On Guilty Pleas

Photo by Ante Hamersmit on Unsplash

I do not envy the job of Sam Bankman-Fried’s lawyer after seeing the screenshots of Caroline Ellison’s guilty plea.

That is… some ugly stuff. Waking up naked in a dumpster after a three day bender level ugly. The confession details the following:

• Alameda and FTX executives were aware that Alameda had special terms to borrow unlimited amounts from FTX without paying for it (or, put differently, steal the customer funds)
• Alameda and FTX were knowingly making large, illiquid investments in the market and loans to the senior executives using said customer funds
• That the senior staff were fully aware of what was going on and acting to disguise this activity, up to and including providing false information to others about the balance sheet and activity

Reading this, I think there are several conclusions that one can come to about the court case, and then some policy and regulatory considerations that should come after, given this activity.

First, I don’t know if there is a path for SBF to get out of this

From a legal perspective, now that you have one of his co-conspirators flipping on him and giving this kind of ammunition to the feds, SBF’s defense will have to convince a jury of one of the following: