Why the Second Bankman-Fried Trial is Cancelled
Also: Welcome to Dark Markets.
Happy New Year! Flesh/Markets is dead!
This newsletter will henceforth be known as Dark Markets. So will my new podcast, which just launched. Our first episode is with FTX victim Sunil Kavuri.
As I mentioned in my “business boy” post, Flesh/Markets was launched as a self-indulgent side project, with a weird, abstract, and slightly off-putting name to match. Dark Markets is less weird, and concisely describes what I’m doing here.
On the one hand, this newsletter covers the obvious “dark markets” of fraud, crime, and the deep state. We are also interested in more neutral markets, including crypto, that are “dark” in the sense of being less visible and comprehensible to mainstream observers. Finally and most deeply, I write about the irrationality of markets themselves, both in their nature and in how legislation shapes them.
You’ll see some changes in branding, and a new sender in your email inbox after this edition. Unfortunately, the substack subdomain darkmarkets.substack.com has been taken by a lazy Nazi, so that won’t change quite yet.
And now, some extremely *interesting* news.
Crypto Market Brief
Anticipation for the Bitcoin ETF is truly heating up. BTC is up nearly 7% over the past 24 hours, blowing through $45,000. After months of seeming to lag, Ethereum followed almost precisely. As I predicted about a month ago, it’s up only for a bit longer.
No Second Trial for Bankman-Fried (Or His Parents)
On December 29, Federal prosecutors announced that they “do not plan to proceed” with a second trial of Sam Bankman-Fried, which would have considered charges including U.S. campaing finance fraud, banking fraud, and alleged bribery of Chinese officials.
There is a reasonable, rational explanation for the abandonment of a second trial. In short, when Bankman-Fried was arrested in the Bahamas in December of 2022, not all of his crimes were yet known - including the campaign finance and bribery charges. These were not part of the extradition documents that sent Bankman-Fried back to the U.S., which apparently prevented them from being included in the first trial without Bahamian permission, which apparently never came.
Crucially, this is in no way letting Sam Bankman-Fried himself off the hook. The government argues that it has already “proved at trial the conduct underlying the additional counts,” and those findings will be taken into account for Sam’s sentencing. According to the SDNY prosecution team, the new charges wouldn’t change the recommended sentencing range for SBF. So, long story short, the new trial would just be a waste of money and time, as far as Sam is concerned.
But despite this legal logic, the announcement has triggered extreme outrage from many observers. Some see it as a political move to defend, most of all, politicians who may have been entangled in SBF’s campaign finance fraud. While a second trial wouldn’t change anything for Sam, it might have revealed embarrassing additional information about politicians he donated to, or other influence-peddlers he was affiliated with. Michael Kives and his K5 group, for instance, might have been further exposed.
Furthermore, the “reasonable” sequence of events leading to the cancellation of the second SBF trial could easily have been manufactured. It’s not at all hard to imagine someone discouraging the Bahamian government from allowing the chargest to be rolled into the first trial.
This suspicion is accentuated, fairly or not, by the timing of announcement of the second trial’s cancellation. Releasing news on any Friday is always done with the intent to bury that news. Releasing news on the Friday between Christmas and New Years, rather than at any point in the preceding two months, shows a clear goal of making sure as few people as possible notice it.
The cancellation is also a godsend for Joe Bankman and Barbara Fried, SBF’s parents, particularly Barbara, who is on record seeming to encourage the fraudulent use of straw donors. In one fascinating wrinkle that will be discussed in an upcoming episode of the Dark Markets podcast, it seems possible Sam himself did not even realize that this use of straw donors was illegal - that’s why he admitted it to Tiffany Fong in their very first interview. (This is also notable further evidence in my argument that, contra his image, Bankman-Fried was actually very stupid.)
If that’s true, it’s haunting, because it means Bankman-Fried’s own mother led him to commit crimes he himself did not know were crimes. Obviously he committed plenty of other crimes without her help, but that level of familial callousness fits into the larger portrait of the Bankman and Fried clan. My discussion with Sunil Kavuri, lead plaintiff in a series of depositor class actions against the FTX estate, delved deep into the tragedy of what looks an awful lot like a loveless family.
It’s unclear whether Bankman and Fried have enough powerful friends left for their protection to be anything other than an accidental side-effect of the protection of more powerful figures. But they can’t help but be breathing a sigh of relief for themselves right now, even as their son rots in jail awaiting sentencing - a moment of truth still coming in March.
Whether or not the cancellation of SBF’s second trial amounts to a political cover-up will hinge substantially on what happens next for Joe Bankman and Barbara Fried. Based on evidence presented at their son’s first trial, there is good reason to believe his parents were complicit in his crimes - Barbara’s role in the campaign finance fraud most obviously. Many have called for their investigation and prosecution.
Until we get such a prosecution, there’s plenty of reason to be suspicious that justice is not truly being served.