This transcript has been auto-generated using Adobe Premier Pro.
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Gregg Sofer
Ever wonder what is going on behind the scenes as the government investigates criminal cases? Are you interested in the strategies the government employs when bringing prosecutions? I'm your host, Gregg Sofer, and along with my colleagues and Husch Blackwell's White Collar, Internal Investigations and Compliance team,
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Gregg Sofer
we will bring to bear over 200 years of experience inside the government
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Gregg Sofer
to provide you and your business thought provoking and topical legal analysis as we discuss some of the country's most interesting criminal cases and issues related to compliance and internal investigations.
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Gregg Sofer
Welcome to the Justice Insiders. I'm your host, Gregg Sofer. And today I'm luckily here with Jonathan Porter, a partner at our law firm at Husch Blackwell. And he is in our white collar group and out in Georgia, where he was an assistant United States Attorney for several years, prosecuted some very significant cases, including fraud cases. And he focuses, among other things, on the health care arena.
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Gregg Sofer
You can find a link to his bio in the show notes. Jonathan, thank you so much for joining us today.
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Jonathan Porter
Gregg, thanks for having me.
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Gregg Sofer
So we're here today to talk about the Sam Bankman-Fried case where he was recently convicted by a jury in in New York on what I would describe as a fairly quick verdict and lots of different aspects of that case, which are very interesting. And we'll touch on some of them today. But it's really been a case that's been closely followed by the media and led to a lot of speculation about fraud in general.
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Gregg Sofer
And it's got some interesting aspects to it in the legal area as well that we'll we'll talk about. Well, let's start with the basics, if you don't mind, Jonathan. Can you just walk us through the base or what is this case about? And why does it matter to your folks in America and our to our clients?
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Jonathan Porter
Yeah. So I think a lot of people hear about Sam Bankman-Fried and they think this is about cryptocurrency. This is a cryptocurrency case, but it's not a cryptocurrency case. This is really the things that the government alleged and then ultimately prove to trial, which is good old fashioned fraud. So what SBF was charged with was wire fraud, which is sort of the bread and butter of of white collar statutes.
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Jonathan Porter
And really what he what he's accused of doing boils down to three big allegations. One, that he defrauded users. So the users of his cryptocurrency exchanged that they deposited funds with FCX and then he misappropriated those funds. So just funds meant for taking them and trading with them. That's that's the big one. And that was an $8 billion, you know, misappropriation.
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Jonathan Porter
So that's one to that. He defrauded his companies and lenders by misrepresenting the companies financial conditions. And three, that he that he defrauded the company's investors again by misrepresenting his company's financial positions, which is not ideal. So but the heart of this case really was good old fashioned wire fraud. He took dollars that FTX users sent FTX to trade on the exchange instead of safeguarding those funds.
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Jonathan Porter
So, you know, investors or users can come back and take those dollars and trade them out. He let his crypto hedge fund trade on those dollars and what ended up being very risky positions. And then when the crypto bubble popped those risky positions, they lost big and FTX users realized their money wasn't there to to exchange out. And so very much related to this concept is is that when these lenders and investors you know, came to get involved in FTX and his his crypto fund he you know misrepresented finances and that's what this case is about.
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Jonathan Porter
It's about misappropriating dollars, misrepresenting finances.
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Gregg Sofer
So let's talk a bit a little bit about the environment in which this all happened. So you talk about it sort of fell apart. And only when crypto really crashed did we say sometimes it's like skinny dipping in the ocean during low tide or the the snow melting after a blizzard, you start seeing the rocks or the bodies.
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Gregg Sofer
This tends to be a concept that we see all the time. Right. It's something I'm sure you handle a lot. And the government, the telephone call comes in when the whole thing falls apart. Can you talk a little bit about that?
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Jonathan Porter
Yeah. So, you know, there are a lot of financial institutions who take money that are deposited and then they invest the money. You know, banks do this famously, banks do this. They they have power. You know, the people who bank with them, their dollars are their they in the banks take the dollars and they, you know, loan out funds.
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Jonathan Porter
That's pretty regular. What's different is those banks are heavily regulated. They are they're they're very transparent on what they're doing. And there's a lot of checks on the system. What went wrong in the crypto world is that it is a few things. First, there aren't those regulatory checks on crypto exchanges. There wasn't a ready group of regulators sitting there saying, we're going to we're going to watch what you guys are doing.
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Jonathan Porter
And then what SBF and his companies were were doing rather than, you know, mortgages that have securities and everything like that, they were investing in crypto. And crypto is very volatile. You know, commodities, equity, it depending on how you want to look at it. And when everything went down, there wasn't a, you know, well-diversified portfolio to absorb those losses.
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Jonathan Porter
And so when your leverage is a lot, when you're trading other people's money that you probably should have been doing in the first place, when everything comes crashing down, it causes a big, big impact. And that's what happened here with with SBF.
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Gregg Sofer
So this is an interesting concept. And we see these trends in in the financial world many times. That's the it's the shiny investment. It's the new concept. It's a way to make money quickly. You know, for instance, in crypto, you see all these guys on the back of yachts and and SBF did a great job in plugging the wealth.
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Gregg Sofer
I mean, he had lots of famous people around and was giving money to major political figures and powerful folks had tons of celebrities sign up for all this. So on the outside, it must have looked like a great ship to get on.
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Jonathan Porter
Yeah, I think we all I certainly had a lot of friends who were pinging me around that time saying, What do you think of crypto? You know, Bitcoin was going through the roof. I had a very different opinion because at the time it seemed like every scam case that I was investigating prosecuting had a crypto component to it where whatever, you know, the whatever victims were out there, all of a sudden, the dollars that they'd send in for the romance scam or whatever it is, get turned into Bitcoin and they disappear Bitcoin or other cryptocurrencies.
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Jonathan Porter
So my view at the time was that it was a device for laundering funds. But I get that there are a lot of people who are who are true believers in crypto. There are people who don't believe in the government and the, you know, the trust in financial institutions and cryptocurrency was a was a way around that. But at some point, speculators got involved realizing all the all the money that there was to be made.
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Jonathan Porter
And so, yeah, you're right. You're right, Gregg. There are a lot of people who came in and got their yachts. I don't know where those yachts are now that things have sort of course, corrected for a lot of these coins and funds. But but yeah, it was it was the get in was good there for a while.
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Gregg Sofer
And I call this FOMO. And when we go around and give people advice, you know, I always tell them if you're in one of these FOMO areas, fear of missing out, that ought to be a red flag to you that at least an extra level of due diligence should be applied here. So why then does the leader of this organization take the hit when the people who were investing in it should have seen potentially that they were in an unregulated Wild West of investing?
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Gregg Sofer
What's your what are your thoughts about that?
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Jonathan Porter
Yeah, that's a really good question, Gregg. I'm the farthest thing from a due diligence lawyer. I've never once done that. I'm there are a lot of good lawyers who are out there trying to figure this out. But what's interesting is, you know, I think lawyers do a very good job on the due diligence front when it comes to industries that they're aware of.
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Jonathan Porter
What happened here in the cryptocurrency exchanges was that people just didn't know how to how to do this. I read I'm halfway through one of the books on SBF and there's a story in there about how one U.S. based V.C. came and offered something based on like a $4 billion valuation. And SBF said no. And they said, okay, how about a $20 billion valuation?
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Jonathan Porter
They just didn't know how to. There was no real metric to figure out what this was worth. They just saw something go up and up and up at a at a spike that you don't see in normal businesses that you can evaluate and apply normal principles of due diligence to. They just saw it's FOMO. It's exactly right. Right.
00;09;14;00 - 00;09;42;24
Jonathan Porter
They saw this exponential growth and they said, well, let's let's sort of discount our usual due diligence procedures just because everyone else seems seems to know this is doing. And what's interesting, Gregg, is that this is now a few cases in a row. The other case, Theranos, the prosecution of Elizabeth Holmes, comes to mind where there there were just major shortcomings on investors and lenders doing due diligence, figuring out that there's something missing here.
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Jonathan Porter
And maybe that speaks to a bigger a bigger issue. But as we are getting these emerging technologies, these emerging companies trying to try to totally shift the way we do health care or, you know, financial services, there are we've got to we got to realize that this is now a trend. This is now a trend of these big companies coming out promising huge changes, but really coming short on a lot of sort of the basic building blocks of of the way that we think businesses should operate.
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Gregg Sofer
And I again, I think it's a it's a trend that's probably been there.
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Jonathan Porter
For.
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Gregg Sofer
Hundreds of years on some level, is if you can sell something and get a whole bunch of people running towards it, they tend to do less due diligence because they're afraid if they don't hurry up. And this goes for even big venture capital firms, if they don't get in on the deal, then they are going to lose an opportunity.
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Gregg Sofer
And when you see the yachts and and and the famous people, it's it people run to it. It's just it's human nature is something that has to be checked with the due diligence that you talked about, I found it interesting. I read a story that he was in a meeting with some major potential investors and he was playing video games the whole time and the investors were looking at him.
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Gregg Sofer
And normally, you know, I would look at that and say, this guy's obviously not somebody we want to give our money to. But they loved it. They thought his quirky, bizarre behavior meant this thing must be so good that this guy is sitting there playing video games during his. We better hurry up and give him more money.
00;11;07;12 - 00;11;42;27
Jonathan Porter
Yeah, I think there's something, you know, our human brains where where we hear, you know, there's this guy out there who is so good at what he does that he doesn't even have to give me his full attention and he's still that much more. I think we want to think that there are humans out there who just can they've got the cheat codes to life and they can figure out how to make, you know, in space case $1,000,000,000 to replace government backed currencies with this other you know, this other thing I think some people just want to believe that that SB4 exist and can solve the problems of humanity a lot of times that, you
00;11;42;27 - 00;11;49;01
Jonathan Porter
know, we're, we're wrong. We're wrong. And we can't just, you know, we can't just assume that people can can do everything.
00;11;49;08 - 00;12;06;14
Gregg Sofer
So we're probably not going to fix human nature. And I do advise my clients not to be afraid to ask, you know, stupid questions or be skeptical about people they're giving their money to. But we're not going to fix that for now that we're certainly not we're not going to be able to fix this problem. So it all happened.
00;12;06;17 - 00;12;30;04
Gregg Sofer
The money went in. The money obviously was lost. And in Russia's the government at that point, you know, in the terrorism world where I used to practice, we considered a post-blast prosecution to be a failure because it had already happened here. They came in too late, but it could have been later, I guess, and more money might not have been able to be seized and gathered.
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Gregg Sofer
In any event, the government comes in and they fashion the indictment that you referenced before. Tell us a little bit about the the niceties or the complexities, I should say, of of the fraud counts here.
00;12;45;04 - 00;13;07;02
Jonathan Porter
Yeah. So the fraud counts, as we were discussing earlier, the fraud counts are the backbone of of this indictment. You know, wire fraud is the is the bread and butter of in the white collar world. It is it is it is a statute that that pretty much every white collar prosecutor uses and is is used to. It's so it's actually very straightforward.
00;13;07;04 - 00;13;34;21
Jonathan Porter
If you actually if you look at the statute itself, it's a bit of a mess. It is just one I think it's one long sentence but broken down into elements. Wire fraud is a is a pretty straightforward concept. So what the government had to prove with their wire fraud charge was really just three things. One, they had to prove a scheme to defraud or to obtain someone else's money by using materially false or fraudulent pretenses, representations or promises.
00;13;34;21 - 00;13;54;12
Jonathan Porter
In other words, some sort of a scheme to lie, a scheme to get someone's money through lies. To that, the defendant himself participated in the scheme knowing that it was fraud, knowing the fraudulent nature of it, and with the specific intent to defraud. Would you talk about it more in a second and three, a wire in interstate commerce.
00;13;54;15 - 00;14;15;09
Jonathan Porter
I would imagine that every juror ever hears that last element to wire interstate commerce and is totally confused. But here's the brief answer on that. Not every crime is a federal crime. To be a federal crime, you need an act that crosses state lines. So with wire fraud, you need a, you know, a phone call, an email, a text message, a financial transaction, something that crosses state lines.
00;14;15;09 - 00;14;35;11
Jonathan Porter
And that's super easy for the government to prove. And most in most cases. But the hardest element to prove is proving that the defendant acted with the specific intent to defraud, the intent to cause financial losses to specific people. And what's interesting about this is, you know, if you're just reckless or risky with money, that's usually not enough.
00;14;35;13 - 00;14;54;23
Jonathan Porter
The government's got to prove that you wanted to cause a loss to someone. And that's often where the defense focuses. It's challenge because you can show things that mitigate against intent to defraud, like evidence that the defendant thought they were doing an okay thing or evidence that the defendant sought answers to legal questions in some in some case.
00;14;54;26 - 00;15;14;22
Jonathan Porter
And so we may want to talk about that one later, but on that intent to fraud element, there's an aspect of this case that that I'm sure the prosecutors were more worried about, and that's the SBF was reckless in many ways that were not inherently criminal. You know, one of the interesting things about this case, SBF founded his companies when he was in his early twenties.
00;15;14;22 - 00;15;43;11
Jonathan Porter
He never managed a human being before founding his companies. He'd never been involved in any type of high level business decision making. And so within his companies, he didn't at all value like accounting or audits or bookkeeping of of any kind. There's a story from early in SBF companies days where the company just lost $4 million. They didn't know where the $4 million was and they had no way of finding out where it was because they had no controls or tracking of of anything.
00;15;43;11 - 00;16;09;29
Jonathan Porter
So SBF just sort of dismisses it. And, you know, we come to sort of expect that successful companies have these basic controls, but operating a business in Hong Kong that doesn't have adequate bookkeeping isn't necessarily a violation of U.S. law. So the prosecution here had to deal with a, you know, a double edged sword of recklessness to show that SBF was not just reckless, but actually crossed that intent line.
00;16;10;03 - 00;16;19;20
Jonathan Porter
And specifically intended to cause losses to users, investors and lenders. So that's a that's a little bit about the the indictment.
00;16;19;22 - 00;16;41;28
Gregg Sofer
So and not surprisingly, given your description of this, his defense very much focused on the question of his intent. So there's some unusual pieces of his defense. And I think we ought to go through those, because I think they're very interesting. The first one is the fact that he did rely a little bit, as you alluded to, to advice that he got from lawyers.
00;16;42;00 - 00;17;07;18
Gregg Sofer
And, of course, the government called witnesses against him who were insiders in the company. And this is very common. The government works its way up the hierarchical food chain by grabbing the people towards the bottom, having them plead guilty or flipping them, as it's commonly referred to in the government, because when you have to prove what somebody was thinking or what someone intended, the way that you do that is by getting information about what they said to people and how they interacted with people.
00;17;07;18 - 00;17;35;14
Gregg Sofer
So they called a bunch of his own former employees against him. But he still he still had some pretty good arguments, even with that testimony that he at least he thought he did, that he would be able to say, well, look, I, I did I did not form this intent. And here's here's one of the mechanisms that proves that is I went to lawyers and lawyers told me that a lot of this stuff was okay.
00;17;35;20 - 00;17;53;18
Jonathan Porter
Yeah, that's absolutely right, Gregg. So on the cooperators piece, it is waiving in the minds of jurors. One of the most effective things. One of the most meaningful things is to hear someone come in and say, I committed a crime. I pled guilty for this crime, and I did it with that person sitting at that table right there.
00;17;53;20 - 00;18;12;13
Jonathan Porter
That is one of the I you know, for for the people who do this for a living, that's that's a that's a big we know that's a big thing to have a not just one cooperator, but several come in and say, I committed a federal crime. I did with that person. But to me, one of the most interesting aspects of this case is exactly what you brought up.
00;18;12;15 - 00;18;41;18
Jonathan Porter
And it's the advice of counsel, defense, or the advice of counsel semi defense here. So advice of counsel, this is a highly technical legal concept and it's one that is frankly underdeveloped as a legal concept and it's applied in different ways by different judges. But but you've got two big flavors of the advice of counsel issue. So you got you got a formal affirmative defense of advice of counsel, which we'll talk about a second.
00;18;41;20 - 00;19;04;12
Jonathan Porter
But then you've got the informal advice of counsel defense, which does not technically operate as an affirmative defense, but instead is targeting at target, proving lack of intended to fraud. And so that these are these are technical things for the non-lawyers listening. I could hear you like throwing your phones at the legalese, trying to explain those. But let me just let me back up and try to explain these these two concepts.
00;19;04;12 - 00;19;30;28
Jonathan Porter
So the law, in essence, wants to protect people who get legal advice and follow it. So let's say that SBF personally went to some lawyer. He disclosed absolutely everything about what he wanted to do with user funds and with its financial disclosures. He sought legal specific legal advice on the legality of that conduct, and he was told it was legal and he believed in good faith that what he was doing was legal.
00;19;30;28 - 00;19;55;10
Jonathan Porter
And he followed the advice to a tee. If he did all those things, then he's in. Then he is entitled to an advice of counsel, defense and is in theory going to be acquitted of whatever crime he committed. That falls within the scope of that legal advice. But in practice, that formal advice of counsel to defend is a really hard needle to thread, and it's usually not an option as an affirmative defense.
00;19;55;10 - 00;20;14;26
Jonathan Porter
Here are some of the many reasons why it's a really, really hard. First, you got to actually ask the right question and get the right answer from your lawyer. And you've got to follow that advice to a tee, and you'd be surprised how rare that is. Second, you've got to waive privilege. Ordinarily, when you're indicted, the government doesn't get to see your communications with your lawyers.
00;20;14;26 - 00;20;34;21
Jonathan Porter
But if you want to assert formal advice of counsel, you've got to turn over everything, every email and every text message with the lawyer whose advice you relied on and the government gets to then talk to that lawyer and question whether the that needle was sort of threaded properly. And third, in general, it's got to be the defendant's own legal advice.
00;20;34;21 - 00;20;50;14
Jonathan Porter
There's a lot of case law on this, and it goes different ways. But most of the case law says that if a corporation gets legal advice and an individual executive can't use it to assert a defense, it's actually more it's more complicated than that. But in a nutshell, you've got to have the privilege in order to waive it.
00;20;50;14 - 00;21;09;21
Jonathan Porter
And so if it's a it's a if it's a corporation's privilege, it's hard to waive it and you'll struggle to assert the privilege. Again, that's a complex issue, but that formal advice of counsel defense is really quite rarely asserted. What's far more common is that second flavor, that informal version of advice of counsel. Here's here's what that is.
00;21;09;21 - 00;21;34;02
Jonathan Porter
So in order for the government to prove wire fraud, they've got to prove that that among other things, that SBF intended to defraud. And one of the ways you poke holes in that is, is by saying, hey, I went to a lawyer and I got legal advice in. Then ideally, you know, the defendant the defendant can argue to the jury that the government didn't meet its burden because the defendant sought legal advice.
00;21;34;02 - 00;21;55;25
Jonathan Porter
It pokes a hole in one of the government's required elements. And the argument at its core, it says something like this I didn't commit fraud. My lawyer said it was fine. Some judges give a lot of leeway when it comes to that informal version. But other judges like Judge Kaplan, SBS Judge put up put up major guardrails around those types of statements.
00;21;55;27 - 00;22;23;03
Jonathan Porter
And the reason for those guardrails is the notion that you can't use legal advice as both a sword and a shield. For the most part, you can't just tell jurors that lawyers were cool with the fraud without letting the government behind that privilege. Jurors would be utterly confused. And I get that. And so you've got these complex inquiries like SBF and judges, they struggle to draw the line in that space trial.
00;22;23;03 - 00;22;46;20
Jonathan Porter
Judge Kaplan went to the very rare decision to actually have SBF testify out of earshot of the jury. To hear a preview of that informal advice of counsel, defense and for the most part, SBF actually was prohibited from telling the jury about legal legal advice. The judge thought that it would be too confusing. Other judges give a tad bit more leeway to let that testimony.
00;22;46;20 - 00;23;03;03
Jonathan Porter
And to be honest, I think there should be a fair amount of leeway in that area. You know, if you have if you think about some random company and you you know, and you think about the CEO of that company, that CEO is going to go to corporate counsel and say, I'm going to do X is X. Okay.
00;23;03;03 - 00;23;21;01
Jonathan Porter
And if you're told X is okay and you do it, why in the world can't you then say we asked? I was asking or I was asking my, you know, our corporate counsel about this issue. They said it was fine. Why in the world can I now, now not tell a jury that this is something that I did because because I was told it was okay.
00;23;21;02 - 00;23;32;29
Jonathan Porter
That doesn't seem entirely right. But to be honest, this is a this is a that informal advice of counsel is something I think is going to need to be looked at a little bit more because it's not entirely coherent.
00;23;33;01 - 00;23;54;25
Gregg Sofer
Yeah. And as you point out, the judge here did something highly unusual, which is essentially go test this thing out, away from the presence of the jury so he could make these decisions. We'll see whether that in and of itself caused an appellate issue, because what that really does also is give the prosecutors a preview of what this guy looks like on the stand, what he's going to say, and then they get a second shot of it.
00;23;54;25 - 00;24;10;23
Gregg Sofer
To the extent he goes back out and does the same thing in front of the jury, we'll come back to his, you know, to talk to assert these defenses and to make a decision that you're going to tell the jury about all of this and what was running through your mind. You also have to get it on the witness stand, which turns out to be a very dangerous concept.
00;24;10;23 - 00;24;32;15
Gregg Sofer
And that happened here, too. I want to go back to this advice of counsel, defense, formal or informal. One of the main components of it is that if you want to throw that out there, the prosecutors get to start asking questions about what exactly you told your lawyer and what facts you brought to their attention so often. The cross-examination, it goes, did you tell your lawyer about this?
00;24;32;15 - 00;24;52;20
Gregg Sofer
Did you tell your lawyer about that? Did you tell your lawyer about this? And those are those devastating questions and answers sometimes blow up the whole thing in a really ugly way. It's also why judges, I think, struggle so much, because it does pierce privilege. And in order to get the answers to these questions of what you told your lawyer, you're basically asking to waive the privilege at that point.
00;24;52;20 - 00;25;13;11
Gregg Sofer
So it is a very interesting and unusual concept, although we're seeing in a lot of high profile cases. And he must have made a decision, he and his lawyers, after listening to the evidence and listening to his former employees come in and say, as you point out, I committed a crime and I did it with that guy over there that he had to testify or he was going to get convicted.
00;25;13;13 - 00;25;33;06
Gregg Sofer
So let's talk a little bit about that. That's a that is a really rough decision for a defense counsel as to whether or not to take that chance. You expose your client to a skilled prosecutor potentially for cross-examination. He jumped in that pool, didn't obviously did not work for him. What are your thoughts about that decision and how it played out, this trial?
00;25;33;09 - 00;25;52;03
Jonathan Porter
Yeah, that that decision whether to have the defendant testify it that's a that's probably the biggest one in every trial. So it's and this is one of the biggest ongoing discussions throughout the white collar community. The conventional wisdom in the white collar community is that when a defendant testifies, two big things happen in the minds of a jury.
00;25;52;06 - 00;26;26;00
Jonathan Porter
First, I think the entire trial becomes, do we believe the defendant throw everything out the window because the trial becomes whether we believe what this defendant is telling us. And second, given that first point, the analysis by the jurors really becomes, do we believe the defendant more than we believe the government witnesses? And as a corollary to that, if you think if you talk to those who those of us who practiced in this field, we tend to think that jurors think less about that government heavy burden, you know, proving a crime beyond reasonable doubt.
00;26;26;02 - 00;26;48;04
Jonathan Porter
And jurors just then do the human instinct of weighing two different stories and picking the one that hits their gut as the more believable one. And so, to me, one of the big risks of a defendant testifying is that you're potentially losing your big advantage, that beyond a reasonable doubt standard, you're not losing it in any sort of like a legal sense.
00;26;48;04 - 00;27;11;17
Jonathan Porter
But jurors are human. And what we've learned over time is that jurors given to short stories, they simply weigh the two, given one story, plus an instruction on presumption of innocence and the government's heavy burden. I think jurors, they take those instructions seriously. But here's here's the reason. Taking the stand is super risky in cases like this one, where the defense has already made a ton of statements.
00;27;11;20 - 00;27;37;29
Jonathan Porter
Cross-examination is a beast. When you've got statements, any skill prosecutor is going to do what SB4 prosecutor did and put those statements on the screen in a way and in a volume that the jury is going to get the impression that your story has changed across can be devastating, especially these days. You know, when our win, our trial system was developed, you didn't have all these methods to make defendants look ridiculous.
00;27;38;01 - 00;28;06;04
Jonathan Porter
Crosses were much more logical back then, where you wear a witness down using, you know, methods of law, of logic to make your point. I think law schools still teach that like funnel system and remember that Gregg the funnel system of crossing but now now cross is about throwing out emails and tweets and DMS and Google search history, everything up on the screen, sometimes out of context and rifling through the communications in a rhythm that would make really any one of us look a bit ridiculous.
00;28;06;04 - 00;28;27;07
Jonathan Porter
That's the state of cross-examinations right now. It's it's ruthless. And it's to the point where just about anyone who sends text messages can be made to look ridiculous. And SB4 was made to look ridiculous being when when the government had a very good recall of specific things that he testified about and then showed that his story had changed.
00;28;27;09 - 00;28;45;17
Jonathan Porter
And so here's SBS decision to testify. It was very risky, but to be honest, I don't disagree with the decision here. I don't think he was going to be acquitted without testifying. The decision to call him is like deciding whether to throw a Hail Mary at the end of a football game. But you don't actually know what the score is.
00;28;45;17 - 00;29;03;23
Jonathan Porter
The defense here could could probably tell that they were down in the game and needed to throw the Hail Mary. But that analysis sort of depends on case to case, and it all depends on how the government's case is going. And in SBS's case, I think everyone who followed the trial knew it was not going well for the defense.
00;29;03;23 - 00;29;27;01
Jonathan Porter
They were not able to sort of establish their story by crossing government witnesses. But the final point on this is, to me, really important. Don't talk to the media after you know that you're being investigated. SBF went on this media tour and made all of these statements and they all got thrown back in his face, just like every white collar practitioner at the time said.
00;29;27;01 - 00;29;45;29
Jonathan Porter
He says said, what happened all SBF did was just provide additional fodder to the government. And he locked himself in on stories and just gave the government more stuff. So you know that the old saying, just keep your mouth shut. That's there's a reason we give that advice and SBF proved it.
00;29;46;01 - 00;30;11;28
Gregg Sofer
Yeah. I mean, those are two, I think, very important points there. Certainly when you're under investigation, controlling and being disciplined about the kinds of communications that come out of your mouth, the mouths of your employees, the mouths of your company, the extremely important that communication ends up being hugely important. But as you point out, what's amazing is how much people talk on social media and then their texts and their IMS.
00;30;11;28 - 00;30;45;20
Gregg Sofer
And the government gathers all this for the exact reason that you just subscribe and also just to try to prove the most difficult parts of their case, which is what's running through your mind. And often they can't do that, but once they see all your actual communications, they are able to do it. Now, I'm amazed how many times people just don't have discipline in terms of what they put on paper or on out there digitally, and especially when they're involved in something that's got potential liability and whether civil or criminal, you're just you're you're putting yourself out there in a way that's extraordinarily dangerous.
00;30;45;22 - 00;31;06;02
Gregg Sofer
But my experience in life has been that when the defendant testifies in almost every case, it removes all reasonable doubt. So this this idea that because it is such a high burden in a criminal case for the prosecution and the prosecutors do sit there and I spent many a sleepless night wondering whether there was some reasonable doubt that I hadn't thought of, that a defense attorney would raise.
00;31;06;04 - 00;31;35;05
Gregg Sofer
And it's a very high bar. And so the prosecutors are under that constant pressure to make sure they've done this. And as you point out, no one knows what the score is of the game, but you have a pretty good sense at the end. But to abandon the sort of reasonable doubt defense, to just attack the government and sit in your defensive position where the deck is stacked in your favor for putting someone on the stand where it often all the questions of what was really running through their mind once they've been effectively crossed or gone.
00;31;35;05 - 00;31;55;20
Gregg Sofer
That's been my experience has been the nail in the coffin every time it's ever happened in a case that I prosecute, it doesn't happen that often because it's so dangerous. But as you point out, the Hail Mary, sometimes it has to be thrown. And they did it. It did. The ball wasn't caught. It looks like Mr. Bankman-Fried is headed to prison, possibly for an extremely long period of time.
00;31;55;23 - 00;32;07;05
Gregg Sofer
Well, we'll end with that final piece of this, which is the sentencing guidelines and sort of what he's looking at here and and some predictions. What what do you think will happen to him?
00;32;07;11 - 00;32;35;14
Jonathan Porter
Yeah, he's in some trouble. That's my expert opinion, is he he's going to get a bit of trouble right now. So the the drafters of the sentencing guidelines, they don't even have a category close to this amount of loss. So the government seems to think that the loss amount as that's a that's a defined term, that the loss amount is going to be $8 billion or perhaps more, that to be 1.1 loss amount table, which largely drives sentences and financial crime cases.
00;32;35;14 - 00;33;01;14
Jonathan Porter
It stops at 550 million. The Sentencing Commission just stopped there. Whatever this loss amount ends up being and I fully expect SBF lawyers to push back firmly on that $8 billion figure. It's going to be one of the largest ever. You know, Bernie Madoff's scheme was larger in terms of dollars, but SBF might end up being, you know, second or way up there.
00;33;01;16 - 00;33;24;18
Jonathan Porter
And so he's looking at he's looking at substantial jail time. You know, I think I mentioned earlier there are no founder, Elizabeth Holmes went to trial last year on wire fraud for now and was convicted of defrauding investors in Theranos. She was, you know, in a lot of ways, she's very similar to to SBF, very young, viewed as like this real game changer.
00;33;24;22 - 00;33;51;09
Jonathan Porter
Her restitution order was 450 million. That's the amount that the court, you know, found that her investors were owed as a result of her fraud. SBFs is potentially 20 times that and so much broader. Holmes was acquitted of some of the counts, but SBF was convicted on not just investor fraud, but, you know, fraud on the users of FTX, fraud on the on those who deposited funds with FTX to trade cryptos.
00;33;51;09 - 00;34;08;03
Jonathan Porter
So we're talking about here a lot of victims which is a big driver of guidelines, and a lot of loss. I don't see a way out of this where I don't see a way out of this where, where, where SBF is not going to federal prison for a very, very long time.
00;34;08;05 - 00;34;31;03
Gregg Sofer
I concur. And again, when something like this falls apart, when you're the head of the organization and the government builds that case up the pyramid, unless you have someone else to point the finger at or have some other fantastic argument, you're going to eat it. And he's eating it, a big pile of it. This time. I agree that the guidelines don't even capture the top of what he's going to get.
00;34;31;03 - 00;34;50;17
Gregg Sofer
I think the chances of him getting a sentence, that's where he spends the vast majority, if not the entirety of the rest of his life in prison is very, very high. He'll obviously never pay all the money back. That's that's one thing that's clear. Well, Jonathan, thank you so much for coming on. It's a fascinating conversation. I'm sure we could talk about lots of other aspects of the case, but this was fantastic.
00;34;50;17 - 00;34;51;12
Gregg Sofer
Appreciate your time.
00;34;51;13 - 00;34;53;12
Jonathan Porter
Thanks for having me, Gregg.
00;34;53;14 - 00;34;56;03
Gregg Sofer
Thanks for joining us on The Justice Insiders.
00;34;56;03 - 00;35;06;15
Gregg Sofer
We hope you enjoyed this episode. Please go to Apple Podcasts or wherever you listen to the podcast to subscribe, rate and review the Justice Insiders. I'm your host, Gregg Sofer.
00;35;06;15 - 00;35;10;02
Gregg Sofer
And until next time, be well.