On "Carpe Consensus," hosts Ben Schiller and Danny Nelson dive into the latest crypto news.

• [0:55] Inside the Desk: CoinDesk reporter Helene Braun has been covering the Sam Bankman-Fried trial alongside Danny Nelson. The pair reflect on the verdict and the experience in the courtroom.
• [14:58] The world of crypto still turns, even as SBF's trial comes to an end. Ben and Danny chat about what's on the horizon, from the end of crypto winter to the rise of real world asset tokenization. Ben highlights Consensus Magazine's Trading Week package.

“Carpe Consensus” is executive produced by Jared Schwartz and produced and edited by Eleanor Pahl.

Audio Transcript: This transcript has not been edited and may contain errors.

BEN SCHILLER:

Hello, and welcome to "Carpe Consensus." This is a podcast from the CoinDesk Podcast Network. I am Benjamin Schiller, features editor here at CoinDesk. And joining me today is Danny Nelson, the other cohost, hello, and also Helene Braun. She is a reporter here at CoinDesk. And we're going to be talking about the SBF trial which just wrapped up last week with the former founder of FTX being found guilty on seven counts of federal fraud and related charges. And that was a pretty big deal for the crypto industry and certainly here for CoinDesk as we broke the story originally. So Danny, what was it like to be there at the end of the trial there with the verdict?

DANNY NELSON:

Yeah, I gotta say it was unexpectedly emotional, right? So for five weeks, we heard all these co-conspirators, these insiders, who pled guilty to various crimes testify against Sam saying, 'he made me do this. He told me to do that.' Caroline, Nishad and Gary all coming with their very powerful stories. And then at the end, Sam testified, and then he was found guilty, and I feel bad for him. I know, weird thing to say, I don't feel like he is innocent. Or I don't think he's not guilty. Rather, he's definitely guilty. He's guilty as hell. But watching him in the courtroom watching his parents there. I just felt like this sense of 'wow,' that I felt the gravity of the moment. And I don't know, we should lock him up. But we shouldn't give him 115 years. This is a hot take. I know.

BEN SCHILLER:

Maybe we can get into the rights and wrongs of you know how long he's gonna get. Helene? What about you? How did you feel when you saw the verdict being read out?

HELENE BRAUN:

Yeah, I did not feel bad for him at all, especially after we heard all the closing statements. We heard two different closing statements from Assistant U.S. Attorney Danielle Sassoon. And they were very compelling and very convincing. And I felt like there was this moment and her closing argument where I looked at Sam, and it just felt like he finally realized that this was it for him, there was no going back, his defense was just not good enough. And I think the jurors knew too. And at that point, I was just like, I hope he gets 150 years or 200 years. I don't feel bad for this guy. All the evidence that we've heard was just crazy to me. So now, I totally disagree with Danny. I think he deserves to be in prison for the entirety of his life.

BEN SCHILLER:

Right. So you mentioned the defense there. I mean, there was a seemed to be a consensus amongst lawyers that we spoke to about the trial and the defense that he didn't get a very good service on that score. I mean, how much of a difference do you think that actually made? I mean, it seems like a structural set of circumstances where he would get a guilty verdict anyway. And most people expected him to go to jail. But do you think if he had a better defense, he could have gotten a better sentence or a better verdict?

HELENE BRAUN:

Yeah, I think it's interesting. Because in the beginning of the trial, it sort of felt like the defense wasn't trying very hard. And I think it must be so funny. If you're Mark Cohen, the defense attorney, than Sam was represented by to read all these articles about you and how bad of a lawyer you are and how bad of the defense strategy you have from all these, you know, journalists that have nothing to do with the law and aren't attorneys themselves. And they're just judging your work, basically. But I think in his closing statements, I could see that he was trying really hard and that I think he was he had hoped for his defense. I don't know he's supposed to be good. I don't know. I was wondering that, too. If is he supposed to be a really good lawyer? Or is he just the guy that all the bad guys go to because he's the only one is willing to defend them?

DANNY NELSON:

From what I've heard, I think Mark Cohen is a fine lawyer. But that's the name of the game when you're a defense attorney, your clients, especially the more outspoken ones, like Sam Bankman-Fried, you're not going to win all your cases. And if you have a really bad deck, well, that's the deck you have to play with. And he went to trial with this guy who had so much evidence against him. I think it was very insurmountable. So sure, maybe he wasn't as quick on his feet with some of the strategic and tactical things in the courtroom, like objections and phrasing of questions and things like that. But if you have all these people testifying against your client, and then when your client takes a stand, you can't get him to sound the way that an innocent person would sound. And also, you have to remember before the trial even began, the defense lost a lot lot of attempts to shape how the trial would go, the judge wouldn't allow the defense to bring in all of Sam's philosophical arguments. They wouldn't allow him to bring defensive counsel arguments. He went to trial with a losing hand. And it's not completely his fault that the trial ended up going against his client. Right?

BEN SCHILLER:

I mean, I have to say, I agree with you, Danny, about feeling a little bit sorry, for SBF. I mean, you know, both things can be true. On the one hand, you can say this guy was a fraud, he was a criminal, he took a lot of people's money, and he spent it lavishly and irresponsibly. On the other hand, you know, he has a human being, you know, to get this huge sentence. I mean, he could go away for 115 years maximum, seems like a rather excessive amount of time. And there is an argument out there that he is very much the poor guy for the for the industry, and the guy who's kind of taking the rap for a lot of cultural problems in the industry. And it kind of lacks general corporate governance culture out there. I mean, there were VC funds that put millions of dollars billions of dollars into FTX, without doing any due diligence, and that's not a criminal act, but it was a act of cultural indifference or negligence that you could say contributed to this enormous folly. So, you know, I think there's a reasonable argument to say that he is taking the route for the entire industry when maybe he doesn't quite deserve that kind of level of status here. What do you think about that, then?

DANNY NELSON:

I don't know. I think it's like a special kind of stupid to set up a company in the way he did. And sure, there's a lot of follies that crypto in general has committed, but just the arrangement between Alameda and FTX. And that's this whole case, right? That Alameda spent all this money from FTX customers that is so unique, right? That doesn't even have to do with crypto. The way that this fraud was committed was mostly because people were wiring their money into Alameda research to get it into FTX. So there was also the allowed negative code and the let's borrow $65 billion code that was more crypto native, but I don't know and, you know, look at me, I'm contradicting myself again, right? Because earlier in the episode, I'm saying, 'Well, I feel bad for Sam' and here, I'm saying, 'Well, he's guilty as hell.' I don't know. I think there's room for both statements. Because it's it's very hard to watch someone's parents in the room when a guilty verdict is handed out like they're older, right? He's going to be locked up probably for the rest of their lives. I don't know. I just I can't get over that scene in the courtroom.

HELENE BRAUN:

I did feel guilty.

Did you steal the money?

I'm sorry. I did feel bad for him. I did feel bad for him up until his testimony. Because up until that point, all these people that he used to be friends with that were all part of the scheme to like he wasn't just the only one that committed this fraud. All these other people, Caroline, Rashad, Gary, they were all part of this. And they all were put up on the stand as the 'good guys,' so to say, just because they cooperated with the government and they told their side of the story. But then his testimony just showed that he is not remorseful at all he still was trying to lie to people, he's still trying to talk himself out of this and at that point it's too late for this. You're already in this trial, you're on the stand, it's time to look back and be a little bit remorseful and stop thinking that you're smarter than everybody else.

BEN SCHILLER:

I mean, I think it would have made a difference if he was remorseful well?

DANNY NELSON:

If he was remorseful, he would've been convicted even faster?

HELENE BRAUN:

Yeah, it's tough because he can't really be remorseful because in his opinion, he's not guilty. Right? So what's he gonna say to the jury?

BEN SCHILLER:

He could say something like, 'I'm sorry, got the people got hurt and I made mistakes' and something like that.

DANNY NELSON:

He did say that. That was the very first thing he said basically. And then after that, it was every everything was basically 'I don't remember.'

HELENE BRAUN:

He just said it to say it. Because he had to.

DANNY NELSON:

Helene, among the the witnesses that flipped on Sam, who's the biggest villain? You sat through that whole thing too. Who do you walk away feeling the least bad for and who do feel the most bad for? I feel like there are easy answers here.

HELENE BRAUN:

I feel the least bad for Caroline. Literally just because of that tape that we heard from that meeting in November where she told her employees that it was kind of fun to you know, steal money. She obviously didn't explicitly say like that, but she she said it was fun. She sounded a little crazy in that recording. So after her testimony after hearing that recording, I thought, 'Wow, she's she's definitely not the innocent little girl that everybody says she is.' She certainly knew what she was doing. And she certainly, you know, she's certainly guilty as well. So I feel the least bad for her. The person that I felt really bad for was Nishad. But I also don't know if that's just because he's airy, soft spoken, he has a very low voice, he seems like a very sweet guy. So it could just be a front that he put on for his testimony.

DANNY NELSON:

I have the opposite answers actually, like a complete opposite. I feel like Caroline from reading the Michael Lewis book, which is sympathetic to Sam. But also some of the things that were said about Caroline were repeated by the government in their narrative, Caroline just comes off to me as someone who was completely, I guess the word I would use is 'submissive,' in every aspect of this business and personal relationship. And I don't feel bad for her at all. But I feel the most bad for her, even though she did big fraud. I think that that Nishad, though, is next-level evil. He presents himself like you say, as this guy who is soft spoken, and but oh, by the way, after he learned that the companies were stealing money from customers, he took out $3 million dollars to personally buy a house. This wasn't like, in furtherance of the scheme to keep it all afloat. This was so he could have a house, his personal enrichment. So I think it's all just a front. And Gary, I don't know how to read him. I think he just doesn't talk much. And he took the deal as soon as his lawyer said 'we should we should make moves here.'

BEN SCHILLER:

Do we know what the deals are with those collaborators who turned on SBF? I mean, will they be getting any jail time?

DANNY NELSON:

We don't know that aspect of it. I would imagine that Gary will get the best deal because he he offered himself up to the government before the government was even investigating. Caroline, she didn't speak until they raided her house. So you get negative points for that. And I don't know about Nishad. But I would expect Gary to get the best deal.

Unknown Speaker

Gary said he hopes that he doesn't get any jail time, though. And I think I think that could actually be the case. Yeah. Because we see in a lot of these white collar cases that those people are the witnesses that cooperate with the government actually get zero jail time. So I think that's a possibility, which would be crazy to me.

DANNY NELSON:

Yeah, they will probably get years of probation. So if they would violate the deal, then they would go right to jail. But I think Caroline might get some time. I don't know about Nishad. And I would expect Gary to get no jail time.

BEN SCHILLER:

Could we even see them back in the crypto industry?

DANNY NELSON:

I highly doubt that, that seems exceptionally unlikely. I think they want nothing to do with this. In fact, in other cases, the government, like for securities fraud -- So, some of them have some of them pled guilty to securities fraud. When you plead guilty to securities fraud, the government often makes you say, 'I will never work in the securities industry again.' That probably means I shouldn't work in any of crypto, because most cryptos are securities

BEN SCHILLER:

Bitcoin's not a security.

DANNY NELSON:

Well, bitcoin is not a security, neither is Ether. But a lot of the other ones probably are. So I if I were them, I would steer clear.

Unknown Speaker

I don't know. I think they've had their fair share of the crypto industry. And I don't think anybody needs to see them back in the industry. I think Adam Yedidia, who was one of the first witnesses and a senior software engineer at FTX, I think, or Alameda. He is a high school teacher now.

DANNY NELSON:

Yeah, he's a math teacher.

HELENE BRAUN:

He seemed a little traumatized by this whole experience.

BEN SCHILLER:

Well, maybe in a few years time, we can do a sort of 'Where are they now?' article. So Helene, just final thoughts from you? What's your sort of takeaway feeling from the end of the trial? Relief, exhaustion?

Unknown Speaker

A little bit of both. In the beginning, before going into this trial, I was very certain that he was going to be found guilty. And then during the trial, I sort of had hoped that he would put up a really good defense. I was kind of just excited to see the trial. I wanted to see a really good show, because I knew that he had hired these really good lawyers, Mark Cohen and Christian Everdell. Um, that didn't happen. So after a few weeks, I was excited for the end and I was excited to see a verdict come in. Not shocked at all after like I said, the closing statements. So very glad this is over because it did kind of get a little ridiculous and repetitive towards the end.

BEN SCHILLER:

Danny, is it a bit of a come down to get back to normal crypto journalism after the adrenaline rush of the courtroom?

DANNY NELSON:

Man, I don't want to go back to normal crypto journalism. The trial was so much fun. It was. I was ready for it to be over, but it's like a different plane of existence, it felt that way. So I'm looking forward to the next criminal trial, which was going to be Avi Eisenberg's in December but it got punted to April. So I just have to sit around and wait.

BEN SCHILLER:

Well, there's speculation now that CZ of Binance is the next major name on the kind of prosecutorial docket. So we'll see if that happens and what's the space for continuing coverage. Thank you very much, HELENE BRAUN: for everything you do for CoinDesk and for appearing on this podcast with us. And Danny, likewise.

DANNY NELSON:

Well, I think that I'm ready to move on from SBF now. This has been my life for five weeks, and my back hurts and I'm tired. And I'm ready to get back to the show. So tell me, what have I missed in the last five weeks? What has gone on with crypto?

BEN SCHILLER:

Well, that's a good question, Danny, thanks for asking that. So I think it's interesting how there's kind of this split screen reality because on the one hand, story of crypto has been a lot about this trial, a lot about what happened with SBF and why it happened, and all the shenanigans that went on with with FTX. And I would like to draw listeners' attention to an article that Dan Kuhn wrote today for something that we're calling 'Trading Week,' which was about the worst trades that Alameda and FTX made. It's quite kind of eye opening about some incredibly stupid decisions they made. And it's really, as he says in the article, astounding that we ever thought that Sam Bankman-Fried was a smart guy, because clearly under the hood, he wasn't. But at the same time, what I mean by a 'split screen' is that you know, was just been going on outside the trial. There's this general consensus that the crypto market is picking up, that the regulators are offering a little more clarity than they were, and that there are bright spots, particularly in the way in which TradFi, or traditional finance, is viewed in crypto. And that's particularly around promise of spot bitcoin ETFs. So, at the same time there are shifts in the market towards what's called tokenization, which is the idea of tokenizing existing financial assets, like U.S. Treasuries, or actual physical assets, like office buildings and other things. So that's seen as a great source of interest and the potential basis for a new bull run going forward. And the question really is, what does that bull run look like? And most people seem to think that it's going to be a more mainstream play, that it's gonna be about what these mainstream institutions are interested in trading in rather than the kind of crypto bros or crypto native folks, which obviously had a different set of interests. So that's what we've really been exploring in trading week, which is sponsored by CME, which is obviously a mainstream financial institution itself.

DANNY NELSON:

Now, but I mean, we've been in the winter, since what is it? When did Terra blow up? I think that's definitively the start of the downfall of everything. But April of 2022, right around then. So the first leg was Terra, and then 3AC and then Celsius, right, because Celsius blew up during the conference. I wonder for next year's Consensus, because that's coming up, which crypto company is most likely to implode at the end of this Consensus? Stay tuned for that, dear listener. But until then, I'm wondering like, how do we define the bear and the bull, right? So in the real economy, yes, the real economy, there are definitions for what is an isn't recession. How do we define that in crypto? Is it just going off vibes?

BEN SCHILLER:

I wrote about this last week, you know, recession is defined as two down quarters of GDP or gross domestic output. And apparently there is no official definition of what a crypto winter is or the opposite of winter. But I think if you've been in crypto long enough, you kind of know it and smell it and can feel it. And people kind of know, I mean, but there is no official technical definition. But you know, when prices are rising when players are coming back into the market when there is a renewal of VC funding, which is sort of happening now. That's when people call the end of a crypto winter.

DANNY NELSON:

Well, I guess everything is relative, right? Because just these past few weeks, we've seen huge layoffs at OpenSea, we've seen this week, pretty big layoffs at Ava Labs, which is behind the Avalanche Blockchain. At CoinDesk, we're scrambling to divvy up office furniture and, apparently, dishwashers. So the bear is still being felt, even if we're on to the bull, or I don't think we're on to the bull, maybe we're in to the in between. Right?

BEN SCHILLER:

Well, you could argue a different ways, right? I mean, you could say that, you know, troubles that OpenSea have more to do with the NFT market, and particularly the rise of OpenSea's main competitor, which is Blur, and maybe kind of hubris in that kind of operation where they invested very heavily in staff during the bull run in NFTs. And that's sort of taken a while to play out and for those people, very unfortunately, to lose their jobs. So that's not necessarily a kind of leading indicator of what the market as a whole looks like. I think it's more particular to OpenSea and the NFT market and kind of a huge pent up amount of capital out there that still kind of needed to be spent from the last bull run. And that's actually propped up a number of companies to seem more solvent than than they are.

DANNY NELSON:

When I started at CoinDesk in 2019, good goodness, my intro to crypto news. Back then at CoinDesk I was reading about tokenization, about an effort to take real estate and gold bars, and I don't know anything else, and put it on the blockchain and make it tokenized, and then trade it. And that didn't work, or maybe it worked, but no one talked about it. Fast forward four years. And we're talking about a real world assets and tokenization. Again, I'm just fascinated by this trend.

BEN SCHILLER:

It's a bit problematic to talk about real world assets as a particular category, because there are actually lots of different industries that are looking to tokenize things. And you know, kind of the spearhead of that at the moment is U.S. Treasuries, which are now being traded. And that's to do not only with the new capabilities that is enabled by tokenization, but also a function of the fact that, you know, people can make money from trading in U.S. debt at the moment, because interest rates are quite favorable. So it's kind of an easier way to get in on something that's a good trade anyway. Whereas you also have categories like real estate, so the idea of kind of fractionalized a building and putting on blockchain to trade, it is part of that trend, but quite different. So I think we'll have to see whether the enthusiasm for things like tokenized treasuries translates into these more exotic categories that, as you say, or indicate are maybe a harder sell for for investors. But there's definitely a lot of interest in there. And if Wall Street says it's going to be a thing, then generally it is a thing. And I think if you look at the NFT bubble, or boom, last time, that largely happened, because enough people thought it was a boom. And I think there's a sense now that a lot of people think that tokenization will be a boom in the next bull run. So it kind of has a self fulfilling prophecy dimension to it, I would say.

DANNY NELSON:

Ben, what else should I be looking out for? What else should we be looking out for in trading? We what are some of the greatest hits?

BEN SCHILLER:

We have a lot of pieces. You know, I mentioned real world assets and tokenization, we have a few pieces on that we have some interviews with crypto traders, looking at how they're looking to get an edge. And Jeff Wilser has seven successful strategies of crypto traders, which is definitely worth looking at. We've got some pieces looking at the opportunity from bitcoin ETFs, which some people think could be up to a trillion U.S. dollars going into bitcoin that's kind of modeled on the success of gold ETFs, which came out in the early 2000s. And, you know, sprang into a huge opportunity, as light in this package from the kind of human interest side of crypto trading to analysis and opinion from, as I say, leading players in the market. You've grilled me for a few minutes here, I want to put this back on you. What are you excited about in the next few months? If anything?

DANNY NELSON:

Well, in the immediate term, I'm excited to go to sleep because I did not get much of that during the trial. And to be honest, not to give it all the trials topics, but I'm a very, I've got the bug now. I'm excited for more going forward. I'm looking forward to Celsius, to Mango Markets, and to all these other opportunities that I'll have to go to the courthouse because the intersection of crypto and the law, it's only going to get more interesting. With Sam, it was kind of a plain vanilla fraud. What happens when perpetual swaps enter the courtroom? I don't know. We'll find out.

BEN SCHILLER:

That's a great point, actually. Because I mean, you know, for all the interest around the SBF trial, they won't actually a lot of kind of live crypto issues. And actually, the verdict was fairly predictable. I mean, very predictable, perhaps. And it's not like any of the big kind of outstanding questions of crypto were really answered in the in the preceding. So there's a lot of that still to come.

DANNY NELSON:

Yeah, when we get to tornado cash. And when we get to Mango Markets even we're gonna have to grapple with these notions of, is code actually law? Right? So when we get to smart contracts law versus actual contract law, who knows what happens? So stay tuned.

BEN SCHILLER:

Yeah, that's interesting. Another area that you might mention, Danny, is the whole issue of DAOs. Which sort of seems eminently litigatable.

DANNY NELSON:

DAOs are down only. Yeah, down only, down only, down with all of them. I hate them. I love to hate them. Please keep burning, keep boiling over, keep blowing up. It's endlessly fun. So I'm looking forward to some more explosions.

BEN SCHILLER:

On that apocalyptic note, thank you very much, Danny, for your irrepressible presence. And get some sleep. And we'll see you all next week or, you won't see us but you're listening to us, hopefully, and leave us a review on Apple Podcasts and all other good platforms like that. And thanks very much for listening. Goodbye.

DANNY NELSON:

Bye.