In the break after Caroline Ellison stepped down from the stand, Barbara Fried engaged defense lawyer Christian Everdell in an animated conversation. Fried, the defendant\u2019s mother, was gesticulating, and clearly had a strong opinion about something. Everdell walked off, and Mark Cohen talked to her for a bit after that. <\/p>\n<\/div>\n
Fried seemed frustrated, and I couldn\u2019t blame her. The defense absolutely biffed the cross-examination of Ellison and, to make matters worse, was unable to keep a recording of an all-hands meeting where Ellison confessed to taking customer funds from being played for the jury. Is this really the best the defense can do?<\/p>\n<\/div>\n
Before this case, I had been told that Everdell and Cohen were \u201cworkman-like,\u201d which I took to mean that they were unshowy but competent. I now believe that comment was an insult. I have been waiting for a juicy cross-examination, as I live for chaos and drama. I am beginning to think I am not going to get one.<\/p>\n<\/div>\n
In Cohen\u2019s disorganized cross-examination, he mostly bored the jury<\/p>\n<\/div>\n<\/div>\n
Ellison had given, in her direct testimony, fairly damning evidence tying FTX CEO Sam Bankman-Fried to the conspiracy to take FTX customer funds. There were fake balance sheets, one of which was sent to crypto lender Genesis. After a Genesis representative received the balance sheet, he texted Ellison to tell her he\u2019d spoken to Bankman-Fried \u2014 strongly suggesting that Bankman-Fried was aware of the contents of the fake balance sheet. Not great!<\/p>\n<\/div>\n
But a lot of testimony relied on Ellison recounting conversations she\u2019d had in person, or on auto-deleting text messaging platforms. This gave the defense an opportunity to try to make her sound unreliable. After all, she had an incentive to flip on Bankman-Fried: the possibility of leniency in her sentencing. Given her fun tweets about speed<\/a>, the fact that she was Bankman-Fried\u2019s ex-girlfriend, and that she\u2019d apparently written a bunch of stuff down, I was expecting fireworks. For the first time in this trial, maybe the defense had an opening.<\/p>\n<\/div>\n Instead, I got a sad trombone. In Cohen\u2019s disorganized cross-examination, he mostly bored the jury. At one point, two different jurors appeared to be asleep.<\/p>\n<\/div>\n Midway through the morning I began wondering if there was a mercy rule for cross-examinations. Prosecutor Danielle Sassoon had run an effective direct examination<\/a>, creating an easy-to-follow narrative. By contrast, Cohen appeared to be bumbling around, taking up one topic only to abruptly pivot. Sure, we\u2019re still in the prosecution\u2019s case, but Cohen had all night to prepare his lines of questioning.\u00a0<\/p>\n<\/div>\n Apparently, Alameda had a problem with retaining accountants<\/p>\n<\/div>\n<\/div>\n We established that Bankman-Fried had a much larger appetite for risk than Ellison. I thought perhaps it might be building to something, but this line of questioning was quickly dropped. We established that Bankman-Fried and Ellison reacted differently to stress, and that they also had different approaches to media: namely, that Ellison avoided it while Bankman-Fried sought it out. Okay?<\/p>\n<\/div>\n We discovered that there was one accountant at Alameda in 2021, and two more junior accountants were hired in 2022. Apparently, Alameda had a problem with retaining accountants, which didn\u2019t surprise me much; CEOs generally don\u2019t do the balance sheets for their companies. I was ready to hear this pursued further \u2014 but then it, too, was dropped.<\/p>\n<\/div>\n I think the defense was also trying to suggest that the government had coerced Ellison\u2019s testimony, by suggesting that she had pleaded guilty to a charge of defrauding investors that she couldn\u2019t have been involved in. After all, she didn\u2019t prepare materials for them. Unfortunately, she did say that she had conversations with investors as part of their due diligence \u2014 and, of course, Alameda was taking on losses from FTX to keep FTX\u2019s balance sheet pristine. This line of questioning felt like a waste of time.<\/p>\n<\/div>\n There were rather a lot of sidebars during the cross-examination, to the point that when one occurred, several jurors looked entertained. There were a few yesterday, too, including one in which the prosecution complained that Bankman-Fried was visibly scoffing at Ellison\u2019s answers, according to the court transcript. (I did observe him occasionally shaking his head, and sometimes quivering at points during her testimony, but didn\u2019t have a view of his face.)<\/p>\n<\/div>\n At one point, Ellison appeared to even be toying with Cohen<\/p>\n<\/div>\n<\/div>\n As we were approaching lunch, several jurors looked annoyed, and Cohen looked clueless. He asked Ellison to define what \u201cbuy on the way down\u201d meant, as though it were a term of art. (It means what you think it means, to purchase an asset that\u2019s losing value.) This seemed to puzzle her. At other times, Cohen seemed to forget what she had testified to, bringing up things she hadn\u2019t said. I don\u2019t know if this was an attempt to trap her in a lie or just poor preparation, but much like FTX employee Adam Yedidia<\/a> before her, Ellison was fastidious about making sure a question was clear and her answer was precise.<\/p>\n<\/div>\n At one point, Ellison appeared to even be toying with Cohen. She\u2019d testified on direct about Luna, a cryptocurrency token. It had a sister token, Terra, that was a paired algorithmic stablecoin<\/a>. (If you don\u2019t understand what that means, it doesn\u2019t matter, because they were both nonsense.) Cohen asked her about Terra\/Luna and she pointed out she\u2019d only spoken about Luna, leaving him to fumble about how to explain the relationship between the two tokens. She kept a straight face on the stand while I chuckled from the press seats.<\/p>\n<\/div>\n During the opening statement, Cohen had blamed Ellison for not taking out a hedge on some of the risks Alameda was trading. We heard more about this hedge in cross-examination, and friends, it was stupid<\/em>. Forget evaluating the trade itself (hedging being long crypto by selling Nasdaq futures<\/a>). Was she supposed to have taken more<\/em> customer funds to put on the hedge? Was that the defense, that she didn\u2019t take enough of them? Was it that she should have taken them sooner? What the fuck?<\/p>\n<\/div>\n When Sassoon got up for a quick redirect, she demolished any points Cohen had attempted to make. But I didn\u2019t really appreciate her cleverness until after Ellison left the stand, and the jurors left the room. She\u2019d managed to set a neat little trap for Cohen.<\/p>\n<\/div>\n