problem at the time. No one refused to live in the company-owned housing despite their protests after the fact. In fact, you heard from Can Sun about this. We will talk about him later as well. Remember, the government referred to him. He came on to be the general counsel of FTX. Now, we will talk about it later. His testimony was, shall we say, sculpted. Very careful. This was someone who had a Ph.D. from Princeton, law degree from Yale, who had worked for one of the leading law firms in the world, was admitted in New York, was the general counsel of the FTX but told you he wasn’t even sure if that was the senior legal position there. And later we will see he was very, very careful in what he told us about what he thought happened with Sam in later events. He even said he was coming just to tell us what happened and didn’t bother to mention that he had received a nonprosecution agreement which he had signed two days before he testified. Even someone who was as careful as Can Sun admitted that he received a $2.3 million loan. What was the purpose?  It was part of a management incentive program to incentivize employees to move to the Bahamas. Did he take the loan? Sure, he did. He didn’t think there was anything wrong with it. It was a valid corporate expense. And you heard a lot about the penthouse apartment that Sam lived in with nine other people, including Gary and Nishad and for a time Caroline.

You will recall during the questioning when a witness would refer to the apartment, the government would interrupt them and say: You mean the $30 million apartment. The apartment. You mean the $30 million apartment. Until the witness would get it and say, as I meant, the $30 million apartment. What was that all about? To make you think, who is this guy, living in a $30 million apartment. What kind of nerve does he have. Make you dislike him more.

But, again, given that FTX at the time was a multibillion dollar company and that Sam and the others wanted to live together and work together, and they were the senior leadership of the company, it was a valid business expense. And you heard I asked Nishad about it, and I pointed out that the ten people living in the apartment at the time were either millionaires or billionaires and asked him if he thought that was an acceptable expenditure a relative basis. He told you, well, I can’t say how a billionaire is supposed to live, which is frankly not an answer. You heard today about the private plane. Sam flew in private planes. Sam told you why he did that. He thought it was a valid business expense, given the size of the company and his need to get to places like Washington, D.C., where were weren’t that many flights available on a given day; again, a valid business expense for a company of the size and complexity of FTX. You heard a lot about venture investments and loans that were made by Alameda to Sam or Gary and Nishad to fund the venture investments.

But, again, Sam told you he believed that Alameda, based upon its capital base, its third-party loans, its profits and so on, had the basis to make those loans and in fact they were — if we go to the next slide — they were documented by promissory notes. Let’s talk about another thing that counsel mentioned this morning that sort of sets the backdrop as we come into the period in May of 2022, the terms of service. You saw — if we could pull it up — a terms of service that was dated May 13, 2022 and issued by FTX. Now, the government’s case, when it comes to the fiat@ account, depends on FTX not being allowed to borrow assets from FTX customer fiat deposits. That’s what it depends on. Because if they could do that, that part of their case falls away. So what did we get here over four weeks? Witness after witness comes before you, and conveniently none of them  happen to read the terms of service.

The government didn’t want to focus you on that. Why? Again, the only witness who said he had read the terms of service was Can Sun, the general counsel who had helped to draft it. Even though he was very careful in what he told you, he admitted that nowhere do the terms of service contain language that prevents FTX from loaning customer fiat deposits to Alameda or anyone else. Just a quick point on the venture capital investments. Not only could Alameda have funded those from the capital base it had from third-party loans, you heard the government’s own witness, Professor Easton, testify that, in 2021, Alameda had borrowed $15 billion from third-party lenders, again confirming this point that there were more than ample funds to make the venture investments. Given what the world looked like to Sam and the others, as they moved from 2021 into 2022, why would he think that money owed to customers was ever at significant risk when the assets he had access to were so much greater than the debts that needed to be paid out? He didn’t, and he wouldn’t.

A few more key points for this period before we move on. We have heard a lot of testimony about the difference between the info@ account on FTX and the fiat@ account. We could pull up that slide. I just want to briefly spend some time on this, ladies and gentlemen, because it affects how we think about what Summation – Mr. Cohen happened later on. Two different accounts, often in the 0 government’s presentation they get mushed together, but they are actually distinct and the distinction is important. If you look to the right-hand side, info@ Alameda was the trading account that Alameda had on the FTX exchange where it was trading for its own account. If you look at the visibility on the admin user dashboard at the bottom, when Sam was the CEO of FTX, no longer running Alameda, he would use that admin dashboard, as others would, to check accounts of all customers, including Alameda, and what he could see was what was in the info@ Alameda account, the trading account. On the left-hand side is the FTX — account.

That was very different. It was a tracking account. It was supposed to track FTX customer deposits and withdrawals of fiat or dollar, currency, so forth, via Alameda bank accounts, and it wasn’t visible from the admin user dashboard. When Sam would check, and he told you this, the info@ account at the end of 2021 going into 2022, what did he see? He saw that Alameda had borrows, loans, of 2 billion because Alameda did trade on futures, which allows for margin, and some of the subaccounts were margin accounts. But that those borrows were covered by many more assets than $2 billion. No reason for him to think there was a problem. And, in addition, toward the end of 2021 and frankly going into 2022, all the way to November, at no point was there Summation – Mr. Cohen a time when a customer wanted to withdraw funds from the 1 exchange where he or she could not. Gary told you that no customer waited longer than a day for a withdrawal prior to November 2022, that all withdrawal requests were honored.

That’s Gary’s testimony at page 504. Again, this gave Sam no reason to think anything wrong was happening in Alameda’s accounts or how they were being tracked in FTX’s systems or that customers were not being able to receive withdrawals if they wanted to. Now let’s turn to a topic that counsel spent a lot of time on today, a lot of time, and during this trial. That’s the codes and the code base. The government’s theory is, these codes were secret and that Sam, in perhaps one of his most villainous acts, secretly directed Gary and Nishad to put these codes in place. I think the government’s word was so that he could create a back door to steal customer money. That’s what we were told over and over and over again. But the evidence was different. The evidence was the opposite. We found out that the codes were not secret, that in fact anyone who had access to the FTX code base could see them. So if you look at this slide, this we went over with Nishad, and it says: Coding features were visible to anyone with access to the code base. If you look at the bottom, here is what’s called a code commit that Nishad wrote that says to other developers who Summation – Mr. Cohen 2 looked at this: Be careful not to liquidate PMM, which we learned was primary market maker, which at the time was Alameda, clean up messages. We asked Nishad about this. We asked about visibility in the first place. And here was the exchange. Based on your experience as head of engineering at FTX, did you have an understanding of who might access the code commits we were just looking at? They were available to the whole company in Slack, if nothing else.

There were Slack logs of all the messages. We submit this is the opposite of secret. If these coding rights were actually intended to serve as tools to steal, it makes no sense that the group of people in a company with hundreds of employees would have access to them. It makes no sense. The whole idea of a conspiracy is that you are trying to keep things secret so you won’t be detected. There was nothing about this code base and the commits that were kept secret.

Let’s talk for a moment about the allow-negative function that counsel spent a lot of time on. The government claims that it was set up as another way to siphon funds, but, again, that is not the evidence in the case. You heard from both Gary and Nishad, and the quotes are up here, that they were set up originally, allow negative, for a few other bookkeeping accounts on FTX, said Gary, and for accounting oriented accounts to go negative, said Nishad. Again, this  wasn’t set up to be some back door to abuse anything. We can take that down. 3 You heard a lot today and during the trial about the line of credit. What you heard was that the government kept saying one of the reasons we know Sam was a fraudster is, he directed Gary and Nishad to put up the line of credit to 65 billion.

Look at that. That’s bigger than anyone else in the company. That’s way bigger than anyone else. But they never asked the why question. They never went into the fact that in fact, in practice, only about 3 billion of the line of credit was used, not 65 billion, and that it had been raised because of the fact that when Alameda was the main market maker, it had to put out many, many open orders during the day, and in order to be able to put those orders out, it needed more collateral. So the letter of credit was used to take its place, and, in response to that, Gary raised the limit several times until, finally, he decided to raise it to a level where it wouldn’t be hit again, just move the parameters out. That’s his testimony at 397 and Nishad’s testimony at 1554.

This was all done in response to specific issues, to business issues, and done to help customers, not to hurt them. In a related vain, let’s talk about this complicated word, auto deleveraging event. You heard both Sam and Nishad testify about this. What was it all about? When liquidations were happening on FTX, Alameda and Summation – Mr. Cohen other large traders would step in as backstop liquidity providers to close out the insolvent accounts and prevent further harm to the exchange or customers. An auto deleveraging event happened when FTX ran out of backstop 4 liquidity capacity. In other words, first, they went to the collateral in the customer account. If that didn’t work, the risk engine went to the backstop liquidity provider. And if that didn’t work, we had an auto deleveraging event where the engine would start to pull in collateral from any customer’s account who had authorized margin trading. And FTX wanted to avoid that because customer A didn’t want to have his or her funds used to cover losses from customer B if it could be avoided. Sam told you about an event that happened in 2020 where due to the servers being overworked, it ran — it was running behind, and there was a threat not just of the backstop liquidity providers being liquidated but Alameda itself being liquidated, and they concluded this would be really bad for its role as a market maker. It would hurt customers, so they put in a provision to delay that liquidation. (Continued on next page) 22

MR. COHEN: Again, not out of some intent to steal, not out of some nefarious intent. And before we take that down, I just put up Government Exhibit 1617, which is before you, just to show the letter of credit actual usage in the pre-October 2022 period. So that takes us to the end of this first period of 2019 to 2021. And I also want to point out something else as we came to the end of this period. Sam’s good faith, as I mentioned, is a defense to all the charges against him. And no witness who testified about this period has testified that Sam ever told them that he’d set up FTX to steal funds or allowed anyone to install secret code-based features to steal funds, or told them that he was using this as a way to steal funds from the exchange.

The testimony counsel pointed to earlier today from Caroline was simply about the ability to borrow on the exchange; it wasn’t some secret code base to steal from customers. So now let’s move to the second period. Put up the next slide, please. Okay. I’m going to talk about the fiat bug, which we all spent a lot of time on this case, but again, first let me set the stage. In May and June of 2022, if you look outside your window, if you’re in the crypto world, you see a storm. Companies are going out of business.

There’s stress  everywhere. Bitcoin, the leading indicator and the hallmark, it has dropped by 70 percent. And it’s against this backdrop that the sequence around the bug plays out. And what happened as a result of this is that a group of people began to realize that there was a fiat@ bug and there was a fiat@ liability, which I’ll talk about in a moment. So again, what happens? Well, we learned from the evidence that in July, the year before, a bug had been introduced inadvertently into the system. And the effect of the bug was it caused an error that caused the fiat@ accounting entry to appear as if it was 8 billion larger than it was. The upshot of this was it looked like Alameda owed FTX $8 billion more than it really did. So that’s right here, what was going on. And in fact, later in 2021, Gary, Nishad, and Adam Yedidia complained about the bug, and at the time, it was only causing a $500 million impact. Now to most of us that’s a lot of money, but at the time, you heard the testimony from Nishad that Gary was relaxed, not stressed about this. This was apparently on everyone’s list of something that needed to be attended to and hadn’t yet been attended to. And so it doesn’t goóóit doesn’t get corrected or fixed. Six months go forward and now in June 2022, the stage is set when Caroline comes to the FTX office where Sam, Gary, and Nishad are working, and she tells Sam she thinks Alameda  might be insolvent, and that it also will need to repay its lenders. And I want you to stop and really think about this, because it’s a very important moment for an issue we submit hangs over the whole case. And think about what it means for not having a fully built out risk management system.

The CEO of Alameda wasn’t aware that there was a bug in the system for six months after it had already been discovered, and she woke up one day and believed that her company, which previously had a NAV of 8 to 10 billion, was now bankrupt, overnight. How could that happen? Not through Caroline’s fault, not through Sam’s fault, not through anyone’s fault. It resulted from FTX lacking a fully built out accounting risk management system. Ask yourself, if they had had a full-time chief risk officer, would that person have let it happen? And what’s even more remarkable about this is but for the seemingly accidental discovery of the bug in June, we don’t know when Alameda or Sam or the others would eventually have appreciated the scope of the fiat@ liability, or taken steps to address the underlying causes. So coming back to this, to the time line, when Sam heard that Alameda might be bankrupt and needed to repay lenders, he saidóóand he testified to this to youóóthat didn’t sound right to him.

And he asked Caroline, How confident are you in this, that Alameda is insolvent? And she responded, up front, Not very confident. Summation – Mr. Cohen 8 So what did they do next? They bring in Gary, who’s the chief technology officer at FTX, Nishad, who’s the number two technology person, and then other developers, Adam Yedidia, Andrea Lincoln, and other developers, to get into the issue and figure out what happened. And again, if what’s really going on here is that this “inner circle” is running a conspiracy, the last thing they would do when this bug came to the fore is bring in all these other developers to look at it. After about an hour, or after about two or three hours of work, the team led by Gary determines that the $8 billion liability isn’t real and there was a bug in the system. And everyone’s relieved. You thought that Alameda was insolvent and now you find out it’s back to being worth 8 to 10 billion in NAV.

And this led to the other issue we talked about, repayment of the loans. Now when Caroline firstóóSam told you that when Caroline first came to him about concern about insolvency, she raised another valid concern, can we repay our lenders, should we repay our lenders? And Sam told you that once he understood that the bug was fixed and believed that the NAV was back to 8 to 10 billion, which, again, was consistent with what he saw on the info@ account, that it wasóóhe was fine with repaying the lenders. And that payment was made. Now there is a problem with some of the testimony about that payment, and it has to do with how it was done and Summation – Mr. Cohen 9 the scale. And you should consider that when you evaluate the whole sequence. Caroline testified to you that what happened was, Alameda “would have to take the money from our line of credit to pay the lenders.”

And that’s at transcript page 763. And I asked her, Well, if that’s true, if the lenders were being repaid off the line of credit, wouldn’t 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. Pimbleyóóand that’s Defendant’s Exhibit 617óóyou 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. It repaid some of its line of credit, Alameda repaid some of its line of credit usage but not on the order of the 5 to 10 billion that Caroline claims. She was just mistaken in that. And during that same sequence, we heard a lot from the governmentóówe heard about it todayóóabout a spreadsheet of seven alternative balance sheets that Caroline prepared. And we heard, this is one of the most nefarious things Sam did. He directed Caroline to prepare multiple spreadsheets to send to the lenders, and the idea was, let’s pick the one that’s going to be the most misleading and send it to the lenders. But again, we submit that the evidence didn’t support this interpretation.

Sam told you he reviewed the spreadsheet. government made a big deal today about, oh, the metadata showed that he didn’t. He said he did, but he only remembered reviewing one of theóóone of the balance sheets. And that’s actually consistent with Caroline’s testimony, where she said at page 1070 of the transcript that she only discussed some of them with him. And if you think about it, Sam believedóówe had gone from thinking Alameda was oh, my god insolvent to being worth 8 to 10 billion. He certainly was now okay repaying the lenders. He received the balance sheet that he looked at, which looked like the ones he had seen many times before from Caroline, and given all the other things he was doing, working 12 to 22 hours a day, dealing with 60,000 emails in his inbox, being a member of hundreds of Signal groups, it seemed reasonable to rely on the spreadsheet he had been given by Caroline. And two other things about this. Ask yourself, if you’re a fraudster, why would you repay the lenders? Why don’t you just keep the money and run? That’s a billion dollars, even on the reduced scale. You wouldn’t. If you were a fraudster, why would you repay the lenders and give them a false balance sheet? It doesn’t make any sense.

And there’s a third layer that’s really important, perhaps the most important layer for this sequence, that, in fairness to Caroline, she couldn’t know about. Sam was having separate discussions with the leadership of all the lenders,  BlockFi, Zac Prince, Genesis, Voyager. At the same time as these loans were being repaid, they were reaching out to Sam in a separate discussion. Their other employees were talking to Caroline about the loans at issue, but these CEOs were reaching out to Sam about the following: Hey, we’re in the crypto winter too, hey, we’re having problems, you think FTX could loan us some money? You think FTX could invest some money in us to help us get through? And in fact, you heard that FTX wound up making a loan, and with the possibility of an investment, to BlockFi. You heard that both from Sam and from Zac Prince, the CEO. And ask yourself, if you were making a loan to a company that you’re going to maybe buy eventually, why in the world would you spend time sending it a false balance sheet? You wouldn’t.

So coming back to the aftermath of the bug, once the bug is discovered, what do Sam and the others do? Well, we submit they sort of act sensibly, and Sam does as well. First thing he says is, you know, we got to fix this. We got to make sure we don’t have another situation where we’re off by $8 billion in our account. So he asked the team that ends up being led by Nishad and Adam Yedidia to fix the bug. And they do. It takes a few weeks. What’s the other thing he does? Well, if you’d call up slide 26. He says, it’s not just the bug, we really need to fix Summation – Mr. Cohen 2 our accounting, because we can’t have this where we’re off by so much, and whether youóóthis is now looking at it from FTX’s point of view. We can’t have a customer like Alameda, large customer, where the accounting is so far off. And he went over with you his live issues for September 27, and his list of priorities, which we looked at earlier this week. Each of these prioritiesóóthere’s this list of 16. Each of them involves or collectively they involve billions of dollars. And what does he call out as something that’s really important?

Let’s get the accounting right on FTX. And he had asked Andrea Lincoln, one of the developers, to work on that, with an ETA of October 15th. So that’s something else that you would expect a CEO to do, to want to do. Let’s get the accounting in shape. And coming out of that sequence, Sam told you that for the first time he learns that separate and apart from the bug, okayóótake that 8 billion, get it off the table, separate and apart from thatóóhe learns through this sequence, through discussions, that there’s another liability that Alameda owes, that’s in the neighborhood of 8 to 10 billion. And again, not just system, but no one testified that they knew about this liability, which we’ve come to learn was related to the fiat@ account, before June 2022. In fact, Caroline told you that during her time as CEO of Alameda, before that, she had been seeing what she called otherwise confusing decreases in Alameda’s assets from the bug. She  didn’t quite know what was going on with this liability. And Sam told you he certainly knew in around this time in June that there was this big liability, 8 to 10 billion. The government makes it sound like he’s fighting with the others about knowing this. He wasn’t.

But what he didn’t put together until September or October, which is, by the way, when Nishad put it together, that Alameda had this additional 8 billion, $10 billion liability and it was associated with the fiat@ account. And as Sam is piecing things together and thinking about it, what does he think? He thinksóóand the government was critical of this, but frankly, we think this is how many CEOs would thinkóóhe thinks, well, it is what it is. We don’t have the situation. We had a messed up accounting system. We had a messed up risk management system. And now we have a very big liability that we didn’t know about that we have to address. And he spendsóóand he thinks about it as a liquidity issue. Does Alameda have assets on the exchange or off the exchange to take care of it over time? Are there assets at FTX, can he use his equity, can he use other assets. And we would expect that’s a reasonable way for him to look at it as the CEO at the time. And this isn’t what Mr. Roos said. This isn’t saying, oh, things will work out all right at the end. This is how he’s thinking about it at the time, and it’s a reasonable way. 

And let’s turn now to September. This is another point where the government says, oh, there’s this “aha” moment about Sam proposing shutting down Alameda, and I talked about that earlier in my summation, where Sam sends the memo “we came, we saw, we researched,” where he proposes shutting it down. And as I mentioned beforeóóI won’t belabor it hereóóif he really thought Alameda was the key to his fraud, if this was the engine to keep stealing money from customers, the last thing he would do would be to propose shutting it down. And there’s a discussion between Caroline, Gary, Nishad, and Sam where they decide not to shut it down and they move forward. And we think, and we submit, that what the evidence showed is that each of them came to different realizations at different points in time. Caroline told you she came to her realizations about the impact of the fiat liability in June and July. Nishad told you he came to that realization in September. Gary was somewhere in between. Sam told you around September and October. Does that make any of them right or wrong, for not being consistent with each other? No. That’s how they looked at it from a business point of view, from a business judgment point of view, of people trying to figure out what had happened, what this liability was, how do we deal with it, how do we get our arms around it.

Which brings us now to November 2022. And when we talk about November 2022 and there’s been a lot of testimony and evidence about this in this case I want to break it into two categories: what happened; and what were Sam’s statements during November? And we’re talking about those 11 days, November 1 to November 11. And I told you in openingóóand I think I was borne out by thisóóthat a lot happened in those 11 days. Things were literally changing moment by moment. And that affects what Sam thinks moment to moment, that affects how he reacts moment to moment, and we submit as he reacts moment to moment, his state of mind is somebody who’s acting in good faith and doing the best he can under what are very, very difficult circumstances.

So the sequence begins on November 2nd, when an article is leaked by CoinDesk, which is a leading crypto publication, that leaksóóan article appears that leaks Alameda’s balance sheet. Now the article has the effect of causing some of FTX customers to start withdrawing assets from the exchange, which ultimately, toward the end of the week, sets off what Sam called a run on the exchange. In his view, the run was all the customers on the exchange or almost all of them suddenly want to be taken off the exchange. And what’s his reaction when it comes out, when the article comes out? Well, they talk about how to address it. A tweet is put up to address it, and things move forward. What happens then? On November 6th, there’s a tweet from CZ, the CEO of Binance we all heard so much about. And he tweets that he planned to sell his substantial FTT holdings because the balance sheet that had been leaked had showed that Alameda owned a lot of FTT. And this has a more dramatic effect.

Because now this is a disclosure not about how the market is going in general, how the crypto market is declining in general; this is a disclosure that affects FTT specifically and therefore affects Alameda, which owns a lot of FTT. And now you heard right after that tweet on November 6th, Gary testified that withdrawals skyrocketed. That’s at page 568 of Gary’s testimony and 567. He told you that prior to November 6th, a typical withdrawal volume for FTX was 5 to 10 million an hour, but on November 6, FTX starts getting withdrawal requests of over a hundred million dollars an hour, which amounts to over a billion dollars in the first day, which isóóI think Sam also told you.

Now this is becoming an unprecedented situation. So in this crazy situation, with the storm going on outside in the general market but now a specific storm about FTT and about Alameda and the value going down, we submit Sam acts appropriately, as best he can. What did Caroline say about what Sam did? She said that Sam “said to liquidate Alameda’s positions and send the money to FTX.” That’s at page 893. And that is a sensible thing for a CEO to do during that period. Sam also continues with efforts to raise capital because he’s thinking, I still have this liquidity issue, Alameda’s NAV is positive but things are getting tight, and I’m going to need to raise capital. And in the course of raising, seeking to raise capital, Sam reached out to a number of lendersóóexcuse meóóinvestors, and he asked others on the team to reach out to a number of investors. And one of those lendersóóexcuse meóóinvestors that they reached out to was a company called Apollo, which is a leading investment firm in New York, and you heard a lot about that.

Now this is where we bring Can Sun back into the picture. Sam had reached out to Apollo, investments were handled byóóinvestor relations, you heard, were handled by Sam and a fellow named Ramnik Arora, who is there in the Bahamas also working on this, and Can told you that he learned that Sam had sent a balance sheet to Alamedaóóto Apollo, and the balance sheet he sent reflected the fiat@ liability. It’s the opposite of seeking to deceive Apollo. He sent them the balance sheet that was now updated to show the effect of the fiat@ liability. Even Can admitted that. And then there was a conversation that Sam was going to have with Apollo where they’d asked questions about how could things have happened from a legal and compliance perception, and Can does research and he goes over it with Sam, and the net of it is, based on what we found so far as regards the fiat@ liability, we don’t have an explanation from a legal or compliance point of view. And Sam, in his style, says, Yup, okay, that means I can’t tell that to Apollo. And he doesn’t. And he’s on the call with Apollo right after speaking with Can, and Can is not on the call.

What else happens during that week? Well, on November 9th, there’s an all hands meeting that we heard so much about that Caroline has for Alameda. And if we could call up slide 29. And let me set the stage for this, ladies and gentlemen. This was a regularly scheduled meeting. Sam is not going to attend. It’s for Alameda people only. And you saw this exhibit in evidence that Caroline reaches out to Sam and others about how to approach the meeting. And she says: “Thinking about what to tell people at Alameda all hands.” “Right now I’m thinking a vibe of ‘Alameda is probably going to wind down, if you don’t want to stay or want to take some time off no pressure, if you do want to help with stuff like making sure our lenders get repaid it’s super appreciated'” “Does that seem right?” And Sam says, over here, “and maybe something about there being a future of some sort for those who are excited but that you can’t know for sure what it is.” Well, how did the government present this to you? They presented it in two ways. Sort of, again, the “heads I win, tails you lose” way. First they said, Aha, you see, this Summation – Mr. Cohen 9 meeting was really Caroline confessing that they’d all been committing crimes for the last few years, three, four years. But if you read the setup to this meeting that Sam’s involved in, he’s not at the meeting, this is not written by someone who’s planning to confess.

The second alternative, government says, well, if you don’t like that one, here’s another one. This is part of a coverup. It’s a way to get people to keep working without telling them anything about what’s happening. It’s about a vibe. We submit this doesn’t support that interpretation either. And in fact, after the meeting, Caroline reaches back out to the same group and she said she “thought it had gone well.” And that’s the tape you listened to. Neither excerpt is consistent with someone who is covering anything up, who’s doing anything at the direction of Sam. Just to complete that week, Sam is reaching out wherever he can to raise capital. No question they need capital. Alameda is very tight. Sam still believes until the very end of the week that it has a liquidity issue, not a solvency issue, although by the end of the week that comes. So he even reaches back out to Binance, FTX’s bitterest rival, his own personal rival, and he says, hey, you have capital, will you do a deal with us, and Binance signs a letter of intent with them. And there’s negotiations over a frenetic day about, hey, maybe we can sell FTX to Binance.

And just to drill down on what that would mean, that would mean selling the equity that Sam owned in FTX to Binance so that funds could come in to pay expenses, to pay lenders, investors, and customers. So Sam is, as he always was, willing to give up everything he had in order to take in the capital if he could and save the situation. So that’s what happens during that week. Now let me come to the second part I want to talk to you about the week, which is, what did Sam say during the November crisis? Now the government, again, because in their movie Sam’s a villain, or mega villain, says that all week he’s just sort of wheeling and dealing, he’s lying to his employees, he’s lying to the outside world, he’s doing anything he can to hold on to the company and keep people from making withdrawals, even though they’ve had billions of dollars of withdrawals, all of which had been paid. And then when we look at the actual evidence from that period, we submit it doesn’t support what the government says. If we could pull up slide 30. This was the November 6th tweet regarding the leaked balance sheet. And there was testimonyóóand you saw an earlier draft of it.

This was something that Caroline worked on with Sam and others. We ought to put out a tweet to respond to the CoinDesk story. We ought to tell the market what we think happened. \ And the tweet makes three points. First, at the top, Caroline saysóóand certainly Sam is on board with thisóó”A few notes on the balance sheet info that has been circulating recently,” meaning the leaked balance sheet. “That specific balance sheet is for a subset of our corporate entities, we have greater than 10 billion of assets that aren’t reflected there.” And is that accurate? It certainly is. If you look at the corporate entities, which include Alameda’s assets on and off the exchange, FTX’s equity and other assets, it’s an accurate statement. What does Caroline next say?

“The balance sheet breaks out a few of our biggest long positions.” Long is where you’ve bought something. “We obviously have hedges that aren’t listed.” Is that accurate? It certainly is. You heard a lot of testimony, not just from Sam but from Caroline and others, about there was a sequence going through the year of putting on hedges, talking about putting them on, and for the first part of the year no hedges were put on, but finally, by this period, at the end of Novemberóóin the middle of November, hedges had been put on. Now they don’t work as well as they should have. By the way, that’s not anyone’s fault. We’re not faulting Caroline, we’re not faulting Sam. The hedges they finally put on were to the general market, if the general market was down. The problem they had was the move was about FTT and Alameda’s specific assets so the hedges don’t really work as well as they could.

But that statement is accurate. 2 “Given the tightening in the crypto credit space this year we’ve returned most of our loans by now.” And they had. They had paid back the lenders. So that statement on November 6th by Caroline, or Caroline working with Sam, doesn’t advance the government’s case. It doesn’t move the needle at all. And let’s look at the next slide, 32. This is right after CZ makesóógo back. Go back to the other one. This is right after CZ makes the offer to buyóósell his FTT at $22. Caroline writesóóand she said she consulted with Sam and others in that, and that’s rightóó”CZ, if you’re looking to minimize the market impact on your FTT sales, Alameda will happily buy it all from you today at $22″ per token. That’s an accurate statement. $22 was a fair market price. It was the six-month low. You heard that that from Sam. Sam believed that they had the wherewithal to buy the tokens if they needed to.

Now I think there was some concern by Sam and Caroline that maybe CZ wasn’t really selling, he was just doing this to hurt FTTóóFTX. Maybe he was, maybe he wasn’t, but this statement in response was accurate. If we could go to the next one. And I’m going to go out on a limb here. I think this is the government’s favorite piece of evidence. I don’t think Summation – Mr. Cohen 3 there’s a witness they haven’t showed this to more than one time. And they used it again and again in their openingóóexcuse meóóin their summation. But let’s talk about what really happens here.

This is November 7th in the morning. Sam tweets, “A competitor is trying to go after us with false rumors.” He believes that. That’s CZ, Binance. Sam believes they are going after us with false rumors. And then he says, “FTX is fine. Assets are fine.” And he told you why he felt he could write that. And it’s the same thing we’ve been discussing. As of the morning of November 7th, from a liquidity point of view, Sam believed that Alameda had assets on and off the exchange that could address the liquidity issue and that FTX also had assets that could address the issue. And here’s the critical companion to this, the part that the government didn’t ask any of its witnesses, even though they showed this slide to all of them.

By the next day, by November 8th, the price of FTTóóremember, that’s what’s causing the specific run, FTT is plummeting. Because of all the things that are happening, the price of FTT has dropped, Sam told you, to all the way down to close to zero, $5 a token. What does that mean? It means assets are not fine. So what does he do? He takes the tweet down. And this was corroborated by the stipulation we read to you showing that in fact on November 8th, this tweet was taken down. So again, if all he’s doing this week is wheeling and dealing like a Summation – Mr. Cohen 4 fraudster, why would he do that? Why wouldn’t he put up an even more outrageous tweet? He wouldn’t, because he’s reacting in realtime as events are unfolding, and once he sees that because of what’s happened to FTT, I can’t say this anymore, he takes it down. The other thing that happens during that week isóóif we can call up the next slide. óóis the following:

And let me just set the stage for this. We’ve had a lot of testimony from all the witnesses. Maybe this is the second favorite topic, after the last slide, about deletion, and auto-deletion, and the government said, Aha, you know how we know Sam’s a fraudster? You know how we know he’s nefarious? Is because on a few occasions, he deleted Signal messages ’cause he was trying to hide evidence. And what Sam told you was in fact, FTX, like a lot of companies, had a data retention policy, or data protection policy, and his understanding of it was it created three categories. One were messages you had to preserve, things that you might show to regulators, for example; the second category is things you had to destroy, things like people’s Social Security information, personal data; and the third category was sort of everything else, which, as Sam understood it, allowed the person who was dealing with the chat to set the delete or not as they saw fit. And even with all thatóóand so over time, Sam and others would delete certain messages. 

And even with all that, here we are in November, the week of November 11th, the worst week in the history of the company, and what does Sam do in the three chats called out? The first one is Hashtag Organization. Its participants are him, Nishad, Gary, and Caroline. He turns off auto-deletion, on November 9th. The next one are messages just between him and Caroline. On November 10th, he turns it off. And again, him and Gary, he turns it off. We submit this is the opposite of someone who was running a fraudulent scheme would do. Your Honor, we may have hit a natural breaking point.

THE COURT: You mean for the day?

MR. COHEN: Well, I have a lot more to do, soóó

THE COURT: Sidebar, please.

MR. COHEN: Sure. (At the sidebar)

THE COURT: If you want to break, we’ll take a break.

MR. COHEN: I’m just concerned, your Honor, it’s been a very long day, and I’m concerned that the jury is not going to be paying attention as we get to 5:30, 6:30.

THE COURT: Do you have a view?

MS. SASSOON: No objection.

THE COURT: We’ll go on.

MR. COHEN: Can we take a break, your Honor?

THE COURT: Yes, sure. (In open court) Summation – Mr. Cohen 6

THE COURT: We’ll take a break, but I’m told we should finish by 6 or 6:30, and unless somebody has a serious problem with that, which you’ll let me know by a note when you come back from the break, I’d like to go on, but if there’s a serious problem, I won’t. So we’ll take a 15-minute break. (Recess) (Continued on next page) 8

THE COURT: The jury was given an opportunity to make calls to enable them to stay, and we are going to continue; not indefinitely, but continue. Let’s bring them in.

MR. COHEN: Thank you, your Honor.

THE COURT: I think it is in everyone’s interest to get the case to the jury.

MR. COHEN: I understand, your Honor. (Jury present)

THE COURT: Defendant and the jurors all are present. Ladies and gentlemen, thank you so much for accommodating this later-than-usual sitting this evening. We are simply trying to complete the matter in an appropriate way. You may continue.

MR. COHEN: Thank you, your Honor. Again, thank you, everybody, for staying. We really appreciate it. This obviously could not be more important to me and my client. Thank you. When we broke, I was just finishing talking about the period that ended in November 2022. There is one last piece I wanted to cover quickly that goes into December. The government, in its summation, talked about Sam’s talking to journalists in November and December, and the government’s theory apparently was this is yet another example of Sam the criminal mastermind. 

And we submit that when you think of it with your real-world experience, their theory makes no sense. He decided to speak with something like 50 journalists in November and December. He did that even though he had no access to his records, not even to his email, and even though, as with Good Morning America, he didn’t know what he would be asked. And the notion that he was somehow going to navigate 50 interviews as part of an elaborate coverup just doesn’t make any sense, and we submit you shouldn’t put any weight on it. The last piece from this period is the testimony you heard that the government elicited from Gary Wang about the Bahamas in the period right after November 11. And the testimony and certainly the implication from the government is that not only was Sam running this criminal enterprise for three years, not only was he along the way lying to Congress, not only was he, I guess, lying to the media to create a coverup, in his last vengeful act he was also trying to curry favor with the government of the Bahamas so that he could keep control of FTX, even after the bankruptcy. That’s the theory. The evidence, of course, came nowhere close to showing that. In fact, it showed quite the opposite.

I just want to focus on two pieces for you, ladies and gentlemen, quickly. First was GX-248, which we looked at yesterday, both — two days ago, both on Sam’s direct and — his cross-examination and his redirect, and that document is a Summation – Mr. Cohen 9 series of emails between Ryan Pinder, who was the Attorney General of the Bahamas, and Sam and others getting into what had happened with FTX, what was going to happen going forward. And the government, in its examination of Sam, read only one part of the same paragraph, and they suggested that in that paragraph what Sam was doing was opening up withdrawals from FTX only for customers who were based in the Bahamas as a way to get favor with the Bahamian government. They left out the very next sentence. You can see it here, the bottom paragraph, in which we brought up with Sam in which he goes on to say: It is your call whether you want us to do this, but we are more than happy to and would consider it, at the very least, of our duty to the country, and we could open it up immediately if you reply saying you want us to. What’s happening there? When you live in a country and the Attorney General reaches out to you, you better return the call. You better respond to the email.

And Sam believed, and he shows he is unclear, that, in part, this might be what the government of the Bahamas wanted him to do. If they wanted him to do it, he was going to do it. We can take that down. The second piece that they elicited from Gary, and the government claimed this again showed nefarious conduct, involved Sam’s interview with the SCB, which was the securities commission of the Bahamas, and the decision after that to Summation – Mr. Cohen 0 transfer certain assets to the SCB. Again, that was portrayed to us as, you know, yet again Sam currying favor with the Bahamas or somehow trying to control the process. But, again, that’s not what the record showed. Remember our first witness on defense was Ms. Krystal Rolle, the very distinguished Bahamas attorney who flew all the way here to testify for you. She told you she is now a King’s Counsel. She used to be a Queen’s Counsel. There is 40 of them in the Bahamas. She is one of the most distinguished attorneys in the Bahamas, and she told you, there was no fooling around. Sam was ordered to go to this meeting at the SCB. He went there with her.

They met with the SCB and its leadership. They also met with something called the joint provisional liquidators. And then they went from that meeting to FTX offices and, under an order, transferred the funds. Nothing nefarious about that. Let me turn to the next part of my presentation. And just to orient you, I am now going to make — talk a bit about the government’s case and then just make some concluding remarks. Again, thank you for bearing with me. Let me talk about the government’s case. I want to talk about three things: Their cooperating witnesses, the specific counts relating to customers, lenders, and investors, and how to think about the testimony of Professor Easton and Agent Owens who you heard from. 

Let me talk about their cooperating witnesses. It’s really, really interesting because in a three-and-a-half-hour summation the government didn’t mention their cooperation agreements at all. They didn’t mention at all that they might have some incentive to testify in a certain way or not.

Let me talk about how to think about them. Now, we expect the Court will give you an instruction on how to weigh evidence and, as always, it’s Judge Kaplan’s word that controls. But we ask that as you deliberate you keep in mind a few things when you think of what the cooperating witnesses said, and here I’m talking about Gary, Nishad, and Caroline, who had cooperation agreements, and I’m also talking about Adam Yedidia, who had an immunity agreement, and Can Sun, the attorney who had a nonprosecution agreement. Let me suggest a way to think about those witnesses and their testimony as you deliberate. First, of course, is what matters is Sam’s state of mind. Counting up the number of people who did or didn’t testify against him doesn’t matter. What matters is what Sam believed in good faith at the time. As we mentioned when we started in an opening, we didn’t have to present any evidence at all, so the number of witnesses presented by each side doesn’t matter.

Second, if you examine their testimony carefully, as we know you will, you will see that when you view it against  your real-world experience, you cannot rely on it to carry the government’s burden of proof as to Sam. Think about the three main cooperating witnesses, what they said about when they realized there was a problem with Alameda borrowing FTX’s assets. You heard different answers from them. They were even inconsistent among themselves. Gary claimed he became aware of the issue as far as back as 2019 or 2020, when he happened to be sitting next to Sam at Alameda, and overheard an Alameda trader mentioning Alameda having a negative account balance at FTX. By the way, what did he do about it at the time? Nothing. Nishad, on the other hand, claimed he never knew about the size of Alameda’s borrows and the possible impact of the fiat@ liability until June of 2022, and he didn’t think there was a problem with what was happening until September.

Now, Nishad worked right alongside Gary for years, and you heard the government tell you how Nishad and Gary were the engines behind setting up the secret codes and the code base, yet they gave you conflicting accounts of what happened there. Then there was Caroline, who fell somewhere in between. She testified she was aware of Alameda borrowing its funds using its line of credit sometime in 2020, but, again, didn’t do anything about it, but she didn’t consider there to be a problem until June 2022, when we had the bug sequence that we talked to you about. Summation – Mr. Cohen 3 The three of them are working side by side with each other and with Sam, their friend, for the entire time, but they claim they learned this information at different times and in different ways and that they did essentially nothing about it until November 2022. It doesn’t make sense if you thought at the time — if you thought for years you were doing something wrong that you wouldn’t take action.

Another thing to consider when you think about the number of witnesses, and if we can put up the next slide. A lot of the witnesses weren’t actually additive witnesses. They were just repeating things they had heard from some other witness. You will recall you heard testimony from Caroline about the all-hands meeting in which she said there was the fiat liability and that was causing the problem. You then heard from Adam Yedidia that he resigned when he heard about what happened at the all-hands meeting, not that he was there, not that he even spoke to someone that was there, but he spoke to Lelia Clark, who spoke to someone who was there and, based on that, he resigned. Think about that for a moment. Adam was a developer. Adam could access the code. Adam could work on the bug fix. And he tells you that he based everything he was doing, he based his conclusion that Sam had done wrong on something he heard from someone who heard from someone who had been at the meeting.

That doesn’t make sense. Same thing with Christian Drappi, the individual with Summation – Mr. Cohen 4 whom the recording was played with. He was also a developer like Adam. He could have verified or not verified what he was being told, but he just acted on it. Nishad told you, at the bottom of the chart, that he based his conclusion on what was happening with the liability on a conversation with Caroline in September and then Can told you he based it on Nishad. There is a lot of telephone going on here and the point is it’s not four, five, six witnesses giving you firsthand knowledge. It’s four or five witnesses just repeating what they have heard down the chain. You can take that down. Turning back to the three cooperating witnesses, Gary, Caroline, and Nishad, a few things you should consider when you evaluate their testimony, which you should do very carefully. Let’s put up the next slide. You will recall there was testimony about their compensation. Going into November 2022, these were extremely wealthy people who had made significant salary, significant cash bonuses, and certainly, based on the equity value, were each billionaires. You should keep that in mind as you consider their testimony. Let’s go through now what each of them did.

If you can pull up the next slide. Actually, take that down for a moment. Summation – Mr. Cohen 5 Again, Gary tells you that he first heard of a problem in 2019 in the trader conversation, but he didn’t do anything about it, that between 2019 and 2022, he becomes a billionaire. And certainly had he thought there was anything wrong going on, he could have cashed out, he could have resigned, he could have left, he could have contacted an attorney and notified the authorities. He doesn’t do any of that. Same thing with Caroline. She goes through the same sequence. She tells you she first learns of the problem in June 2022, but even before that she doesn’t resign, she doesn’t leave the company, she doesn’t hire any advisers. Why? Because they don’t think they are doing anything wrong. Then there is Nishad. He testified that they were doing wrong in September, and he had, shall we say, an interesting view about what was right and wrong at that time. He said what was wrong in September was, quote, spending dollars. Spending anything after September was necessarily digging the customer deficit hole deeper. That’s Mr. Nishad at page 416. But did he really believe that? Just like the others, he didn’t resign, he didn’t leave, he didn’t seek an attorney.

And, more than that, remember Nishad admitted on cross-examination that, in October, he borrowed $3.7 million off the FTX exchange to buy a house for himself and his friends. If he actually thought what they were doing was Summation – Mr. Cohen 6 wrong, would he have bought a house with funds borrowed from the exchange? Now, if you can put up the next slide. This just returns to a theme we talked about in opening, the cooperating witnesses then and now. Again, it just summarizes the points that I have just made. Think about it. Five of the seven counts that Sam is charged with are from being part of a conspiracy, presumably with one or more of these people. In light of what we have just discussed, how could he have been in a conspiracy with any of them? We can take that down. Now let’s talk about what happens with the three of them during that very, very fateful week of November or ten days or 11 days, November 11, 1 to 11. No question, we can all agree, this is a very chaotic time. This is a very stressful time. The companies are on the verge, by the end, of going bankrupt, and they do go bankrupt.

And what happens? As that week unfolds, what the cooperating witnesses do, as FTX’s situation become more and more desperate, as regulators pop up in the Bahamas and elsewhere, as there is chaos at the door, something subtle happens. Blame is shifted to Sam. They are doing what they need to do to get out from under. How do we know that? We know that from their own Summation – Mr. Cohen 7 testimony, both on direct and cross-examination. Remember the all-hands call we just talked about. At a certain point in the call, and this is the part the government played for you, Caroline is asked what happened and who made the decisions. Now, to hear the government tell it in summation, certainly Caroline made the decisions. She was part of it. But how does she respond to this group of people who, by definition, are not in the conspiracy?

Quote: Sam, I guess. And you recall we saw a Signal conversation with Nishad and Sam on November 6 which the government played for you today where Nishad told Sam, one thing that would seriously help me is if I didn’t have any debts. And to erase his debts, on November 6, Nishad proposes a fake transaction that’s going to be backdated that would net out his loans. And a fair reading of this tweet — and the testimony is at 1459 through 1461 — fair reading of this tweet is as things are unfolding and things are getting tighter and tighter and tighter, Nishad to starting to something focus on himself, how to get out from under. Sam told you — and it was not just Sam; others testified to this — he regarded Nishad as suicidal during this period. So he responds, sure, we can probably do that, but he told you on his testimony, he’s not planning to do a backdated transaction with Nishad. He is just agreeing because he doesn’t want his friend to do anything drastic. What his  friend is doing is focusing on himself.

Two days later, on November 8, Sam — Nishad sends a chat to Sam which the government actually showed you today, I was surprised, that says, quote, this is wildly selfish of me, but they may need to know that it wasn’t a ton of people orchestrating it. The government suggests that the it is the crime here, but a fair reading is the it is problem, the mess, the disaster going on. To put this in context, Nishad sends this same chat, and within a few days he goes from buying a $3.7 million home for himself with funds off of the FTX exchange to sending this kind of chat. What about Gary? Gary goes from the meeting with the regulators at the SCB in the Bahamas, where he certainly knows things are up, the wind is up to his lawyers from the U.S. coming to get him in the Bahamas and going back to the U.S. The point here is not that Gary, Nishad, and Caroline are bad people.

We haven’t said that at all during this case. We actually have empathy for the situation they found themselves in and what they felt they needed to do. But they were under pressure to get out from under, and that meant pointing at Sam. Sam, of course, never tried to do those things. Remember that these witnesses ultimately entered into cooperation agreements with the government. Summation – Mr. Cohen We can pull up the next slide. 9 They entered into a cooperation agreement, and they agreed to plead guilty to the various charges that expose them to serious, serious jail time. And they were asked about that both on direct and on cross-examination. And at first we got sort of a boilerplate answer, I’m just here to testify. I am just here to tell the truth. I have no expectation about the sentence I might get. I am just here to tell what happened. But then Gary slipped, and that’s at page 477, and he said: You know, ideally, I don’t want any jail time. That’s what this was about. And they are not going to get it. They are not going to get the kind of cooperation agreement they want, the kind of sentence reduction motion by saying, you know, at the time we really didn’t think anything was wrong. They are not going to get it by saying, you know, we all made business decisions, we made mistakes, we did some dumb things, and they turned out wrong. They are not going to get it that way. And they are not going to get it by saying, you know, Sam was our friend. He was a good guy. We built businesses together. He worked really hard, and at the end he was trying to save FTX and customers.

So they did what they had to do. And in that regard think about this. Caroline was up front with you in her direct and cross that she had really nothing to do with investors. Her business as CEO of Alameda was to work with outside lenders and to run the company and,  yet, she pleaded guilty to one of the counts was committing fraud with respect to investors. Nishad told you in his direct and cross that he didn’t feel he had done anything wrong with respect to making political donations, and he originally thought that the donations were properly characterized. But he pleaded guilty to a campaign finance charge among the counts he pleaded to.

Again, we don’t fault them. They did what they had to do under the circumstances, but it means you should consider their testimony overall very carefully. Someone who will plead guilty to something they are unsure of or didn’t even think they did is someone whose testimony you should think about very carefully. As for Adam Yedidia, he received an immunity agreement, even though he told you he didn’t think he did anything wrong. It seems inconsistent. And Can Sun, the attorney, told you he received a nonprosecution agreement two days before he testified. Now, let me move on and talk about some of the specific counts in the indictment and customers, lenders, and investors. Just to go back to where I started, Sam’s good faith is a defense to all the counts in the indictment. If you find he acted in good faith, you must find him not guilty on all seven counts. But there are also specific defenses and specific problems with some of the individual charges in the indictment as well, and I want to point them out to you now. If we could call up the next slide. This is Count One, wire fraud on customers. Again, these are not controlling. What controls as to the elements is what Judge Kaplan will tell you. But as to the customer counts, we ask that you consider the evidence on that.

And when you do, we ask that you think about the fact that the government called two customers, and we submit that their testimony did not carry the day. First, you heard from Mr. Julliard, the French person who lives in London who was the very first witness called in the case. Now, he told you he was a commodities trader, sophisticated commodities trader who traded in cocoa. And he admitted on the stand that he agreed to but never reviewed FTX’s terms of service, and instead he initially claimed that the reason he put assets on FTX was because of the advertisements FTX had put up. He remembered the one involving Gisele. He didn’t remember her last name. And he thought based on these ads there must be good financials behind the company.

Does that testimony make sense to you, is that someone who is a cocoa commodities trader would actually act in the real world? It isn’t. And I don’t think you can give his testimony any weight in considering the counts against Summation – Mr. Cohen customers. 2 The other customer we heard from was Mr. Morad. He testified that he was very familiar with crypto, that he had accounts on many, many exchanges, and he had traded on many of them. Of course, like all the witnesses, except Can Sun, he never read the terms of service, and he claimed to make his investment decisions based on Sam’s tweets. Does that make sense to you? Again, we don’t think that moves the needle at all, so we suggest that that lack of evidence means that there is an additional problem with respect to Count One and Count Two. Count One is wire fraud on customers and Count Two is conspiracy to commit wire fraud on customers. Now let’s turn to Count Three and Four, which are the conspiracy to commit wire fraud claims against lenders, if we can go to the next slide. Now, you heard testimony from Caroline about interaction with lenders, and I am not going to redo that.

You heard our view on why that doesn’t carry the day as to proving Sam acted with criminal intent. And the only lender the government called was Zac Prince, the CEO of BlockFi, and we submit that his testimony also doesn’t move the needle on the lender counts. He told you, I went over with him that BlockFi had done a credit memo on whether to make a loan to Alameda. And in that credit memo his credit team had received everything they asked for, and Summation – Mr. Cohen 3 they were fully aware of all the factors they thought were material or important to them. For example, one issue we have talked about in this case a lot was that one of Alameda’s main sources of collateral was FTT, the token that FTX had backed. And sure enough Mr. Prince told you, yeah, his team knew that. We analyzed the FTT. We insisted that because FTT was illiquid, we would be overcollateralized in FTT.

There was nothing misleading to him when they made the loans, loans that were then paid back in full. As I mentioned before, Mr. Prince also then had — during the crisis he had conversations directly with Sam in which he was asking Sam if FTX would invest or loan money to BlockFi, which did happen. One last piece on the lenders, and this actually applies to the investors and the customers. Because the directive doesn’t the really move the needle, the government does the following. They ask the investors and lenders some variant of the following question. If I told you that Sam had stolen customer assets, would that have been important for you to know? Who is going to say no to that? But that’s what was happening in real time. That is the conclusion the government has reached after bringing its case. That’s not a fair analysis of materiality. Speaking of the investors, the government called two investors: Matt Huang, who was from a company called Paradigm; Summation – Mr. Cohen 4 and I am going to mispronounce this, but Mr. Robert Boroujerdi, who was from Third Point.

And here are some important points about the investor count, which is Count Five related to securities fraud. They each made their investments by January of 2022. Remember the chart we showed you about all the different offerings. So they made their investments before the events of May — June through November 2022, before Sam did all the horrible things that the government says he did. If they made their investments before that, how could his later conduct have been material to them? It couldn’t have been. Again, they ask the default question. If I told you that to prove my case, would that be important to you? OK. That’s not proof. On the investors as well, we had the piece where we talked about the call with Apollo at the end of November or the first week of November. A few facts there to emphasize. They don’t show support for the investor count.

This we received from Can Sun. First of all, Can admitted that in reaching out to Apollo, Sam sent them the balance sheet that contained the fiat@ liability, so nothing was kept from them. And then Sam spoke with Can. Can went over the discussion with you in which he said you can’t use the borrow lending order book as a way of explaining what had happened. Sam said yup. And Can said they refused looking into what margin assets in general might have Summation – Mr. Cohen 5 covered that. They never got to it. But, more importantly, Sam didn’t have the call with Apollo and didn’t say any of those things. And when you think about that sequence, think about this. Apollo ended up not investing and, more to the point, the government didn’t bring Apollo before you to testify that Sam had said anything different. They also didn’t bring before you Ramnik Arora, who was deeply involved in all the investment decisions.

The government may say, well, the defense could have brought them in too if they wanted you to hear from them, but, you know, we don’t have a burden. We don’t have to call any witnesses. So consider that. Because their proof doesn’t get them there on the investor counts, remember none of the cooperating witnesses, Gary, Nishad, or Caroline, had anything to do with investors, because they didn’t call Ramnik or anyone else because the two individual investors I mentioned don’t get them there. We had these elaborate convoluted stories about the ECO Serum sequence and the MobileCoin sequence.

What is that all about? It trying to back into some convoluted way to say that Sam somehow did something with Nishad that would have misled investors. And we submit the story on ECO Serum is convoluted and inconsistent, and Sam told you, look, I didn’t tell Nishad to Summation – Mr. Cohen 6 backdate anything with regard to ECO Serum. The fact that he signed an agreement that others prepared for him doesn’t move the needle. And on MobileCoin, which is, again, another effort to backdoor into some sort of proof of the investor count, Sam told you, yeah, there was a loss on FTX and I felt, I Sam, felt I had mishandled it.

So I moved it to Alameda where I would personally take most of the loss. That seems like trying to help investors, not hurt them. Let me briefly talk about the money laundering count. Quickly, let me go to Count Six. Excuse me. Count Six. Count Six is the conspiracy to commit commodities fraud count and that’s basically the Count Five securities fraud count repackaged as a commodities fraud count. To the extent, for the reasons I have just said, the securities fraud count fails, this one must fail as well. Let me turn finally, to the money laundering count, which is the last count. I want to talk about the two types of money laundering that the government has alleged here and how the proof that you actually receive doesn’t support it. The first one is called concealment money laundering. That’s where someone is making — has illicit sources of funds and seeks to conceal them.

When you think about the government’s theory here, it makes no sense. They say that the way Sam and others were Summation – Mr. Cohen 7 seeking to conceal assets they have taken from Alameda was by making political donations with them. Think about that. Why would someone conspire to steal funds and then try to conceal them by making political donations, which are some of the most regulated publicized and scrutinized forms of spending there is. Why would they go through the further trouble of hiring political consultants and give them access to the internal workings of FTX in a chat called donation processing, which is what happened here, if the entire purpose was to secretly launder money? The government’s theory doesn’t make any sense.

The same goes for its second theory, money laundering above a monetary threshold. The theory essentially is, the way the government has presented it, that basically any transaction involving Alameda funds that may have been connected to FTX customer funds, however they come up with the connection, is per se money laundering, and you will hear the instruction, but we submit that that theory goes too far and should be rejected. Last in this section let me talk briefly about Professor Easton and Agent Owens, who the government presented. Now, the government spent a lot of time with Professor Easton, and we saw chart after chart after chart after chart, and you are invited at the end of the government’s summation to look at those charts again. They really give you a suggested way to think of Professor Easton’s testimony. At a very high level, if you find that Sam acted in Summation – Mr. Cohen 8 good faith and in good faith believed that he could spend or FTX or Alameda could spend the funds it did when it did, then really Professor Easton is beside the point. All he did was trace outflow of funds.

The question is not what the flows were: Did it go to account 1, account 2, account 3, or ABC? The question is why? Why was Sam doing it and what did he believe he was doing? On that basis alone, you need not — you’re welcome to, but you need not go through all of these charts. Because if you find, as we submit you should, that Sam acted in good faith, Professor Easton is besides the point. He is just simply taking the government’s theory, assuming it’s true, which, of course, is what is up to you to determine, and then tracing out those funds. We also think, and again you may not need to get to it at this level, that there were some things in his testimony that were not reliable. He said he knew the importance of net-asset valuation, but yet when he did his analysis, his flow of funds, he didn’t look at that when it came to Alameda. He didn’t look at Alameda’s assets that were held off the exchange or FTX or other assets. He also told you in some of his analysis — by the way, that’s at transcript 1802 and 1804. He also told you in some parts of his analysis that he concluded transfers must have come from customer funds because they were, quote, in the Summation – Mr. Cohen 9 immediate vicinity of customer funds. That’s at 1750. That doesn’t sound very scientific to me and not something to rely on.

Finally, you heard from Agent Owens of the FBI, who did a flow-of-funds analysis relating to political donations. Again, the easiest way to think about her is from a high-level point of view. If you conclude, as we submit you should, that Sam acted in good faith, including in making political donations, then she traced out the funds, whether they went to account A or B or C, is beside the point. Like Professor Easton, if you want to get into the specifics, some of her analysis was not reliable. She told you she used the last in, first out LIFO method, but then we showed her a major expenditure that she had to admit on the stand actually didn’t follow that method, so a reason to be skeptical there. That brings me to my concluding remarks finally. We want to thank you again for sitting with us through this trial. You have done a great job keeping an open mind and listening carefully and intently, and we thank you for giving up the time in your personal lives to hear this case.

It is important to us. Now, after I speak, tomorrow the government gets to speak again. It’s called a rebuttal summation. As I Summation – Mr. Cohen 0 mentioned, they get to do that because they get two because they have the burden of proof and it never shifts. But, even so, the defense can still be heard. What do I mean by that? You can speak for us. When you hear something in the government’s rebuttal, and as you evaluate it later in the jury room, please consider they are making points that we might make, asking questions we would ask. For example, if the government says, well, once the fiat liability was discovered, Sam should not have come to a different view about Alameda’s liquidity and Gary, Caroline and, Nishad. Please ask, why not?

Wasn’t this in the end a difference in business judgment? If the government says in rebuttal, well, please disregard what the defense told you about how to think about the cooperating witnesses and their agreements, about all the real-world pressures on them, about the shift in what they said between then and now, please ask, why should we do that? Shouldn’t we be very skeptical of their testimony and not accept it due to those concerns and so on?

As you listen to the rebuttal summation and as you go into the jury room we ask you, please, to think about the questions we would ask and consider them as you go through the evidence. Because in the end we submit that Sam did his best to start and operate two companies that became multibillion dollar businesses in a new industry. Some decisions and judgments Summation – Mr. Cohen turned out very well. FTX wound up with 6 million users, managed billions and billions of dollars of trade. Some decisions turned out poorly, especially without hedges. 1 Holding long-term assets against short-term liabilities was a decision that turned out poorly. It led to FTX and Alameda’s liquidity gap and ultimately to the bankruptcy filings.

As I have said many times now, business decisions made in good faith are not grounds to convict. We submit that when Sam testified before you, he told you the truth, the messy truth, that in the real world miscommunications happen, mistakes happen, delays happen. And the borrowing happening in the case of Alameda here, in the case of Alameda depositing or withdrawing hundreds of millions of dollars a day, in a process that swept in customer fiat assets, there were mistakes, there were failures of corporate controls in risk management, and there was bad judgment. That does not constitute a crime. This has been an extraordinary journey. In Sam’s life he has gone through more than most do in a lifetime. One day he’s a college student. Then he’s in an apartment with his close friends starting a crypto company. They are working around the clock, moving all over the world. The company is becoming amazingly innovative and successful, worth billions. Then there is a market crash and then this. And here we are, finally before you, in your hands, 2 the jury, so I’ll speak last for Sam, for my client. Consider the evidence in light of your real-world experience. We submit you will find that Sam acted in good faith throughout, that he made the best business decisions he could at every stage. He didn’t want to hurt anyone, far from it. He didn’t want to defraud anyone and he didn’t. He didn’t intend to defraud anyone. So, with respect, the greatest of respect, we ask that when you deliberate, you find him not guilty on all counts. Thank you.

THE COURT: Thank you. Ladies and gentlemen, thank you for staying. We will tomorrow morning hear any rebuttal argument by the government, and I will charge you and you will get the case. I should add, in full disclosure, I am informed during the day — and, again, I’m not commenting on how long this should take or how quickly you should be done one way or the other — if we do stay late enough to get something to eat, it’s pizza. It didn’t used to be that way. I’m sorry, but that’s what it is. (Adjourned to November 2, 2023, at 9:30 a.m.)