WEBVTT

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The United States v. Samuel Brinkman III. Good

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morning and may it please the court. My name

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is Alexandra Shapiro and I represent Sam Bankman

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Fried on this appeal. Mr. Bankman Fried's trial

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was fundamentally unfair because the jury only

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got to hear one side of the story, the prosecution

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side, which was demonstrably false. In a series

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of evidentiary and procedural rulings, the district

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court deprived Mr. Bankman Fried of the most

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basic principle of due process. the ability to

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rebut the government's case and present his defense

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to the jury. I'd like to focus my time today

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on two of our principal arguments, the court's

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rulings on evidence relating to loss and the

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involvement of counsel. First, the government's

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principal theme at trial, which it repeated over

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and over again, was that customers and lenders

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had lost all their money and would never recover

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it. From the opening statement to the government's

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rebuttal, the prosecutors proclaimed that billions

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had been lost forever. This was false, but it

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was an extremely powerful story with moral force

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and undoubtedly had great impact on the jury's

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judgment. It was a play to what the Supreme Court

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and Old Chief called the human significance of

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what happened. The court's asymmetric rulings

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allowed the prosecution to present this morally

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compelling tale, but prevented the defense from

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showing that the story wasn't true. The court

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precluded... The government, for each of the

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counts charged in the indictment, from my reading

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of the record, had very substantial evidence

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of guilt. And you're saying that the inability

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of your witnesses and the inability of trial

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counsel to dispute the ultimate law's proposition

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irreparably affected this trial? Yes, Your Honor.

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I mean, there was no... Meaningful quarrel with

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the composition of the jewelry. It may not have

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been a perfect trial, but I'm very interested

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in your contention as to why it wasn't fair.

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There are two principal reasons. One relates

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to the evidence concerning loss. The other relates

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to the evidence concerning involvement of counsel.

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With respect to the loss issue, as I was starting

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to say, the government elicited a ton of evidence

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and made numerous arguments that billions had

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been lost forever. That was not true and had

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had counsel been able to introduce the evidence

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and cross -examined government witnesses accordingly,

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Mr. Bankman Fried would have presented the jury

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with a strong case that because this was a margin

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exchange and some of the investments he had made

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were highly valuable even at the time of the

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bankruptcy and certainly at the time of the trial

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when the government was eliciting evidence from

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witnesses that they had lost their money forever

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and had never gotten it back. That would have

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been very important to supporting Mr. Bankman

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Fried's argument that he acted in good faith

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at the time. Did the court allow Mr. Bankman

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Fried to argue or testify that he believed he

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was acting in good faith? The court didn't block

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all of it. The court, when it came to advice

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of counsel allowed some testimony about having

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counsel available or work on retention policies

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and didn't allow it as to other aspects where

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Mr. Bankman Fried explicitly testified. He didn't

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speak to counsel, get counsel's advice or permission,

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but he was allowed to testify about his state

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of mind, that he was acting in good faith. Well,

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two things, Your Honor. First, with respect to

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loss, he was allowed to testify generally as

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to his state of mind. But obviously, not being

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able to corroborate that with more objective

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evidence was extremely prejudicial. As this court...

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Can I just jump in for a second? The corroboration

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of... You're saying that he was able to testify

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to his belief that he wasn't lost, or that there

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was solvency, or what have you. And you're saying,

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well, there's objective evidence to corroborate

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that. But what you seem to be pointing to, at

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least in the briefs, is what came after. And

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so at the time when these actions were happening,

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there isn't, I mean, there's a right to present

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evidence as to his intent, absolutely. But I

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don't understand your. what you're saying about

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there's objective corroboration when the objective

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corroboration seems to be that, well, after the

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bankruptcy, in fact, more money was made. No,

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Your Honor, it's not limited to that. And for

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example, you can take a look at docket 407 at

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pages, I believe, 18 to 19, which lays out the

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fact that based on, as an example, filings by

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the bankruptcy trustee at the time of the bankruptcy.

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It's clear that there were very valuable assets

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in the estate that corroborated Mr. Bankman Fried's

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view that the companies were solvent. But the

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misrepresentations were not to solvency, but

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liquidity. So I'm struggling with part of the

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government's theory of the case is that the defendant

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misrepresented to investors that their money

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was safe, was not being used. I'm sorry, you're

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on. That their money was not being used in the

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way that it was, the government claims and the

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jury convicted, was in fact used. So it wasn't

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an issue of solvency, right? It was an issue

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of liquidity, whether they could get their money

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if they asked for it. Well, your honor, I think

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there's a dispute a factual dispute about whether

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there were misrepresentations and the government

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was taking a lot of things out of context and

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This isn't we're not making a sufficiency claim

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here The issue is whether the government can

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prove beyond a reasonable doubt that these errors

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were harmless and I do want to go back to the

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advice of counsel because I didn't get a chance

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to address your question judge Khan on that and

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the The court's ruling was extremely limited.

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The only piece the court allowed was testimony

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related to the document retention policies. But

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Mr. Bankman Fried was hamstrung in that in regard

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to those beginning. Now he clearly told the court

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he was affirmatively not relying on an advice

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of counsel defense. Correct? No. Yes and no.

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A technical advice of counsel defense that might

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entitle one to the type of instruction discussed

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in Scully, yes, but he clearly was relying on

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the involvement of counsel as evidence of good

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faith. I haven't heard of a quasi defense of

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counsel defense. You either rely on advice of

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counsel defense, or in this case, as I understood

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it, your client was trying to tell the judge

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that the presence of counsel was something he

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should talk about. And the court, in my reading

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of the district court opinion, went through the

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different types of charges and whether Mr. Bankman

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Fried had actually testified that he didn't ask

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counsel for advice on decision A and B. Your

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Honor, just to be clear, and I think the Scully

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case is very clear about this, as is the Howard

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case in D .C., a defendant is entitled to present

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a defense based on the involvement of lawyers,

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whether or not he is claiming to have specifically

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relied on their advice. That's very well settled.

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It's evidence of good faith, and he was entitled

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to present that. The judge rejected his ability

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to present evidence about, for example, the formation

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of the North Dimension entities and the bank

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account creation for those which the government

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claimed was... How is that relevant to any of

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the counts in the indictment? It's relevant to

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the counts in the indictment, as is the other

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four categories that the judge precluded testimony

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about because the government's claim in this

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case was that... Those entities were created

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so that from the outset, the defendant could

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steal the customer's money. That was their government's

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claim. And so it was that. There was evidence

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about involvement of lawyers in the contract,

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the payment agent agreement between those entities

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and FTX. Loans that the government claimed were

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shams. the terms of service, which were key points

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that Mr. Bankman Fried relied on because of the

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margin terms in section 16, as well as the distinction

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between what could be used with respect to digital

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assets in 8 .2 versus fiat deposits. And the

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judge excluded all of this. of the corporation

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drafted an agreement between two of the subsidiaries.

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Help me understand how that is evidence relevant

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to any of the counties. Well, it's all relevant,

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and I don't think, I think you have to look at

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the whole picture and the cumulative picture.

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But this, you know, what happened here was the

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government claimed these entities were set up.

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to take customer money so that the defendant

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could use it as he pleased. So the fact that

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lawyers were involved in creating the entities,

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lawyers were involved in drafting the contract

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whereby the funds were deposited in those bank

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accounts for the benefit of FTX customers, of

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course that's all relevant to the defendant's...

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Good faith. And the real point here, though,

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is that, again, we're not making a sufficiency

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argument. And under Scully, this was for the

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jury. The judge's reasoning in excluding it was

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essentially that he thought it wasn't true. And

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he thought that the jurors. I don't know if that's

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exactly a fair characterization. I think the

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question is, to the extent it has some relevance,

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it's always bounced against the potential prejudicial

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effect. not prejudicial effect in the sense of

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whether or not it's true, but prejudicial effect

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in the sense of the suggestion that, oh, that

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lawyers were involved. Therefore, things that

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were going on were legal. But if the lawyers,

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in fact, were not aware of the withdrawals or

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the transfers or very specific actions that are

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related to the counts, there's a fear that that

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could be misleading. And so I agree there's some

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relevance, but that's always It's always being

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balanced against, well, how probative is this

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evidence and what's the potential for prejudice?

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But that's exactly what this court in Scully

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said is a balance that should be resolved in

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favor of the defendant, just as in Scully. Because

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those are issues, the ones that Your Honor pointed

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to, that the government could cross examine on

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and argue to the jury. Well, maybe he didn't

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tell the... the lawyers all the facts, et cetera.

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I mean, this court's set in scully. There may

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be reasons to doubt the credibility and reliability

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of the defendant's testimony. And the government

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may well be correct that the documents proffered

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by the defendant were unlikely to sway a jury.

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But such determinations are the province of the

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jury alone. He is competent to testify to the

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advice he received, even if his testimony is

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one -sided and self -serving and the court reversed.

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did not advance any advice of counsel defense.

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If you advance the advice of counsel defense,

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a lot of this stuff, I agree, would have been

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much more proactive, but you gave that up and

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just, you had this vague, you know, there were

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attorneys out there somewhere. But this court

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was clear, and the DC Circuit's decision in Howard

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is crystal clear as well, that you don't have

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to have a formal advice of counsel defense, that

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this is all evidence related to good faith. And

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coupled with the inability to - Hiring a lawyer

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is evidence of good faith? Having a lawyer involved

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in the transaction. Look, in the Scully case,

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the government made the - Doesn't it depend on

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what you told - And then what the lawyer told

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you, the fact that, you know, you may have signed

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a retainer agreement. But I think, Your Honor,

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respectfully, the point of the Scully decision

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is that these are issues for the jury to weigh.

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They're not to be taken away from the jury. The

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defendant is entitled to present these arguments

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to the jury. But wasn't Scully a formal advice

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of counsel case? Wasn't that? A formal advice

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of counsel defense was raised in Scully. Isn't

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that correct? It was, although the issue in Scully

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involved a situation in which the government

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argued that, as to certain particular transactions,

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that the lawyer actually hadn't provided any

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advice. And nonetheless, this court reversed

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and granted a new trial. But part of the reason

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of the... And the court didn't distinguish between

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a formal advice of counsel and the idea that

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it's evidence of good faith if you think lawyers

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are involved in things like drafting the terms

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of service, which were a key piece of Mr. Bankman

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Fried's defense. But part of the reason why the

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formality matters is because in that instance,

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then there's an obligation on the defendant to

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say and the lawyers were aware of all of the

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relevant factors. Isn't that part of what is

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involved when you're talking about a formal advice

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of counsel defense? And so here, where there

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isn't testimony or there isn't an assertion that,

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yeah, the lawyers knew about everything that

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was going on. They knew about the transactions.

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They knew about this, that, and the other. Therefore,

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I should be able to testify that, yeah, lawyers

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were present. And that's, I think, the difference

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in the formal defense and sort of what you're

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arguing, which is more just a general sort of

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good faith. having lawyers be involved suggests

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that it wasn't this, you know, pre -planned nefarious

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thing that the government's suggesting. Well,

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I think the problem with this discussion, in

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my view, is that it's all evidence of good faith.

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And again, you know, it's up to the jury to decide

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and he never got to... Why is it evidence of

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good faith? The fact that I hired a lawyer and

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had the lawyer prepared some documents. How is

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that evidence of good faith? It's evidence of

00:17:05.029 --> 00:17:09.130
good faith because, again, I'm repeating myself,

00:17:09.230 --> 00:17:11.589
but you could go through each of these things.

00:17:12.210 --> 00:17:14.730
So there are loans to the defendant and some

00:17:14.730 --> 00:17:17.230
of the other executives. The government claims

00:17:17.230 --> 00:17:22.150
that those loans were improper. If lawyers were

00:17:22.150 --> 00:17:26.589
involved in the loans, one could could certainly

00:17:26.589 --> 00:17:29.509
say, you know, I believe that because lawyers

00:17:29.509 --> 00:17:31.190
were involved, that was part of the reasons I

00:17:31.190 --> 00:17:33.910
thought these loans were proper. But how is the

00:17:33.910 --> 00:17:39.470
court supposed to assess that defense against

00:17:39.470 --> 00:17:42.950
the testimony that the court heard and found

00:17:42.950 --> 00:17:46.690
with regard to the defense theory of the relevance

00:17:46.690 --> 00:17:49.990
of attorney's involvement in drafting certain

00:17:49.990 --> 00:17:54.920
agreements? The court said what was was fatally

00:17:54.920 --> 00:18:00.099
undermined by the defendant's own admission that

00:18:00.099 --> 00:18:04.039
he had not discussed the charged conduct, permitting

00:18:04.039 --> 00:18:08.160
Alameda to take vast sums of FTX customer deposits

00:18:08.160 --> 00:18:12.900
with counsel. So throughout each of the charged,

00:18:13.339 --> 00:18:17.279
each claim as to lawyers were involved in this

00:18:17.279 --> 00:18:20.680
and lawyers were involved in that, the court,

00:18:21.900 --> 00:18:26.240
her testimony, from Mr. Bankman Fried that in

00:18:26.240 --> 00:18:29.799
fact he had not discussed, had not sought counsel's

00:18:29.799 --> 00:18:32.900
advice, had not shared the information with counsel,

00:18:33.480 --> 00:18:38.119
and had not, and counsel wasn't aware of the

00:18:38.119 --> 00:18:43.480
conduct. So how is it, you know, it's one thing

00:18:43.480 --> 00:18:46.380
to say it's good faith, it's another when the

00:18:46.380 --> 00:18:51.579
defendant himself under oath says, I didn't discuss

00:18:51.579 --> 00:18:55.299
this with the lawyers. I didn't share this conduct

00:18:55.299 --> 00:18:57.640
with the lawyers. They weren't aware of it. Well,

00:18:57.880 --> 00:19:00.180
that's not, respectfully, I don't think that's

00:19:00.180 --> 00:19:02.960
a fair characterization of the testimony at the

00:19:02.960 --> 00:19:04.940
preview hearing in the first place, for instance,

00:19:05.039 --> 00:19:08.319
as to some of it. Mr. Bankman Fried did believe

00:19:08.319 --> 00:19:10.259
that lawyers were involved because he was told

00:19:10.259 --> 00:19:13.920
by another executive. And he didn't say that

00:19:13.920 --> 00:19:16.359
as to each of the four categories. I don't think

00:19:16.359 --> 00:19:17.400
that's a fair - Right, he didn't say this to

00:19:17.400 --> 00:19:20.680
retention, right? So the court allowed testimony

00:19:20.680 --> 00:19:22.519
about counsel - No, I'm talking about the four

00:19:22.519 --> 00:19:24.799
categories that he excluded. Right, I know, but

00:19:24.799 --> 00:19:27.569
I'm now asking you a question about - There were

00:19:27.569 --> 00:19:31.130
instances where the court allowed it, where there

00:19:31.130 --> 00:19:35.829
was testimony that counsel had been involved

00:19:35.829 --> 00:19:38.869
and was aware, like in retention policies, and

00:19:38.869 --> 00:19:43.890
that your client's testimony relied on that.

00:19:43.930 --> 00:19:46.170
The court said it was going to allow that. That

00:19:46.170 --> 00:19:49.890
testimony was actually curtailed during the testimony

00:19:49.890 --> 00:19:54.250
before the jury. But the other point, and I know

00:19:54.250 --> 00:19:56.289
your honors haven't asked about this, is but

00:19:56.589 --> 00:20:00.369
The preview hearing itself was completely unprecedented

00:20:00.369 --> 00:20:04.190
and and would set a terrible precedent if Permitted

00:20:04.190 --> 00:20:07.450
that there was a ample disclosure which isn't

00:20:07.450 --> 00:20:11.609
required by the rules in the first place and

00:20:11.609 --> 00:20:16.029
But but most importantly the point of all of

00:20:16.029 --> 00:20:24.690
this is you hearing The deposition yes No, that

00:20:24.690 --> 00:20:27.009
is not correct your honor. So there's a whole

00:20:27.009 --> 00:20:33.490
history to this It needs to be to so so the There

00:20:33.490 --> 00:20:41.049
are in our reply brief as we we explain And let

00:20:41.049 --> 00:20:42.849
me just first I'll give you the appendix sites

00:20:42.849 --> 00:20:45.630
in a moment But what happened here was first

00:20:45.630 --> 00:20:49.390
a disclosure was demanded the defense objected

00:20:49.390 --> 00:20:55.180
twice to the disclosure That's at pages A, 554

00:20:55.180 --> 00:21:01.519
and 569. And then under duress, having been forced

00:21:01.519 --> 00:21:04.019
to provide a disclosure, they provided a single

00:21:04.019 --> 00:21:06.819
-space, seven -page disclosure. And then the

00:21:06.819 --> 00:21:09.200
court announced that wasn't enough. And it clearly

00:21:09.200 --> 00:21:12.839
would have been futile to lodge further objections.

00:21:13.230 --> 00:21:17.109
The court, for example, made clear that he was

00:21:17.109 --> 00:21:21.410
going to insist on the hearing at page 880. And

00:21:21.410 --> 00:21:24.470
then during the hearing, again, the court said,

00:21:24.490 --> 00:21:27.029
quote, if you want to push ahead with the evidence

00:21:27.029 --> 00:21:29.329
you're seeking to introduce, it's through this

00:21:29.329 --> 00:21:33.269
hearing, if at all. And that's at page A969.

00:21:33.549 --> 00:21:41.390
So. Whether or not this was going to be an advice

00:21:41.390 --> 00:21:43.509
of counsel defense, and if it wasn't going to

00:21:43.509 --> 00:21:46.210
be an advice of counsel defense, what was it

00:21:46.210 --> 00:21:49.930
going to be? Well, Your Honor, again, I think

00:21:49.930 --> 00:21:52.829
the point here, and the decision in Scully, the

00:21:52.829 --> 00:21:55.210
decision in Howard, made clear that this is evidence

00:21:55.210 --> 00:21:58.609
of good faith. It was up to the jury. It's not

00:21:58.609 --> 00:22:02.230
that hard for the jury, if a person is cross

00:22:02.230 --> 00:22:06.049
-examined, to decide. Well, is this valid, or

00:22:06.049 --> 00:22:08.849
is the defendant not telling the truth? Is he

00:22:08.849 --> 00:22:11.549
telling the truth? Are you seriously suggesting

00:22:11.549 --> 00:22:20.769
to us that if your client had been able to testify

00:22:20.769 --> 00:22:28.529
about the role that attorneys played in creating

00:22:28.529 --> 00:22:32.130
these various documents? of the not -guilties

00:22:32.130 --> 00:22:35.349
would have rolled in on this record? Your Honor,

00:22:35.789 --> 00:22:38.569
first of all, it's their burden to prove harmless

00:22:38.569 --> 00:22:44.410
error, but what we are submitting is that this,

00:22:44.470 --> 00:22:47.529
together with the asymmetrical rulings on loss,

00:22:48.130 --> 00:22:51.490
certainly at a minimum cumulatively would have

00:22:51.490 --> 00:22:53.910
affected the outcome. Mr. Bankman Fried never

00:22:53.910 --> 00:22:57.569
got to present the jury with his full defense.

00:23:01.000 --> 00:23:04.920
I'm sorry, I apologize for repeatedly cutting

00:23:04.920 --> 00:23:08.980
you off. But the asymmetrical rulings on loss,

00:23:09.559 --> 00:23:13.720
you're adverting to the fact that testimony came

00:23:13.720 --> 00:23:19.700
in from government witnesses that they had never

00:23:19.700 --> 00:23:24.940
been made whole? That they were never made whole,

00:23:25.500 --> 00:23:28.880
it was numerous government witnesses testified.

00:23:29.210 --> 00:23:34.589
And the government argued that the money was

00:23:34.589 --> 00:23:37.430
gone forever, that it was never going to be recouped,

00:23:37.569 --> 00:23:41.450
that thousands lost billions. This was repeated.

00:23:45.109 --> 00:23:47.289
Everything. So we're talking about the evidence

00:23:47.289 --> 00:23:49.670
that came in and the way the government used

00:23:49.670 --> 00:23:52.230
it in its opening and its closing. This was a

00:23:52.230 --> 00:23:57.259
case which was presented to the jury. as a situation

00:23:57.259 --> 00:24:00.480
in which thousands had lost billions of dollars

00:24:00.480 --> 00:24:04.240
never to be regained. And having chosen to try

00:24:04.240 --> 00:24:07.400
the case that way, the defendant was entitled

00:24:07.400 --> 00:24:10.839
to respond. He was entitled to demonstrate that

00:24:10.839 --> 00:24:14.259
this was a solvency, a liquidity crisis, not

00:24:14.259 --> 00:24:17.759
a solvency crisis, that he had believed in good

00:24:17.759 --> 00:24:21.119
faith that the assets were there with respect

00:24:21.119 --> 00:24:26.069
to the council issue. So you do, you agree that

00:24:26.069 --> 00:24:30.130
he was trying to argue this was a solvency issue,

00:24:31.190 --> 00:24:35.490
that he didn't have a solvency issue. He simply

00:24:35.490 --> 00:24:39.910
had a limited liquidity issue. At the end, that

00:24:39.910 --> 00:24:43.109
the customers could have been repaid had there

00:24:43.109 --> 00:24:46.230
been sufficient time. How do you square that

00:24:46.230 --> 00:24:49.890
with, for example, the recent Supreme Court decision?

00:24:50.190 --> 00:24:54.349
And other decisions cited in the recent Supreme

00:24:54.349 --> 00:24:59.569
Court decision that the fact that victims might

00:24:59.569 --> 00:25:02.329
be whole or weren't intended to be defrauded

00:25:02.329 --> 00:25:05.069
is not a proper defense. I assume Your Honor's

00:25:05.069 --> 00:25:07.970
talking about kusisis. Kusisis, is that how to

00:25:07.970 --> 00:25:11.289
pronounce it correctly? I believe so. So two

00:25:11.289 --> 00:25:13.910
points, Your Honor. First of all, again, we're

00:25:13.910 --> 00:25:16.529
not making a sufficiency argument. The point

00:25:16.529 --> 00:25:20.829
is. that having chosen to try the case as one

00:25:20.829 --> 00:25:24.470
of essentially permanent deprivation, he was

00:25:24.470 --> 00:25:27.509
entitled to respond to that. That type of argument

00:25:27.509 --> 00:25:30.130
has tremendous moral force, number one. Number

00:25:30.130 --> 00:25:34.470
two, koussis merely says that it's not a required

00:25:34.470 --> 00:25:38.490
element of male... If you're not making a sufficiency

00:25:38.490 --> 00:25:40.970
argument, then do you concede that there was

00:25:40.970 --> 00:25:44.269
sufficient evidence to convict on the counts

00:25:44.269 --> 00:25:47.940
of conviction? There's a disconnect there. There's

00:25:47.940 --> 00:25:50.619
no disconnect, Your Honor, with respect. Well,

00:25:50.839 --> 00:25:53.720
can you answer my question? If you're not challenging

00:25:53.720 --> 00:25:56.680
sufficiency of the evidence, do you concede then

00:25:56.680 --> 00:25:59.400
that the government presented sufficient evidence

00:25:59.400 --> 00:26:03.380
under the current state of law to prove conviction?

00:26:05.259 --> 00:26:08.079
The evidence was sufficient, but that's not part

00:26:08.079 --> 00:26:10.500
of the appeal. The issue on appeal is... Right,

00:26:10.500 --> 00:26:12.740
I get that you're not challenging a sufficiency

00:26:12.740 --> 00:26:15.390
of the evidence, but if you concede... that the

00:26:15.390 --> 00:26:18.849
evidence was nonetheless sufficient, then where's

00:26:18.849 --> 00:26:21.829
the harm? Well, that makes no... Your Honor,

00:26:22.109 --> 00:26:25.990
it's very well settled that the sufficiency standard

00:26:25.990 --> 00:26:29.089
is incredibly high and almost impossible to meet

00:26:29.089 --> 00:26:33.369
on appeal, but the argument here is about whether

00:26:33.369 --> 00:26:36.049
these errors were harmless beyond a reasonable

00:26:36.049 --> 00:26:38.750
doubt, because our contention... Don't we look

00:26:38.750 --> 00:26:41.269
at the sufficiency of the evidence when we look

00:26:41.269 --> 00:26:44.400
at whether there's harm? that errors are harmful?

00:26:44.559 --> 00:26:47.039
The fact that the evidence is sufficient certainly

00:26:47.039 --> 00:26:50.019
doesn't mean that the errors were harmless beyond

00:26:50.019 --> 00:26:52.059
a reasonable doubt. If that were the case, this

00:26:52.059 --> 00:26:55.059
court would never reverse convictions for evidentiary

00:26:55.059 --> 00:26:58.779
errors and it does so. from time to time. I've

00:26:58.779 --> 00:27:01.539
had numerous cases where this court has reversed

00:27:01.539 --> 00:27:04.500
Scully as an example of that. There's no sufficiency

00:27:04.500 --> 00:27:08.200
argument there. The case was reversed because

00:27:08.200 --> 00:27:10.700
the error was harmless. And it's their burden

00:27:10.700 --> 00:27:13.839
to prove the error is harmless beyond a reasonable

00:27:13.839 --> 00:27:18.539
doubt. Whereas sufficiency is based on the notion

00:27:18.539 --> 00:27:22.180
that all inferences have to be weighed in favor

00:27:22.180 --> 00:27:24.950
of the government. It's the opposite. on harmless

00:27:24.950 --> 00:27:28.690
error. That's not how this works. And so the

00:27:28.690 --> 00:27:31.569
point here is that the trial was unfair. It's

00:27:31.569 --> 00:27:34.049
not about whether the evidence was sufficient.

00:27:34.309 --> 00:27:36.910
We don't know. You know, the point is the trial

00:27:36.910 --> 00:27:39.549
was unfair, and we don't know whether the jury

00:27:39.549 --> 00:27:42.210
would have reached the same verdict had Mr. Bankman

00:27:42.210 --> 00:27:45.509
Fried been allowed to fully present his defense.

00:27:45.829 --> 00:27:52.450
This was a high -profile trial, both sides represented

00:27:52.450 --> 00:27:57.059
by able counsel. there with the usual back and

00:27:57.059 --> 00:28:03.859
forth and aggressive, up to the line advocacy.

00:28:04.380 --> 00:28:09.119
You won some things, you lost some things. And

00:28:09.119 --> 00:28:14.720
help me, I mean, it almost seems at times that

00:28:14.720 --> 00:28:17.079
you're spending more ink on Judge Kaplan than

00:28:17.079 --> 00:28:20.420
you are on the merits. I don't agree at all,

00:28:20.539 --> 00:28:23.670
Your Honor, and respectfully, I don't think It's

00:28:23.670 --> 00:28:26.029
a fair assessment of the record below to say

00:28:26.029 --> 00:28:28.750
that trial counsel won some things and lost some

00:28:28.750 --> 00:28:31.549
things. The defense was cut off at the knees

00:28:31.549 --> 00:28:37.430
by the judge's rulings. And it's clear, particularly

00:28:37.430 --> 00:28:40.470
from the loss ruling and the asymmetry of that,

00:28:40.529 --> 00:28:44.009
I think we pointed to certain comments and the

00:28:44.009 --> 00:28:46.950
judge's demeanor as observed by objective observers,

00:28:47.470 --> 00:28:50.390
because we are arguing that if a new trial is

00:28:50.390 --> 00:28:54.910
granted... Yes, but that's just related to the

00:28:54.910 --> 00:28:57.170
argument that if a new trial is granted, it should

00:28:57.170 --> 00:28:59.210
be assigned to a different judge. But the broader

00:28:59.210 --> 00:29:02.309
point is that I think any objective observer

00:29:02.309 --> 00:29:05.089
reading this record can see that the rulings

00:29:05.089 --> 00:29:08.170
are incredibly one -sided. I think you'd be hard

00:29:08.170 --> 00:29:11.009
pressed to point to any significant ruling that

00:29:11.009 --> 00:29:14.049
the defense won, quite frankly. But the bigger

00:29:14.049 --> 00:29:17.150
point is that on these two evidentiary issues,

00:29:17.480 --> 00:29:21.640
They created a very severe asymmetry that prevented

00:29:21.640 --> 00:29:24.740
Mr. Bankman freed from effectively presenting

00:29:24.740 --> 00:29:27.599
his defense to the jury that he acted in good

00:29:27.599 --> 00:29:30.059
faith that this was a margin exchange that everyone

00:29:30.059 --> 00:29:36.359
would have understood that the assets could be

00:29:36.359 --> 00:29:39.400
loaned out and that he did not intend to steal

00:29:39.400 --> 00:29:42.619
anyone's money. And that would have been a defense

00:29:42.619 --> 00:29:44.779
to which of the counts? All of the counts, Your

00:29:44.779 --> 00:29:48.769
Honor. Before you sit down, let me get your view

00:29:48.769 --> 00:29:53.029
on the $11 billion forfeiture. Sure, Your Honor.

00:29:54.069 --> 00:29:57.529
Did you have a specific question? I think we

00:29:57.529 --> 00:29:59.930
have several arguments for why. What's your best

00:29:59.930 --> 00:30:08.799
one? I think they're all great, Your Honor. There

00:30:08.799 --> 00:30:12.380
are statutory arguments that a money judgment

00:30:12.380 --> 00:30:16.339
is improper, as well as that the statute on which

00:30:16.339 --> 00:30:18.359
the government relied for the portion of the

00:30:18.359 --> 00:30:21.440
forfeiture related to the investors and the lenders

00:30:21.440 --> 00:30:26.099
does not apply because, you know, this is not

00:30:26.099 --> 00:30:29.140
an illegal, these were not illegal transactions.

00:30:29.480 --> 00:30:32.200
It's an argument that legal transactions, and

00:30:32.200 --> 00:30:34.440
then most importantly, we have an Eighth Amendment

00:30:34.440 --> 00:30:38.230
argument. I just wanted to be sure, I suppose,

00:30:38.410 --> 00:30:41.549
that there was nothing you wanted to, no points

00:30:41.549 --> 00:30:43.410
you wanted to make. No, Your Honor, I think the

00:30:43.410 --> 00:30:45.869
briefs lay out our position on that clearly.

00:30:46.089 --> 00:30:59.789
Thank you. May it please the court, Nathan Wren

00:30:59.789 --> 00:31:02.210
for the United States on this appeal, and I represented

00:31:02.210 --> 00:31:05.630
the United States at trial. At that trial, the

00:31:05.630 --> 00:31:08.170
overwhelming evidence proved that Sam Bankman

00:31:08.170 --> 00:31:10.990
Freed committed a large -scale fraud on the customers

00:31:10.990 --> 00:31:13.950
of FTX, the cryptocurrency exchange that he ran.

00:31:15.049 --> 00:31:18.849
He told his customers FTX was a safe place where

00:31:18.849 --> 00:31:20.630
their money would be held in custody for them,

00:31:20.910 --> 00:31:24.289
but instead he misappropriated billions of dollars

00:31:24.289 --> 00:31:27.130
of customer deposits by funneling it into his

00:31:27.130 --> 00:31:30.869
trading company Alameda. Despite his explicit

00:31:30.869 --> 00:31:33.670
assurances to his customers, to the public, to

00:31:33.670 --> 00:31:35.710
his investors and even to his own employees,

00:31:36.089 --> 00:31:38.430
that money was not being held safely at FTX.

00:31:38.789 --> 00:31:42.069
What was at FTX was a deficiency of more than

00:31:42.069 --> 00:31:45.690
$8 billion because the money had been moved to

00:31:45.690 --> 00:31:49.430
Alameda where Bankman Fried had spent it on investments,

00:31:50.069 --> 00:31:53.609
political donations and other expenditures. None

00:31:53.609 --> 00:31:56.230
of the claims that Bankman Fried raises on appeal

00:31:56.230 --> 00:31:58.589
provide any basis to overturn the conviction

00:31:58.589 --> 00:32:00.950
in this case, especially in light of the overwhelming

00:32:00.950 --> 00:32:03.799
evidence that was presented at trial. And several

00:32:03.799 --> 00:32:05.740
of the arguments that we've heard both in the

00:32:05.740 --> 00:32:10.240
briefing and this morning are based on a mischaracterization

00:32:10.240 --> 00:32:12.299
or framing of what happened at trial that really

00:32:12.299 --> 00:32:14.559
is not supported by the record. So I want to

00:32:14.559 --> 00:32:17.460
focus first on the issue of evidence as to loss.

00:32:17.680 --> 00:32:19.880
And I think it's important really to focus on

00:32:19.880 --> 00:32:22.759
the actual holdings that Judge Kaplan made that

00:32:22.759 --> 00:32:24.759
are being challenged in this appeal. Because

00:32:24.759 --> 00:32:27.019
if you look at what Judge Kaplan precluded, it

00:32:27.019 --> 00:32:29.559
was very clear that he was precluding evidence

00:32:29.559 --> 00:32:33.400
as to the present day value of certain investments

00:32:33.400 --> 00:32:35.519
that Bankman Freed had directed to be made with

00:32:35.519 --> 00:32:38.059
customer money. And as this court has affirmed

00:32:38.059 --> 00:32:42.359
for decades, evidence about the potential ultimate

00:32:42.359 --> 00:32:44.680
recovery to victims or defendants belief as the

00:32:44.680 --> 00:32:46.940
potential ultimate recovery of victims simply

00:32:46.940 --> 00:32:50.000
is not a defense to fraud. That's in the Malaise

00:32:50.000 --> 00:32:53.900
case, that's in Lange. Does it matter this issue

00:32:53.900 --> 00:32:58.259
that was raised regarding asymmetry and having

00:32:58.259 --> 00:33:02.240
witnesses testify the money's gone? So this day

00:33:02.240 --> 00:33:06.460
I've still not gotten it back with the sort of

00:33:06.460 --> 00:33:09.099
info in the background that actually it's maybe

00:33:09.099 --> 00:33:11.319
not forever and in fact most of the victims are

00:33:11.319 --> 00:33:14.200
going to get some maybe all of the money back.

00:33:14.299 --> 00:33:17.720
I think that's your adversary was describing

00:33:17.720 --> 00:33:21.519
an asymmetry in the sense of the government as

00:33:21.519 --> 00:33:24.079
she's portraying you is saying this money is

00:33:24.079 --> 00:33:27.720
gone forever with the knowledge that actually

00:33:27.720 --> 00:33:31.740
that may not be the case. So there was no asymmetry

00:33:31.740 --> 00:33:34.720
because neither side presented any evidence about

00:33:34.720 --> 00:33:36.839
what the ultimate outcome of the bankruptcy might

00:33:36.839 --> 00:33:39.140
be. The evidence was focused on - Not so much

00:33:39.140 --> 00:33:41.420
on the bankruptcy, but just the government portrayed

00:33:41.420 --> 00:33:44.579
this case as there are all these victims, they've

00:33:44.579 --> 00:33:47.619
lost this money, and it's gone forever. So the

00:33:47.619 --> 00:33:48.920
government didn't make the argument that the

00:33:48.920 --> 00:33:50.900
money was gone forever. The government's arguments

00:33:50.900 --> 00:33:53.859
were focused on the crisis that consumed FTX.

00:33:54.089 --> 00:33:58.369
in 2022 when, in fact, the money had been misappropriated,

00:33:58.650 --> 00:34:01.309
when customers were seeking to make the withdrawals

00:34:01.309 --> 00:34:03.690
that they had been assured by FTX they would

00:34:03.690 --> 00:34:06.009
be able to make and that would be available to

00:34:06.009 --> 00:34:08.710
them, and they weren't able to do so. And if

00:34:08.710 --> 00:34:11.409
you look at the actual parts of the transcript

00:34:11.409 --> 00:34:13.710
that the defendant focuses on, that's exactly

00:34:13.710 --> 00:34:15.050
the argument that the government was making.

00:34:15.130 --> 00:34:17.730
So for example, the rebuttal argument at pages

00:34:17.730 --> 00:34:22.469
A, 1110 and 1111 of the appendix. where the government

00:34:22.469 --> 00:34:25.489
presented the case to the jury that the defendant

00:34:25.489 --> 00:34:27.829
was looking at a balance sheet that true showed

00:34:27.829 --> 00:34:30.849
a net asset value of positive for Alameda, i

00:34:30.849 --> 00:34:33.849
.e. it technically had long -term assets in excess

00:34:33.849 --> 00:34:37.750
of its liabilities, but it had nowhere near enough

00:34:37.750 --> 00:34:40.650
money. to cover customer withdrawals. And the

00:34:40.650 --> 00:34:43.010
reason that was important was because as those

00:34:43.010 --> 00:34:46.050
customers testified, and as multiple other witnesses

00:34:46.050 --> 00:34:48.630
such as Alameda and FTX employees testified,

00:34:49.230 --> 00:34:51.869
the customers had been told the money was being

00:34:51.869 --> 00:34:53.809
custodied for them, that it was safe, that it

00:34:53.809 --> 00:34:57.369
would be available to be withdrawn on demand.

00:34:58.070 --> 00:35:00.590
And in fact, the customers were specifically

00:35:00.590 --> 00:35:03.519
asked... at trial about this theory that the

00:35:03.519 --> 00:35:05.199
defense is now putting forward, both they put

00:35:05.199 --> 00:35:06.840
forward at trial and they're putting forward

00:35:06.840 --> 00:35:09.099
at appeal, that, oh, it's all going to come out

00:35:09.099 --> 00:35:11.460
in the wash because we put your money in good

00:35:11.460 --> 00:35:14.440
investments. And so the first customer who testified

00:35:14.440 --> 00:35:16.920
about being unable to withdraw at transcript

00:35:16.920 --> 00:35:19.519
pages 81 and 82 of the trial transcript, he was

00:35:19.519 --> 00:35:22.559
asked, well, did you agree that FTX would borrow

00:35:22.559 --> 00:35:24.840
your funds and make investments with them and

00:35:24.840 --> 00:35:27.039
you could be paid back out of those investments?

00:35:27.300 --> 00:35:30.260
And he specifically testified, no. That's not

00:35:30.260 --> 00:35:34.840
what I signed up for. So the idea that this use

00:35:34.840 --> 00:35:38.119
of customer funds for investments wasn't presented

00:35:38.119 --> 00:35:41.059
to the jury is simply inaccurate. The second

00:35:41.059 --> 00:35:42.980
customer said the same thing at Trial Transcript

00:35:42.980 --> 00:35:46.159
1289 and 90. He was asked, did you understand

00:35:46.159 --> 00:35:48.059
that your money might be invested? Did you agree

00:35:48.059 --> 00:35:50.860
that it would be lent out? No, I didn't agree

00:35:50.860 --> 00:35:52.920
to that. That's not a risk I was willing to take.

00:35:52.940 --> 00:35:54.960
So you're saying the government's theory was

00:35:54.960 --> 00:35:59.599
never that this money is gone forever? You know,

00:35:59.599 --> 00:36:01.539
I understand the government's theory that money

00:36:01.539 --> 00:36:05.000
was stolen because it was taken without permission.

00:36:05.099 --> 00:36:07.599
Correct. And used for a purpose without permission.

00:36:07.920 --> 00:36:09.960
But did the government argue that this money

00:36:09.960 --> 00:36:12.559
was gone forever? No, there was no mystery about

00:36:12.559 --> 00:36:14.380
what had happened to the money. There were days

00:36:14.380 --> 00:36:17.320
of detailed financial tracing testimony describing

00:36:17.320 --> 00:36:20.380
how the FTX customer funds had been drained into

00:36:20.380 --> 00:36:20.639
these investments. That's not my question though.

00:36:20.920 --> 00:36:23.239
My question is that the government argued that

00:36:23.239 --> 00:36:25.900
this money was gone forever and these victims

00:36:25.900 --> 00:36:29.329
would never recover any money. No, that was not

00:36:29.329 --> 00:36:51.780
what the government argued at the trial. That's

00:36:51.780 --> 00:36:53.539
correct your honor and that was in the context

00:36:53.539 --> 00:36:56.079
of his testimony that when he had deposited his

00:36:56.079 --> 00:36:59.239
funds on FTX He had been under the understanding

00:36:59.239 --> 00:37:01.880
from the representations that Bankman Fried had

00:37:01.880 --> 00:37:03.699
made and the representations that the company

00:37:03.699 --> 00:37:05.820
had made at his direction that the money was

00:37:05.820 --> 00:37:08.420
being held in custody and available for him to

00:37:08.420 --> 00:37:11.440
withdraw from the exchange and as I just referenced

00:37:11.440 --> 00:37:14.500
he was also asked well did you agree that the

00:37:14.500 --> 00:37:16.559
money would be borrowed and Would be put into

00:37:16.559 --> 00:37:18.820
investments and he said no I didn't agree to

00:37:18.820 --> 00:37:22.480
that so it wasn't relevant that ultimately down

00:37:22.480 --> 00:37:25.239
the line the investments might pay out and he

00:37:25.239 --> 00:37:27.579
might be able to get some recovery later because

00:37:27.579 --> 00:37:29.860
he was specifically asked about what was his

00:37:29.860 --> 00:37:33.280
understanding what was the basis the representation

00:37:33.280 --> 00:37:36.639
on which he was induced to part with his money

00:37:36.639 --> 00:37:40.400
and that representation was FTX will custody

00:37:40.400 --> 00:37:42.179
this money for you and it's available for you

00:37:42.179 --> 00:37:45.139
to withdraw on demand he put a hundred plus thousand

00:37:45.139 --> 00:37:48.360
dollars into FTX and he was given a document

00:37:48.360 --> 00:37:51.690
that said you now have three Bitcoin. That was

00:37:51.690 --> 00:37:53.730
false. No Bitcoin were ever purchased for it.

00:37:53.949 --> 00:37:56.210
That money went directly to Alameda where it

00:37:56.210 --> 00:37:59.150
was spent on these investments in direct contravention

00:37:59.150 --> 00:38:01.489
of what the customers were told. And that issue

00:38:01.489 --> 00:38:04.170
was extensively litigated at trial with both

00:38:04.170 --> 00:38:06.730
sides looking carefully at the representations

00:38:06.730 --> 00:38:09.130
that customers were given and whether what was

00:38:09.130 --> 00:38:11.610
actually done with the money was consistent with

00:38:11.610 --> 00:38:14.190
those representations. And again, this court

00:38:14.190 --> 00:38:17.309
has held for decades and the Supreme Court has

00:38:17.309 --> 00:38:20.300
recently made it even more clear in the Koussis

00:38:20.300 --> 00:38:23.920
case that questions about the ultimate losses

00:38:23.920 --> 00:38:27.199
to victims of a fraud are not properly before

00:38:27.199 --> 00:38:30.099
a jury at trial. The question is whether the

00:38:30.099 --> 00:38:32.820
victims were fraudulently induced to part with

00:38:32.820 --> 00:38:35.539
money or property. And that is what the jury

00:38:35.539 --> 00:38:37.639
was presented with in this case, and that's what

00:38:37.639 --> 00:38:43.320
the evidence overwhelmingly supported. Can you

00:38:43.320 --> 00:38:46.969
address the forfeiture issue? Certainly, Your

00:38:46.969 --> 00:38:49.630
Honor. With respect to this question of whether

00:38:49.630 --> 00:38:54.010
it's appropriate for the court to enter a money

00:38:54.010 --> 00:38:57.449
judgment, the defendant's arguments are simply

00:38:57.449 --> 00:39:00.269
foreclosed by circuit precedent. So in the Awad

00:39:00.269 --> 00:39:03.150
case, this court has held that a money judgment

00:39:03.150 --> 00:39:05.590
is appropriate under the forfeiture statutes.

00:39:05.949 --> 00:39:08.389
I know there's currently some cases on appeal

00:39:08.389 --> 00:39:11.449
relating to the issue of whether money judgments

00:39:11.449 --> 00:39:16.409
are unconstitutional. in terms of their amount

00:39:16.409 --> 00:39:20.090
under the Eighth Amendment. What's your position

00:39:20.090 --> 00:39:24.070
on that? I mean, the level here is pretty high

00:39:24.070 --> 00:39:26.150
compared to some of those cases where we're talking

00:39:26.150 --> 00:39:31.550
30 million. Yes, Your Honor. So there are factors

00:39:31.550 --> 00:39:33.670
that the court should consider in evaluating

00:39:33.670 --> 00:39:37.010
whether a forfeiture order is in excess of the

00:39:37.010 --> 00:39:40.530
Eighth Amendment's bar on excessive fines. But

00:39:40.530 --> 00:39:43.530
the primary issue are you're comparing the size

00:39:43.530 --> 00:39:46.449
of the forfeiture to the size of the defendant's

00:39:46.449 --> 00:39:48.989
crime. And if you look at the factors that this

00:39:48.989 --> 00:39:51.090
court has applied, it considers things like what

00:39:51.090 --> 00:39:53.869
would be the maximum fine that Congress would

00:39:53.869 --> 00:39:56.730
have allowed for this conduct? What was the loss

00:39:56.730 --> 00:39:59.949
to the victims of the crime? And how does that

00:39:59.949 --> 00:40:01.750
compare to the forfeiture money judgment? And

00:40:01.750 --> 00:40:03.929
here, because of the enormity of the defendant's

00:40:03.929 --> 00:40:06.989
crimes, you do end up with a very large forfeiture

00:40:06.989 --> 00:40:09.829
award. But that's calibrated to the enormity

00:40:09.829 --> 00:40:11.630
of the defendant's conduct, to the fact that

00:40:11.630 --> 00:40:14.690
he defrauded so many people of so much money

00:40:14.690 --> 00:40:17.849
that the forfeiture order reflects that. What

00:40:17.849 --> 00:40:21.949
legitimate penal purpose do you think does the

00:40:21.949 --> 00:40:24.150
government believe a forfeiture of that amount

00:40:24.150 --> 00:40:28.780
serves? Your honor a forfeiture that allows the

00:40:28.780 --> 00:40:32.139
recovery of the full amount of misappropriated

00:40:32.139 --> 00:40:35.739
or fraudulently obtained funds is an important

00:40:35.739 --> 00:40:40.400
tool in preventing defendants from Profiting

00:40:40.400 --> 00:40:58.389
from their offense conduct spend more and more

00:40:58.389 --> 00:41:04.789
time investigating this and find every, find

00:41:04.789 --> 00:41:11.250
enough funds to make everybody whole. At that

00:41:11.250 --> 00:41:15.030
point, what legitimate penal purpose does an

00:41:15.030 --> 00:41:22.539
$11 billion forfeiture serve? So what's not allowed

00:41:22.539 --> 00:41:24.380
under the forfeiture statutes and what's not

00:41:24.380 --> 00:41:26.440
authorized by this forfeiture judgment is a double

00:41:26.440 --> 00:41:29.519
recovery. And so the defense suggested in their

00:41:29.519 --> 00:41:31.519
opening brief that there wouldn't be offsets

00:41:31.519 --> 00:41:34.539
against the forfeiture for specifically recovered

00:41:34.539 --> 00:41:36.940
properties that were obtained in the course of

00:41:36.940 --> 00:41:39.289
the... forfeiture proceedings, but in fact, the

00:41:39.289 --> 00:41:41.650
forfeiture judgment specifically says those are

00:41:41.650 --> 00:41:43.769
offset against the forfeiture. That's a different

00:41:43.769 --> 00:41:45.630
question. I mean, the fact that their property,

00:41:45.929 --> 00:41:48.309
this property that's been seized and I guess

00:41:48.309 --> 00:41:50.710
its value is to be determined and that will be

00:41:50.710 --> 00:41:53.570
deducted from the 11 billion dollars, which I

00:41:53.570 --> 00:41:55.449
think is what you're describing, is a different

00:41:55.449 --> 00:41:58.289
question than what Judge Parker was getting at,

00:41:58.289 --> 00:42:02.030
which is if one of the factors we consider is

00:42:02.030 --> 00:42:05.369
harm to the victims and if it is going to possibly

00:42:05.369 --> 00:42:08.639
be. in this case, that all of the victims are

00:42:08.639 --> 00:42:10.659
going to be made whole, how do you still get

00:42:10.659 --> 00:42:13.599
to justifying this 11 billion dollar number?

00:42:14.720 --> 00:42:18.239
So in this case in particular as was explained

00:42:18.239 --> 00:42:21.539
to Judge Kaplan the Department of Justice is

00:42:21.539 --> 00:42:24.559
using forfeited funds for remission to victims

00:42:24.559 --> 00:42:27.079
and so part of that recovery to victims that

00:42:27.079 --> 00:42:29.400
the defense is talking about is the fact that

00:42:29.400 --> 00:42:31.699
those forfeited funds are going to those victims.

00:42:31.980 --> 00:42:35.019
So again the the way this was set up and structured

00:42:35.019 --> 00:42:38.099
in this case was specifically to make sure that

00:42:38.099 --> 00:42:40.280
those forfeited funds would be used to make victims

00:42:40.280 --> 00:42:44.380
whole and to the extent that Again, there won't

00:42:44.380 --> 00:42:47.460
be a double recovery here because the total amount

00:42:47.460 --> 00:42:51.800
of losses to victims exceeds the amount. I guess

00:42:51.800 --> 00:42:54.760
I'm not thinking right now about double recovery

00:42:54.760 --> 00:42:56.900
to the victims. I'm just talking about to the

00:42:56.900 --> 00:42:59.400
extent that part of the reason why the number

00:42:59.400 --> 00:43:02.699
is what it is, is because of the victims. To

00:43:02.699 --> 00:43:05.059
the extent that there is recovery by the victims,

00:43:06.199 --> 00:43:09.079
does that mean the numbers should be lower? Not

00:43:09.079 --> 00:43:11.099
because we're concerned about double recovery,

00:43:11.159 --> 00:43:13.599
but just because. To the extent that's one of

00:43:13.599 --> 00:43:15.739
the factors, maybe that means that the $11 billion

00:43:15.739 --> 00:43:19.059
number isn't the right one. So Your Honor, there

00:43:19.059 --> 00:43:22.460
has been some recovery of victim losses through

00:43:22.460 --> 00:43:24.300
the bankruptcy proceedings. And there's also

00:43:24.300 --> 00:43:26.780
been a large amount of recovery through forfeiture

00:43:26.780 --> 00:43:29.619
actions over the course of this case. And those

00:43:29.619 --> 00:43:32.659
forfeiture actions are being administered through

00:43:32.659 --> 00:43:36.000
a remission process. that's working alongside

00:43:36.000 --> 00:43:38.360
the bankruptcy to get that money out to FTX victims.

00:43:38.780 --> 00:43:41.019
So there isn't a situation where somehow the

00:43:41.019 --> 00:43:43.219
defendant is going to have to pay more than what

00:43:43.219 --> 00:43:45.840
victims ultimately may recover. So if the victims

00:43:45.840 --> 00:43:51.539
are made whole, will he still have a forfeiture

00:43:51.539 --> 00:43:56.519
obligation? Your Honor, if in the event that

00:43:56.519 --> 00:43:59.199
total victim losses were covered, that would...

00:43:59.150 --> 00:44:01.289
That would take care of the forfeiture obligation

00:44:01.289 --> 00:44:03.750
the way that the remission process has been structured

00:44:03.750 --> 00:44:06.889
in this case. Yes. So if victims are made whole,

00:44:08.570 --> 00:44:10.730
the forfeiture goes away. Is that what you're

00:44:10.730 --> 00:44:14.949
telling us? If the amount that the forfeiture

00:44:14.949 --> 00:44:17.869
judgment has been satisfied to make victims whole,

00:44:18.110 --> 00:44:20.230
then that would satisfy the forfeiture judgment

00:44:20.230 --> 00:44:22.670
based on the remission authorization that's been

00:44:22.670 --> 00:44:27.650
made in this case. I'm sorry. I don't understand

00:44:27.650 --> 00:44:30.800
that answer. So, my understanding, and I haven't

00:44:30.800 --> 00:44:33.039
studied the remission order in this case, is

00:44:33.039 --> 00:44:37.079
that the remission authorization that the Department

00:44:37.079 --> 00:44:39.739
of Justice has put in place is to take forfeited

00:44:39.739 --> 00:44:43.199
funds and pay them out to victims up to the amount

00:44:43.199 --> 00:44:45.059
of forfeiture that's been authorized in the case.

00:44:45.800 --> 00:44:49.000
And so... That will satisfy both the forfeiture

00:44:49.000 --> 00:44:51.699
judgment and the victim. In actuality, we're

00:44:51.699 --> 00:44:53.440
not going to get close to what these numbers

00:44:53.440 --> 00:44:56.139
are. But in the event that there was sufficient

00:44:56.139 --> 00:44:58.619
recovery. Right. But does that, and I guess perhaps

00:44:58.619 --> 00:45:00.659
I'm not understanding the point you're making

00:45:00.659 --> 00:45:03.699
either. Let's say, so there's $11 billion forfeiture

00:45:03.699 --> 00:45:08.539
order. Let's say at some point, $4 billion of

00:45:08.539 --> 00:45:10.719
it ends up going to the victims. But the victims

00:45:10.719 --> 00:45:13.500
are otherwise made whole. So the victims are

00:45:13.500 --> 00:45:16.780
made whole. And 4 billion of that has come from

00:45:16.780 --> 00:45:19.199
this forfeiture order. He's still going to be

00:45:19.199 --> 00:45:21.980
responsible for the other 7 billion, correct?

00:45:22.860 --> 00:45:25.360
So the forfeiture order would still be in effect.

00:45:25.480 --> 00:45:27.800
I mean, as a practical matter, the odds of recovery

00:45:27.800 --> 00:45:30.119
of those billions of dollars, I think, are unlikely.

00:45:30.639 --> 00:45:33.380
But in practical effects... Right, but that's

00:45:33.380 --> 00:45:35.380
part of the issue, though, not having a forfeiture

00:45:35.380 --> 00:45:37.340
order that's going to be so... This is an important

00:45:37.340 --> 00:45:39.800
issue to us. So you have to please stop bopping

00:45:39.800 --> 00:45:44.130
and leaving on it. Your Honor... The forfeiture

00:45:44.130 --> 00:45:48.409
judgment was based on the losses to victim customers,

00:45:48.750 --> 00:45:53.429
victim lenders, and victim investors. This court's

00:45:53.429 --> 00:45:56.429
precedence established that that is an appropriate

00:45:56.429 --> 00:45:59.590
basis for the entry of a forfeiture award, which

00:45:59.590 --> 00:46:01.210
is what the district court did in this case.

00:46:02.010 --> 00:46:04.349
Now, this court's precedence also established

00:46:04.349 --> 00:46:08.489
that it's permissible for forfeiture to not be

00:46:08.489 --> 00:46:10.989
duplicative of restitution. In other words, they're

00:46:10.989 --> 00:46:13.710
separate obligations on a defendant. And the

00:46:13.710 --> 00:46:17.690
reason for that is because the mere paying back

00:46:17.690 --> 00:46:24.409
the victims is not sufficient incentive for a

00:46:24.409 --> 00:46:26.389
defendant not to commit fraud if it's simply

00:46:26.389 --> 00:46:28.210
paying back the victims. There's an additional

00:46:28.210 --> 00:46:31.150
financial penalty represented by the forfeiture

00:46:31.150 --> 00:46:33.989
award. However, in practice, and especially in

00:46:33.989 --> 00:46:36.570
large victim loss cases, the Department of Justice

00:46:36.570 --> 00:46:39.969
has the authorization to use forfeited funds

00:46:39.969 --> 00:46:43.869
for remission to victims. And in this case, that's

00:46:43.869 --> 00:46:46.809
what the Department of Justice has done and is

00:46:46.809 --> 00:46:49.809
doing with the forfeited funds. So when we hear

00:46:49.809 --> 00:46:52.449
this about the recovery to the victims in the

00:46:52.449 --> 00:46:55.670
bankruptcy, a substantial portion of that recovery

00:46:55.670 --> 00:47:00.190
is due to the forfeitures that took place as

00:47:00.190 --> 00:47:02.690
a result of this criminal case. So if the forfeiture

00:47:02.690 --> 00:47:05.429
award were to go away, those forfeited funds

00:47:05.429 --> 00:47:08.110
wouldn't necessarily be available for the bankruptcy

00:47:08.110 --> 00:47:32.250
to distribute them to FTX customers. unexpected

00:47:32.250 --> 00:47:35.809
recovery by the government, on the government's

00:47:35.809 --> 00:47:41.010
behalf, was able to make all the investors whole.

00:47:42.289 --> 00:47:45.530
I want to just be sure I understand what effect

00:47:45.530 --> 00:47:48.789
would that have on the $11 billion? Certainly,

00:47:48.829 --> 00:47:53.909
Your Honor. So the residual claimants in the

00:47:53.909 --> 00:47:57.130
bankruptcy are the investors and FTX, and they

00:47:57.130 --> 00:47:59.949
come ahead of the insider. shareholders, like

00:47:59.949 --> 00:48:02.329
Benjamin Fried. And so they would, I think, to

00:48:02.329 --> 00:48:04.110
the extent there was excessive recovery in the

00:48:04.110 --> 00:48:06.230
bankruptcy, they would be the ones entitled to

00:48:06.230 --> 00:48:08.090
any residual claims. But I do want to highlight

00:48:08.090 --> 00:48:12.170
one important aspect of this, which is the customer

00:48:12.170 --> 00:48:16.889
bankruptcy claims are linked to the dollar value

00:48:16.889 --> 00:48:20.469
of their crypto balances on FTX at the time of

00:48:20.469 --> 00:48:24.469
the bankruptcy. So when we talk about 100 % customer

00:48:24.469 --> 00:48:26.889
recovery, it's tied to that amount. But if you're

00:48:26.889 --> 00:48:29.170
a customer, like, Mark Juilliard who testified

00:48:29.170 --> 00:48:32.590
at the trial, he thought he had three Bitcoin.

00:48:33.269 --> 00:48:35.530
Three Bitcoin are now worth about eight times

00:48:35.530 --> 00:48:37.389
what the value of those three Bitcoin were in

00:48:37.389 --> 00:48:40.090
November of 2022. So those victims aren't being

00:48:40.090 --> 00:48:42.809
close to being made whole in the bankruptcy and

00:48:42.809 --> 00:48:46.130
in the sort of realistic economic sense. They're

00:48:46.130 --> 00:48:48.929
being made whole as a percentage of the dollar

00:48:48.929 --> 00:48:52.070
value. of their Bitcoin balances as of November

00:48:52.070 --> 00:48:54.909
2022. The reason that's important is the FTX

00:48:54.909 --> 00:48:57.510
estate has said, to the extent there is excess

00:48:57.510 --> 00:48:59.969
recovery, the first priority is to make those

00:48:59.969 --> 00:49:02.789
customers whole relative to what the value of

00:49:02.789 --> 00:49:04.909
their crypto would be. Because that's what they

00:49:04.909 --> 00:49:06.690
were told was happening with their money. That's

00:49:06.690 --> 00:49:10.110
the truly just result here. And so that's, I

00:49:10.110 --> 00:49:13.250
think, why it's essentially almost impossible

00:49:13.250 --> 00:49:14.969
to imagine that there would ever be an excess

00:49:14.969 --> 00:49:17.210
recovery. Because the customers who were told

00:49:17.210 --> 00:49:19.170
that Bankman Fried was purchasing crypto for

00:49:19.170 --> 00:49:21.469
them, that wasn't happening. And that crypto

00:49:21.469 --> 00:49:23.730
has since appreciated in value. So the actual

00:49:23.730 --> 00:49:26.449
losses to customers are much higher. And you're

00:49:26.449 --> 00:49:30.489
suggesting then that if there is a recovery of

00:49:30.489 --> 00:49:34.510
the 11 billion in the forfeiture order, that

00:49:34.510 --> 00:49:37.829
those customers would be the first to... That

00:49:37.829 --> 00:49:40.389
the way the forfeiture is structured, they would

00:49:40.389 --> 00:49:44.869
have the first right to recover in whatever funds

00:49:44.869 --> 00:49:48.570
are forfeited in the future. Forget what's already

00:49:48.570 --> 00:49:52.090
attached. So the way the Department of Justice's

00:49:52.090 --> 00:49:55.030
remission agreement has been structured is to

00:49:55.030 --> 00:49:57.730
pay out claims through the bankruptcy according

00:49:57.730 --> 00:50:00.530
to the respective loss amounts of the different

00:50:00.530 --> 00:50:03.070
groups of victims, lenders, investors, and customers.

00:50:04.030 --> 00:50:06.170
My understanding, and this is getting a little

00:50:06.170 --> 00:50:08.309
bit beyond my expertise with respect to how the

00:50:08.309 --> 00:50:10.309
bankruptcy is structured, but my understanding

00:50:10.309 --> 00:50:12.869
is that the debtor estate in the bankruptcy has

00:50:12.869 --> 00:50:16.070
said, to the extent there's additional increased

00:50:16.070 --> 00:50:19.210
recoveries, the priority will be on making customers

00:50:19.210 --> 00:50:23.369
whole in the true economic sense, that is, what

00:50:23.369 --> 00:50:25.510
the current value of their crypto would be, as

00:50:25.510 --> 00:50:29.449
opposed to the sense of what the November 2022

00:50:29.449 --> 00:50:31.969
dollar value for the claims was. The bankruptcy

00:50:31.969 --> 00:50:34.710
proceedings, they can take a long time, but eventually

00:50:34.710 --> 00:50:37.750
they will end, whereas the forfeiture order doesn't

00:50:37.750 --> 00:50:41.170
end, correct? It will carry on through his sentence.

00:50:41.170 --> 00:50:45.570
Until satisfied, correct. So potentially there

00:50:45.570 --> 00:50:50.590
could be a situation where the bankruptcy process

00:50:50.590 --> 00:50:55.909
has ended and there's a recovery somehow down

00:50:55.909 --> 00:51:01.199
the road. there would be no mechanism in effect

00:51:01.199 --> 00:51:06.219
to make the victims whole, if you will, in terms

00:51:06.219 --> 00:51:10.440
of what they expected to earn as opposed to what

00:51:10.440 --> 00:51:13.360
their assets were valued at in bankruptcy court.

00:51:13.699 --> 00:51:17.699
Is that what you're saying? The currently existing

00:51:17.699 --> 00:51:19.980
mechanism would no longer be in effect, but the

00:51:19.980 --> 00:51:22.300
Department of Justice always has the ability

00:51:22.300 --> 00:51:25.730
when it forfeits funds to accept victim claims.

00:51:26.050 --> 00:51:28.190
But does it have the ability or the willingness?

00:51:28.670 --> 00:51:32.849
I guess that's the key, isn't it? It is the willingness,

00:51:33.050 --> 00:51:36.110
Your Honor. The typical practice in my experience

00:51:36.110 --> 00:51:39.130
has been even though the department is not obligated

00:51:39.130 --> 00:51:42.309
to use forfeited funds to pay victims of fraud,

00:51:42.909 --> 00:51:45.710
that is the overwhelmingly majority of cases

00:51:45.710 --> 00:51:48.889
they choose to do that. So in the unlikely event

00:51:48.889 --> 00:51:52.460
that there were some funds that had been squirreled

00:51:52.460 --> 00:51:54.139
away and hidden from both the bankruptcy and

00:51:54.139 --> 00:51:55.880
the government that were discovered at some point

00:51:55.880 --> 00:52:00.019
in the distant future. We would submit that the

00:52:00.019 --> 00:52:02.500
appropriate thing to do would be for those forfeited

00:52:02.500 --> 00:52:06.380
funds to be used for any remaining victims who

00:52:06.380 --> 00:52:09.260
haven't yet been made whole rather than somehow

00:52:09.260 --> 00:52:11.019
saying the forfeiture should go away and they

00:52:11.019 --> 00:52:14.340
should go back to the defendant who by that implication

00:52:14.340 --> 00:52:17.260
would have profited from his ability to hide.

00:52:17.550 --> 00:52:19.730
fraudulently obtained funds for an extended period

00:52:19.730 --> 00:52:22.369
of time. So the structure of the Forfeiture Award

00:52:22.369 --> 00:52:27.349
is appropriate to ensure both that money is available

00:52:27.349 --> 00:52:31.190
for victims to be made whole and also to prevent

00:52:31.190 --> 00:52:34.210
defendants from being able to conceal the proceeds

00:52:34.210 --> 00:52:38.190
of fraud past the time at which other procedures

00:52:38.190 --> 00:52:46.980
might be in place to make victims whole. What

00:52:46.980 --> 00:52:54.500
is the source? The forfeiture award points to

00:52:54.500 --> 00:53:01.420
which assets? Money that the defendant has taken

00:53:01.420 --> 00:53:08.800
out of the company or money that the trustee

00:53:08.800 --> 00:53:12.000
happens to recover or both? So the forfeiture

00:53:12.000 --> 00:53:16.619
award is directed at the fraudulently obtained

00:53:16.619 --> 00:53:20.860
customer funds. So the biggest component of it

00:53:20.860 --> 00:53:45.059
is FTX. Yes, your honor. To the extent that the

00:53:45.059 --> 00:53:47.840
funds are traceable to FTX customer deposits

00:53:47.840 --> 00:53:50.579
that were improperly funneled into other uses,

00:53:50.940 --> 00:53:53.360
and these efforts are ongoing. The bankruptcy

00:53:53.360 --> 00:53:55.340
estate has been engaged in efforts. The government

00:53:55.340 --> 00:53:57.820
has also been engaged in efforts to identify

00:53:57.820 --> 00:54:00.840
those assets and recover them for the sake of

00:54:00.840 --> 00:54:03.300
victims. But it comes from that initial fraudulent

00:54:03.300 --> 00:54:06.369
misappropriation. and the tracing of those wrongfully

00:54:06.369 --> 00:54:09.530
obtained customer deposits to some other place

00:54:09.530 --> 00:54:11.110
where they were ultimately put, whether it was

00:54:11.110 --> 00:54:13.150
an investment or real estate or some other source.

00:54:14.489 --> 00:54:18.690
Your adversary says, in effect, that Judge Kaplan

00:54:18.690 --> 00:54:27.090
gave you nearly unlimited flexibility in arguing

00:54:27.090 --> 00:54:34.030
that there were investors that would... never

00:54:34.030 --> 00:54:40.489
be made whole and it suffered losses and in effect

00:54:40.489 --> 00:54:44.349
gave you a walk around from his ruling which

00:54:44.349 --> 00:54:48.050
you were exploiting. Can you give me the government's

00:54:48.050 --> 00:54:50.230
position on that? So with respect to the issue

00:54:50.230 --> 00:54:52.690
of losses in particular, Your Honor? Yeah. So

00:54:52.690 --> 00:54:57.570
the only issue that was contested was this issue

00:54:57.570 --> 00:55:00.030
of the degree to which the fact that FTX and

00:55:00.030 --> 00:55:02.429
Alameda declared bankruptcy could be admitted

00:55:02.429 --> 00:55:04.989
into evidence. And the government argued that

00:55:04.989 --> 00:55:07.650
that was important because it established that

00:55:07.650 --> 00:55:11.809
there was, in fact, a deficiency in FTX's assets

00:55:11.809 --> 00:55:15.690
that made it unable to provide for customer withdrawals

00:55:15.690 --> 00:55:17.469
as it had represented to customers that it would

00:55:17.469 --> 00:55:20.909
be able to do. And that evidence was also inextricably

00:55:20.909 --> 00:55:25.690
part of the evidence at trial because the...

00:55:25.710 --> 00:55:28.150
The sort of revelation of the fraud essentially

00:55:28.150 --> 00:55:30.190
coincided with the declaration of bankruptcy.

00:55:30.610 --> 00:55:32.989
But there wasn't evidence about this issue we

00:55:32.989 --> 00:55:36.889
were talking about earlier. Long -term, would

00:55:36.889 --> 00:55:39.670
customers be made whole or not out of the recoveries

00:55:39.670 --> 00:55:42.289
from the investments and the like? The only thing

00:55:42.289 --> 00:55:44.150
that the defense has pointed to are those two

00:55:44.150 --> 00:55:46.710
questions that were asked of customers. Have

00:55:46.710 --> 00:55:49.269
you been able to withdraw your funds from FTX?

00:55:49.710 --> 00:55:51.670
First off, those questions weren't objected to

00:55:51.670 --> 00:55:54.389
during the trial. And second off, as I explained,

00:55:54.650 --> 00:55:57.590
in context, those customers were also asked about,

00:55:57.929 --> 00:56:00.190
well, would you have agreed that your deposits

00:56:00.190 --> 00:56:01.909
could be lent out? Was it your understanding

00:56:01.909 --> 00:56:04.510
that was a possible outcome? Neither of those

00:56:04.510 --> 00:56:07.449
customers had agreed to participate in this margin

00:56:07.449 --> 00:56:10.210
program, which the defendant made a significant

00:56:10.210 --> 00:56:13.030
deal out of at trial. And both of them testified

00:56:13.030 --> 00:56:14.869
they didn't agree to that. That wasn't a risk

00:56:14.869 --> 00:56:17.469
they were willing to take. And so the fact that

00:56:17.469 --> 00:56:19.969
they expected their money had been used to purchase

00:56:19.969 --> 00:56:22.440
crypto, that it was sitting in an account in

00:56:22.440 --> 00:56:25.380
FTX available for them to withdraw, and that

00:56:25.380 --> 00:56:27.699
that representation hadn't been complied with,

00:56:28.039 --> 00:56:30.219
was the fraud. That was the misappropriation.

00:56:30.679 --> 00:56:32.960
And no court has ever suggested that a defense

00:56:32.960 --> 00:56:35.880
to a fraud like that is, oh, well, don't worry.

00:56:35.900 --> 00:56:38.179
I put your money in an investment, and down the

00:56:38.179 --> 00:56:39.400
road, you're going to get it back. You're not

00:56:39.400 --> 00:56:41.340
going to have an ultimate loss. And so that was

00:56:41.340 --> 00:56:42.900
really the focus of the government's arguments

00:56:42.900 --> 00:56:44.980
at trial and the focus of the evidence. And it

00:56:44.980 --> 00:56:47.869
was really those particular questions. sitting

00:56:47.869 --> 00:56:49.010
here today, if you've been able to withdraw,

00:56:49.269 --> 00:56:51.550
that's the context in which those questions were

00:56:51.550 --> 00:56:54.130
asked. Again, they weren't objected to. It wasn't

00:56:54.130 --> 00:56:56.829
an attempt to litigate the degree to which the

00:56:56.829 --> 00:56:59.269
portfolio of investments at Alameda was or was

00:56:59.269 --> 00:57:02.110
not going to be profitable in the end. That simply

00:57:02.110 --> 00:57:04.530
wasn't something that was at trial, and it wasn't

00:57:04.530 --> 00:57:05.889
something that was appropriate to be at trial.

00:57:07.769 --> 00:57:09.869
Before I sit down, if I could just briefly address

00:57:09.869 --> 00:57:12.010
the advice of council issue, because I think...

00:57:11.800 --> 00:57:16.480
Just one point that's important is that the description

00:57:16.480 --> 00:57:18.380
of the Scully case that we heard from defense

00:57:18.380 --> 00:57:21.400
counsel simply can't be squared with what Scully

00:57:21.400 --> 00:57:24.860
says. In Scully, the defendant had proffered

00:57:24.860 --> 00:57:27.679
adequate evidence to support and advice of counsel

00:57:27.679 --> 00:57:29.940
defense. And so this court held that a district

00:57:29.940 --> 00:57:32.420
court's concerns about the credibility of that

00:57:32.420 --> 00:57:35.639
testimony weren't a basis to preclude it because

00:57:35.639 --> 00:57:38.119
it was a sufficient proffer for the defense.

00:57:38.179 --> 00:57:41.690
And in fact, Footnote five at page 477 of Scholey

00:57:41.690 --> 00:57:44.650
makes that clear. Advice of counsel is not for

00:57:44.650 --> 00:57:47.489
the jury's consideration at all, absent some

00:57:47.489 --> 00:57:50.289
evidence of the required facts. Whether that

00:57:50.289 --> 00:57:52.630
burden is met is thus, in the first instance,

00:57:52.869 --> 00:57:55.409
for the court to decide. So the court has an

00:57:55.409 --> 00:57:58.269
appropriate role in determining whether the defendant's

00:57:58.269 --> 00:58:00.409
burden of production is adequate to make out

00:58:00.409 --> 00:58:02.610
the elements of advice of counsel. The district

00:58:02.610 --> 00:58:04.769
court appropriately discharged that role. The

00:58:04.769 --> 00:58:07.300
defendant didn't testify. that he relied on the

00:58:07.300 --> 00:58:09.099
advice of counsel with respect to the issues

00:58:09.099 --> 00:58:12.599
he was testifying about. And so it was appropriate

00:58:12.599 --> 00:58:15.119
for the court to preclude that under Rule 403

00:58:15.119 --> 00:58:17.119
as not being relevant to any issue for the jury

00:58:17.119 --> 00:58:19.639
to consider. Unless there's any other questions.

00:58:20.440 --> 00:58:28.059
Just one last question. Your adversary has contended

00:58:28.059 --> 00:58:34.739
that Judge Kaplan was uniformly biased in your...

00:58:38.460 --> 00:58:41.980
So two responses. First off, I don't think that's

00:58:41.980 --> 00:58:43.920
really a fair characterization of the trial.

00:58:43.980 --> 00:58:45.760
There were a number of times where Judge Kaplan

00:58:45.760 --> 00:58:51.179
cut off government examinations, where he sustained

00:58:51.179 --> 00:58:54.760
defense objections to government questions. His

00:58:54.760 --> 00:58:59.420
rulings were even -handed and he appropriately

00:58:59.420 --> 00:59:02.199
sustained or overruled objections from both sides

00:59:02.199 --> 00:59:05.900
throughout the trial. But secondly, It's not

00:59:05.900 --> 00:59:09.900
a counting game, where each side gets 50 objections

00:59:09.900 --> 00:59:12.000
sustained. And if that doesn't happen, there's

00:59:12.000 --> 00:59:14.500
been some departure. Many of the arguments that

00:59:14.500 --> 00:59:16.739
the defense has made on the evidentiary record

00:59:16.739 --> 00:59:19.559
on this appeal, as we've just been through, are

00:59:19.559 --> 00:59:23.880
meritless. And so the court appropriately ruled

00:59:23.880 --> 00:59:26.559
against the defense on those. And the fact that

00:59:26.559 --> 00:59:29.099
there weren't similarly meritless arguments being

00:59:29.099 --> 00:59:31.380
made by the government doesn't suggest somehow

00:59:31.380 --> 00:59:34.960
that the court was biased. And ultimately, the

00:59:34.960 --> 00:59:38.579
ultimate analysis here is, even if there had

00:59:38.579 --> 00:59:40.260
been any error, and we submit there wasn't for

00:59:40.260 --> 00:59:43.719
the reasons we've outlined, this is a case, if

00:59:43.719 --> 00:59:45.400
ever there was one, where any error would be

00:59:45.400 --> 00:59:47.559
harmless beyond a reasonable doubt. There were

00:59:47.559 --> 00:59:49.960
four people who knew about the misappropriation

00:59:49.960 --> 00:59:53.039
of customer deposits. Three of them testified

00:59:53.039 --> 00:59:55.360
that they conspired with Sam Bankman Fried to

00:59:55.360 --> 00:59:58.239
do that fraudulently. Everybody else testified

00:59:58.239 --> 01:00:00.719
that they had no idea because they had relied

01:00:00.719 --> 01:00:03.599
on Sam Bankman Freed's representations that that

01:00:03.599 --> 01:00:06.099
wasn't what was happening inside of FTX. And

01:00:06.099 --> 01:00:08.260
there was abundant documentary evidence to support

01:00:08.260 --> 01:00:10.400
that in addition to that overwhelming witness

01:00:10.400 --> 01:00:13.000
testimony. So the suggestion that any of these

01:00:13.000 --> 01:00:14.480
errors might have led to a different result at

01:00:14.480 --> 01:00:16.519
this trial simply can't be sustained on this

01:00:16.519 --> 01:00:30.199
record. To make a few points, first of all, my

01:00:30.199 --> 01:00:33.960
adversary said that the government never argued

01:00:33.960 --> 01:00:36.219
to the jury that the money was gone forever.

01:00:36.380 --> 01:00:40.159
That is demonstrably false. Starting with Mr.

01:00:40.380 --> 01:00:43.900
Wren's own opening, this is a trial transcript,

01:00:43.960 --> 01:00:47.420
page 37, in which he said, the customers were

01:00:47.420 --> 01:00:51.179
left with billions of dollars in losses and his

01:00:51.179 --> 01:00:53.880
investors and lenders were left with nothing.

01:00:54.320 --> 01:00:59.639
Another example, at page A1096, in the closing,

01:01:01.420 --> 01:01:05.300
the investors lost all their money, and it's

01:01:05.300 --> 01:01:09.639
very straightforward. At page A1105, thousands

01:01:09.639 --> 01:01:12.420
of people lost billions of dollars. Everyday

01:01:12.420 --> 01:01:16.000
people lost savings. That's also in the closing.

01:01:16.960 --> 01:01:19.460
And then finally, just another example. Again,

01:01:19.500 --> 01:01:21.400
there are many more. They're cited in our brief

01:01:21.400 --> 01:01:26.039
at trial transcript page. 2912, their money was

01:01:26.039 --> 01:01:29.960
gone. FTX was bankrupt. Billions of dollars from

01:01:29.960 --> 01:01:35.760
thousands of people was gone. was based on a

01:01:35.760 --> 01:01:38.860
lot of evidence in the trial, including not only

01:01:38.860 --> 01:01:42.880
the two customers who testified, and in your

01:01:42.880 --> 01:01:45.980
honor, Judge Parker covered some of that with

01:01:45.980 --> 01:01:49.500
my adversary, but in addition, there was similar

01:01:49.500 --> 01:01:52.260
testimony from a lender, there was similar testimony

01:01:52.260 --> 01:01:54.920
from other government witnesses. The picture

01:01:54.920 --> 01:01:57.699
the government painted overwhelmingly was a false

01:01:57.699 --> 01:02:01.820
one that the money was gone forever. Secondly,

01:02:08.700 --> 01:02:12.559
And the main issue here is the one of asymmetry.

01:02:12.699 --> 01:02:16.079
That is really the point here. So the government

01:02:16.079 --> 01:02:19.099
could have tried a case that was essentially,

01:02:19.699 --> 01:02:24.639
well, there was a temporary loss, a temporary

01:02:24.639 --> 01:02:28.280
inability to use the money because of the liquidity

01:02:28.280 --> 01:02:31.369
problem. That wasn't the case they tried. It

01:02:31.369 --> 01:02:35.429
wouldn't have been nearly as persuasive. Are

01:02:35.429 --> 01:02:40.230
you taking any objection to Judge Kaplan's charge

01:02:40.230 --> 01:02:46.010
on the loss issue? As to mail and wire fraud,

01:02:47.090 --> 01:02:50.989
we agree that CUSIS changes the law of this circuit.

01:02:51.809 --> 01:02:57.309
But I do want to make clear two other things.

01:02:58.599 --> 01:03:02.039
My adversary told your honors that kosisis holds

01:03:02.039 --> 01:03:05.579
that loss is not relevant. That is not true.

01:03:05.739 --> 01:03:10.860
What kosisis holds is what the element is. And

01:03:10.860 --> 01:03:14.019
loss or lack of loss is always relevant in a

01:03:14.019 --> 01:03:16.739
fraud case. It's relevant, for instance, to motive.

01:03:18.059 --> 01:03:20.440
And clearly, when the government puts in evidence

01:03:20.440 --> 01:03:22.900
on one side of the ledger and claims there's

01:03:22.900 --> 01:03:25.980
actual loss of billions of dollars, As a matter

01:03:25.980 --> 01:03:28.300
of due process, the defendant should be entitled

01:03:28.300 --> 01:03:34.059
to rebut that. In addition, we also had a jury

01:03:34.059 --> 01:03:35.940
instruction argument about the willfulness that

01:03:35.940 --> 01:03:39.360
goes to two of the counts. That is totally unaffected

01:03:39.360 --> 01:03:44.780
by crucisis. With respect to the advice of counsel,

01:03:45.079 --> 01:03:48.820
just one point. I think my adversary has mischaracterized

01:03:48.820 --> 01:03:51.480
the Scully case. The part of the Scully case

01:03:51.480 --> 01:03:54.099
he's citing to relates to whether a defendant

01:03:54.099 --> 01:03:57.239
is entitled to an affirmative instruction on

01:03:57.239 --> 01:03:59.699
advice of counsel. That's not the argument here.

01:03:59.780 --> 01:04:02.400
The argument is about the admission of the evidence

01:04:02.400 --> 01:04:05.260
and the rest of the Scully case that addresses

01:04:05.260 --> 01:04:08.420
that supports our argument and shows that Judge

01:04:08.420 --> 01:04:12.719
Kaplan and the government are wrong. With regard

01:04:12.719 --> 01:04:14.880
to the forfeiture, I just want to make two quick

01:04:14.880 --> 01:04:18.440
points. One is that if you take a look at the

01:04:18.440 --> 01:04:21.579
forfeiture order, you'll see that regardless

01:04:21.579 --> 01:04:23.880
of what the government is saying about this so

01:04:23.880 --> 01:04:27.280
-called remission agreement, the judgment itself

01:04:27.280 --> 01:04:32.860
is still going to be in effect unless the court

01:04:32.860 --> 01:04:36.860
overturns it. And that is an $11 billion liability

01:04:36.860 --> 01:04:39.800
for Mr. Bankman Fried. And for all the reasons

01:04:39.800 --> 01:04:42.480
in our briefs, it's an illegal forfeiture order.

01:04:42.539 --> 01:04:45.199
But I also want to point out that the current

01:04:45.199 --> 01:04:49.920
situation, as I understand it, is that 98 % of

01:04:49.920 --> 01:04:53.980
all the creditors in the bankruptcy have received

01:04:53.980 --> 01:04:59.059
120 % of the value of the monies, and that includes

01:04:59.059 --> 01:05:03.059
interest. So they have received interest, and

01:05:03.059 --> 01:05:06.400
that after paying out $8 billion and $1 billion

01:05:06.400 --> 01:05:09.059
in legal fees, the estate still has $8 billion

01:05:09.059 --> 01:05:12.619
left over to cover about $2 billion more claims.

01:05:15.949 --> 01:05:19.170
to have this illegal forfeiture order hanging

01:05:19.170 --> 01:05:22.989
out there just with some view that somehow it's

01:05:22.989 --> 01:05:29.469
necessary to repay victims. Just in conclusion,

01:05:29.630 --> 01:05:33.429
if I may, the collapse of FTX affected many people

01:05:33.429 --> 01:05:36.510
and indeed an entire industry and it was a tragedy.

01:05:37.210 --> 01:05:40.110
In these circumstances, the easiest course may

01:05:40.110 --> 01:05:43.150
seem to be to overlook how the trial was conducted

01:05:43.150 --> 01:05:45.789
and find a way to label the errors harmless,

01:05:46.150 --> 01:05:48.929
but that would be a grave mistake. The public

01:05:48.929 --> 01:05:51.690
interest in ensuring that criminal trials are

01:05:51.690 --> 01:05:54.489
fair is at its height in a high -profile case

01:05:54.489 --> 01:05:57.250
like this one, and Mr. Bankman Fried should have

01:05:57.250 --> 01:05:59.989
been allowed to tell his story and to counter

01:05:59.989 --> 01:06:02.530
the government's false tale of lost billions

01:06:02.530 --> 01:06:05.280
with the truth. The jury should have had the

01:06:05.280 --> 01:06:08.440
full picture, and without that, neither the court

01:06:08.440 --> 01:06:11.019
nor the public can have confidence in the verdict.

01:06:11.440 --> 01:06:14.559
And yet, Mr. Bankman Fried sits in prison serving

01:06:14.559 --> 01:06:17.920
a 25 year sentence. His conviction should be

01:06:17.920 --> 01:06:22.159
vacated. Thank you. All right, thank you. Thank

01:06:22.159 --> 01:06:27.340
you both, we appreciate your presentations. Difficult

01:06:27.340 --> 01:06:31.199
case, well briefed and well argued. Thank you.

01:06:31.320 --> 01:06:35.530
All right, thank you all. That's the last case

01:06:35.530 --> 01:06:36.909
on our calendar for argument.