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News broke yesterday that Sam Bankman-Fried, mastermind of the multi-billion dollar FTX-Alameda Research fraud, would plead not guilty to charges including conspiracy and wire fraud. Some, drawing on conspiratorial theories, have taken this as a sign that Bankman-Fried will pull strings with friends in high places to finagle his way towards innocence.
This might be strategic. Bankman-Fried might be holding out for an improved plea deal. Maybe he thinks a show of confidence can restore faith in him, or be enough to convince a jury of his innocence. But an equally likely explanation for the decision to go to a trial in October is that Bankman-Fried and his allies are delusional.
Either way, he's unlikely to win. In fact, Bankman-Fried could earn a longer sentence at trial than through a plea deal. His willingness to testify may suggest he was not offered a deal for pleading guilty, or was offered a very bad one, which would not be surprising given the apparent strength of the criminal case against him.
Perhaps most importantly, Bankman-Fried's trial will be entered into public records in detail. Through the discovery and trial processes, we're going to learn an immense amount, not only about Bankman-Fried, but about the behavior of others at FTX and Alameda – and quite possibly about external allies who are currently still in the shadows.
FTX and Alameda executives Caroline Ellison and Gary Wang will be cooperating with prosecutors, and Ellison has already said she committed crimes at Bankman-Fried's direction.
Still, there are fears Bankman-Fried's political donations and friends in high places may apply pressure to get him off. That's not how things generally work in the U.S. justice system – where other, subtler forms of corruption and influence-peddling prevail. But, in the grand scheme of political clout, Sam Bankman-Fried is a johnny-come-lately, and a bit of a small fry.
Theranos CEO Elizabeth Holmes cultivated some of the most powerful people on the planet in a very intimate way for nearly a decade – Henry Kissinger, a veritable Dark Lord of U.S. influence and power, sat on her Board of Directors. Compared to Holmes' buddying up to Kissinger, Bankman-Fried's seemingly close relationship to SEC Chair Gary Gensler is inconsequential. And even Kissinger couldn't help Holmes avoid a prison sentence.
But if Bankman-Fried isn't banking on help from powerful friends, why on earth would he roll the dice on a criminal trial? The answer is simple: he, and perhaps his parents, appear to be deeply delusional about his guilt. During his "speaking tour" after FTX's collapse, Bankman-Fried defied the advice of his lawyers and spoke about his actions and mind state up to and during the collapse of his crypto exchange.
He declared again and again that he didn't believe he engaged in fraud. This may stem from his upbringing by two academic lawyers interested in ethics or his belief in Effective Altruism (however disingenuous). Whatever his motivations for pleading innocence, now Bankman-Fried has to convince a jury.
– David Z. Morris
