Business

Sam Bankman-Fried built ‘pyramid of deceit’, jurors hear in closing arguments

Published

11 months ago

November 1, 2023

Sam Bankman-Fried’s crypto fraud trial neared its end with closing arguments on Wednesday in Manhattan federal court following weeks of testimony that lifted the veil of FTX’s stunning collapse – and a broader murkiness surrounding digital currency markets. The prosecution quickly painted Sam Bankman-Fried as an unabashed scammer rather than the image of the wayward math nerd proffered by the defense throughout the trial, saying he created a “pyramid of deceit” with his cryptocurrency exchange, FTX.

Assistant US attorney Nicholas Roos also used Bankman-Fried’s own testimony against him.

“FTX was bankrupt. Billions of dollars from thousands of people, gone,” Roos said. “He spent his customers’ money, and he lied about it.”

Just before 10am, Roos started his closing argument by describing the final days of FTX in November last year, which started with the crypto equivalent of a bank run.

Exchange customers learned in a Coin Desk article that Alameda Research, FTX’s sister hedge fund, held billions in FTX’s own cryptocurrency, FTT, and had used it as collateral for hefty loans. Following the report, the Binance chief executive, Changpeng Zhao, tweeted that his exchange would unload its $500m in FTT holdings. FTT crumbled, bringing FTX and Alameda down with it.

“With each day, the withdrawals grew – millions of dollars turned into hundreds of millions of dollars, which turned into billions of dollars. Thousands of people around the world were trying to withdraw their investments, their savings, their nest eggs for the future, but their withdrawals were not being processed. Money wasn’t being returned,” Roos told jurors.

“They were overcome with anxiety. With each additional click of the withdrawal button their dread turned into despair. Their money was gone.”

Bankman-Fried faces seven counts on conspiracy and fraud charges for allegedly siphoning FTX customer funds into Alameda; the prosecution contends that he did so to cover Alameda’s widening debt following the spring 2022 crypto crash. He has pleaded not guilty.

Roos described Bankman-Fried’s alleged antics as “a pyramid of deceit built by the defendant on a foundation of lies and false promises, all to get money. Eventually it collapsed, leaving countless victims in its wake.

“The defendant is responsible,” Roos said, pointing to Bankman-Fried at several points.

When Bankman-Fried’s lawyer, Mark Cohen, presented his closing, he in effect argued that the prosecutor’s case hinged too heavily on Bankman-Fried’s scruffiness rather than the substance of his actions. Cohen argued: “The government has sought to turn Sam into some sort of villain, some sort of monster.

“Testimony about his hair, his clothes, testimony about his sex life, photos of him with big hair, photos of him with messy hair, photos of him with playing cards,” Cohen said. “His appearance and his romantic relationships have nothing to do with whether he’s guilty to the specific charges in the indictment.”

“We’ll agree that there was a time when Sam was probably the worst-dressed CEO in the world and had the worst haircut … and we’ll agree that Sam would talk to just about everyone … and that made his life messy … but that’s not a crime,” Cohen said.

“The reason the government focused so much of its case on Sam’s appearance is because every movie needs a villain.”

Cohen repeatedly told jurors that Bankman-Fried was acting in good faith and insisted this was a defense to the charges in this case. The attorney said he wanted to show jurors “an alternative way to think” about what happened as well as Bankman-Fried’s behavior on the witness stand. He said that Bankman-Fried’s testimony before lawmakers showed that he wasn’t a cunning criminal.

“If he was a criminal mastermind, why in the world would he go in front of Congress and [be] subject to public questioning when he didn’t have to?” Cohen said. “The answer? He wouldn’t.”

Cohen also rejected the government’s contention that Bankman-Fried lined his pockets and bolstered a luxe lifestyle using customer money.

While the government portrayed Bankman-Fried’s spending hundreds of millions in marketing as an “aha!” moment, to purportedly show his misuse of this money, Cohen said, he thought marketing costs were in keeping with the industry.

Cohen also addressed the sprawling Bahamas properties, including a $30m apartment Bankman-Fried lived in with top FTX execs, downplaying their purpose as workmanlike.

“Why did Sam purchase these properties? Why did FTX purchase them? “ Cohen said.” Sam is clear on this in his testimony – the Bahamas real estate was corporate housing for FTX employees.”

FTX, he said, was trying to court top professionals who “uprooted their lives” to move there when they could just have easily gone to work at Google or Facebook.

The prosecution also argued in closing that Bankman-Fried’s decision to testify in his own defense last week – a rare move for criminal defendants, given the perils of cross-examination – was not worth the risk.

“The defendant took the stand and he told a story – and he lied to you,” Roos said of Bankman-Fried’s direct testimony. “Did you see on Friday how his testimony was smooth like, it’d been rehearsed a bunch of times?”

Roos noted that Bankman-Fried testified about “a bunch of things that didn’t really matter” for the case – like his bookish living situation at MIT. And when it came to explaining various things during direct examination, he appeared to have “perfect memory”.

“He never said he couldn’t recall,” Roos said, but when it was prosecutors’ turn, this professed lack of memory “happened over 140 times during his cross-examination”.

“He had to be asked and re-asked. He looked away. He lied about big things and he lied about little things,” Roos argued. “He asked for terms to be defined that he used freely on direct examination earlier.

“He approached every question like up was down and down was up … he came up with a tale that was conveniently put together in a story that excluded him from a fraud,” Roos continued.

Cohen tried to downplay Bankman-Fried repeatedly saying he didn’t recall facts during cross-examination. He said, “if he remembered something he told you, if he didn’t remember something he told you as well.”

The prosecutor argued that Bankman-Fried used hi-tech subterfuge to cheat customers who trusted that FTX was as safe as he claimed – and treated their money as “his personal piggy bank”.

Alameda, FTX’s sister hedge fund, was able to borrow exchange customer money and rack up debt on a whopping $65bn line of credit, unlike other exchange clients.

“He set up a system, a public system, for everyone and a secret system just for Alameda, and he directed others to make it work that way,” Roos said. “No other customer had a set-up like Alameda.”

There was also the liquidity issue. FTX had a system that barred customers from continued margin trading when their liquidity dipped below a certain level; this was not the case with his hedge fund.

“He know that Alameda was exempt from the rules that applied to all the other customers,” Roos said. “What is the result of Alameda’s secret exemption? The defendant took billions of dollars of customer funds, leaving an enormous gap between what it said it had … and what it actually had in cryptocurrency wallets.”

All the while, Bankman-Fried was peddling a false sense of security, Roos argued.

“He ran ads saying FTX was safe, the safest and easiest way to buy and sell cryptocurrency he told Congress and the public by, quote, ‘logging into a customer account at FTX customers can immediately view assets they own held in custody at FTX,” Roos said. “That last part is critical – assets they own, held in custody by FTX.

“That wasn’t true. When customers logged into their account they saw a balance. Behind the scenes, that money wasn’t there.” Ads featuring the Seinfeld creator Larry David and football legend Tom Brady were part of this web of deception.

Roos also argued: “He was taking money from FTX customers when he was saying something different publicly – that makes him guilty of fraud.”

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Business

The #1 Skill I Look For When Hiring

Published

1 day ago

September 17, 2024

Nick Kossovan

File this column under “for what it’s worth.”

“Communication is one of the most important skills you require for a successful life.” — Catherine Pulsifer, author.

I’m one hundred percent in agreement with Pulsifer, which is why my evaluation of candidates begins with their writing skills. If a candidate’s writing skills and verbal communication skills, which I’ll assess when interviewing, aren’t well above average, I’ll pass on them regardless of their skills and experience.

Why?

Because business is fundamentally about getting other people to do things—getting employees to be productive, getting customers to buy your products or services, and getting vendors to agree to a counteroffer price. In business, as in life in general, you can’t make anything happen without effective communication; this is especially true when job searching when your writing is often an employer’s first impression of you.

Think of all the writing you engage in during a job search (resumes, cover letters, emails, texts) and all your other writing (LinkedIn profile, as well as posts and comments, blogs, articles, tweets, etc.) employers will read when they Google you to determine if you’re interview-worthy.

With so much of our communication today taking place via writing (email, text, collaboration platforms such as Microsoft Teams, Slack, ClickUp, WhatsApp and Rocket.Chat), the importance of proficient writing skills can’t be overstated.

When assessing a candidate’s writing skills, you probably think I’m looking for grammar and spelling errors. Although error-free writing is important—it shows professionalism and attention to detail—it’s not the primary reason I look at a candidate’s writing skills.

The way someone writes reveals how they think.

Clear writing = Clear thinking
Structured paragraphs = Structured mind
Impactful sentences = Impactful ideas

Effective writing isn’t about using sophisticated vocabulary. Hemingway demonstrated that deceptively simple, stripped-down prose can captivate readers. Effective writing takes intricate thoughts and presents them in a way that makes the reader think, “Damn! Why didn’t I see it that way?” A good writer is a dead giveaway for a good thinker. More than ever, the business world needs “good thinkers.”

Therefore, when I come across a candidate who’s a good writer, hence a good thinker, I know they’re likely to be able to write:

Emails that don’t get deleted immediately and are responded to
Simple, concise, and unambiguous instructions
Pitches that are likely to get read
Social media content that stops thumbs
Human-sounding website copy
Persuasively, while attuned to the reader’s possible sensitivities

Now, let’s talk about the elephant in the room: AI, which job seekers are using en masse. Earlier this year, I wrote that AI’s ability to hyper-increase an employee’s productivity—AI is still in its infancy; we’ve seen nothing yet—in certain professions, such as writing, sales and marketing, computer programming, office and admin, and customer service, makes it a “fewer employees needed” tool, which understandably greatly appeals to employers. In my opinion, the recent layoffs aren’t related to the economy; they’re due to employers adopting AI. Additionally, companies are trying to balance investing in AI with cost-cutting measures. CEOs who’ve previously said, “Our people are everything,” have arguably created today’s job market by obsessively focusing on AI to gain competitive advantages and reduce their largest expense, their payroll.

It wouldn’t be a stretch to assume that most AI usage involves generating written content, content that’s obvious to me, and likely to you as well, to have been written by AI. However, here’s the twist: I don’t particularly care.

Why?

Because the fundamental skill I’m looking for is the ability to organize thoughts and communicate effectively. What I care about is whether the candidate can take AI-generated content and transform it into something uniquely valuable. If they can, they’re demonstrating the skills of being a good thinker and communicator. It’s like being a great DJ; anyone can push play, but it takes skill to read a room and mix music that gets people pumped.

Using AI requires prompting effectively, which requires good writing skills to write clear and precise instructions that guide the AI to produce desired outcomes. Prompting AI effectively requires understanding structure, flow and impact. You need to know how to shape raw information, such as milestones throughout your career when you achieved quantitative results, into a compelling narrative.

So, what’s the best way to gain and enhance your writing skills? As with any skill, you’ve got to work at it.

Two rules guide my writing:

Use strong verbs and nouns instead of relying on adverbs, such as “She dashed to the store.” instead of “She ran quickly to the store.” or “He whispered to the child.” instead of “He spoke softly to the child.”
Avoid using long words when a shorter one will do, such as “use” instead of “utilize” or “ask” instead of “inquire.” As attention spans get shorter, I aim for clarity, simplicity and, most importantly, brevity in my writing.

Don’t just string words together; learn to organize your thoughts, think critically, and communicate clearly. Solid writing skills will significantly set you apart from your competition, giving you an advantage in your job search and career.

_____________________________________________________________________

Nick Kossovan, a well-seasoned veteran of the corporate landscape, offers “unsweetened” job search advice. You can send Nick your questions to artoffindingwork@gmail.com.

Business

Politics likely pushed Air Canada toward deal with ‘unheard of’ gains for pilots

Published

2 days ago

September 16, 2024

Anne Joseph

MONTREAL – Politics, public opinion and salary hikes south of the border helped push Air Canada toward a deal that secures major pay gains for pilots, experts say.

Hammered out over the weekend, the would-be agreement includes a cumulative wage hike of nearly 42 per cent over four years — an enormous bump by historical standards — according to one source who was not authorized to speak publicly on the matter. The previous 10-year contract granted increases of just two per cent annually.

The federal government’s stated unwillingness to step in paved the way for a deal, noted John Gradek, after Prime Minister Justin Trudeau made it plain the two sides should hash one out themselves.

“Public opinion basically pressed the federal cabinet, including the prime minister, to keep their hands clear of negotiations and looking at imposing a settlement,” said Gradek, who teaches aviation management at McGill University.

After late-night talks at a hotel near Toronto’s Pearson airport, the country’s biggest airline and the union representing 5,200-plus aviators announced early Sunday morning they had reached a tentative agreement, averting a strike that would have grounded flights and affected some 110,000 passengers daily.

The relative precariousness of the Liberal minority government as well as a push to appear more pro-labour underlay the prime minister’s hands-off approach to the negotiations.

Trudeau said Friday the government would not step in to fix the impasse — unlike during a massive railway work stoppage last month and a strike by WestJet mechanics over the Canada Day long weekend that workers claimed road roughshod over their constitutional right to collective bargaining. Trudeau said the government respects the right to strike and would only intervene if it became apparent no negotiated deal was possible.

“They felt that they really didn’t want to try for a third attempt at intervention and basically said, ‘Let’s let the airline decide how they want to deal with this one,'” said Gradek.

“Air Canada ran out of support as the week wore on, and by the time they got to Friday night, Saturday morning, there was nothing left for them to do but to basically try to get a deal set up and accepted by ALPA (Air Line Pilots Association).”

Trudeau’s government was also unlikely to consider back-to-work legislation after the NDP tore up its agreement to support the Liberal minority in Parliament, Gradek said. Conservative Leader Pierre Poilievre, whose party has traditionally toed a more pro-business line, also said last week that Tories “stand with the pilots” and swore off “pre-empting” the negotiations.

Air Canada CEO Michael Rousseau had asked Ottawa on Thursday to impose binding arbitration pre-emptively — “before any travel disruption starts” — if talks failed. Backed by business leaders, he’d hoped for an effective repeat of the Conservatives’ move to head off a strike in 2012 by legislating Air Canada pilots and ground crew to stick to their posts before any work stoppage could start.

The request may have fallen flat, however. Gradek said he believes there was less anxiety over the fallout from an airline strike than from the countrywide railway shutdown.

He also speculated that public frustration over thousands of cancelled flights would have flowed toward Air Canada rather than Ottawa, prompting the carrier to concede to a deal yielding “unheard of” gains for employees.

“It really was a total collapse of the Air Canada bargaining position,” he said.

Pilots are slated to vote in the coming weeks on the four-year contract.

Last year, pilots at Delta Air Lines, United Airlines and American Airlines secured agreements that included four-year pay boosts ranging from 34 per cent to 40 per cent, ramping up pressure on other carriers to raise wages.

After more than a year of bargaining, Air Canada put forward an offer in August centred around a 30 per cent wage hike over four years.

But the final deal, should union members approve it, grants a 26 per cent increase in the first year alone, retroactive to September 2023, according to the source. Three wage bumps of four per cent would follow in 2024 through 2026.

Passengers may wind up shouldering some of that financial load, one expert noted.

“At the end of the day, it’s all us consumers who are paying,” said Barry Prentice, who heads the University of Manitoba’s transport institute.

Higher fares may be mitigated by the persistence of budget carrier Flair Airlines and the rapid expansion of Porter Airlines — a growing Air Canada rival — as well as waning demand for leisure trips. Corporate travel also remains below pre-COVID-19 levels.

Air Canada said Sunday the tentative contract “recognizes the contributions and professionalism of Air Canada’s pilot group, while providing a framework for the future growth of the airline.”

The union issued a statement saying that, if ratified, the agreement will generate about $1.9 billion of additional value for Air Canada pilots over the course of the deal.

Meanwhile, labour tension with cabin crew looms on the horizon. Air Canada is poised to kick off negotiations with the union representing more than 10,000 flight attendants this year before the contract expires on March 31.

This report by The Canadian Press was first published Sept. 16, 2024.

Companies in this story: (TSX:AC)

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Business

Federal $500M bailout for Muskrat Falls power delays to keep N.S. rate hikes in check

Published

2 days ago

September 16, 2024

Anne Joseph

HALIFAX – Ottawa is negotiating a $500-million bailout for Nova Scotia’s privately owned electric utility, saying the money will be used to prevent a big spike in electricity rates.

Federal Natural Resources Minister Jonathan Wilkinson made the announcement today in Halifax, saying Nova Scotia Power Inc. needs the money to cover higher costs resulting from the delayed delivery of electricity from the Muskrat Falls hydroelectric plant in Labrador.

Wilkinson says that without the money, the subsidiary of Emera Inc. would have had to increase rates by 19 per cent over “the short term.”

Nova Scotia Power CEO Peter Gregg says the deal, once approved by the province’s energy regulator, will keep rate increases limited “to be around the rate of inflation,” as costs are spread over a number of years.

The utility helped pay for construction of an underwater transmission link between Newfoundland and Nova Scotia, but the Muskrat Falls project has not been consistent in delivering electricity over the past five years.

Those delays forced Nova Scotia Power to spend more on generating its own electricity.

This report by The Canadian Press was first published Sept. 16, 2024.

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