Sam Bankman-Fried found guilty.

Plus, is it worth paying attention to the primary?

I’m Isaac Saul, and this is Tangle: an independent, nonpartisan, subscriber-supported politics newsletter that summarizes the best arguments from across the political spectrum on the news of the day — then “my take.”

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Today's read: 11 minutes.

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Today we're covering the guilty verdict in Sam Bankman-Fried's trial. Plus, a reader asks if the primaries are really worth following.

Quick hits.

New polls from The New York Times and Siena College show President Biden trailing former President Trump in five out of the six battleground states. (The polls)
Former President Donald Trump will testify in his $250 million civil fraud trial today. The Trump organization is accused of making false statements of financial conditions and assets to win favorable loan terms and insurance policies. (The testimony)
U.S. Secretary of State Antony Blinken visited the West Bank on Sunday as Israel's forces encircled Gaza City. Meanwhile, Lebanon's militant group Hezbollah has warned that if Israel continues to attack Gaza, it will lead to a broader regional conflict. (The updates)
Iowa Gov. Kim Reynolds (R) will reportedly endorse Florida Gov. Ron DeSantis (R) for president today. (The endorsement)
Employers added 150,000 jobs in October, fewer than economists expected. Unemployment rose to 3.9%, the highest rate in 21 months. (The numbers)

Today's topic.

Sam Bankman-Fried's conviction. On Thursday, the FTX founder was convicted of stealing billions of dollars from customers of his crypto exchange, marking one of the largest financial fraud convictions in U.S. history. After a short deliberation, a New York federal jury convicted Bankman-Fried on all seven counts he faced. He was also found guilty of money laundering and defrauding investors and lenders to FTX's sister company, a hedge fund called Alameda Research.

"SBF," as Bankman-Fried is commonly known, will face sentencing March 28, 2024 and could serve decades of prison time.

Reminder: We explained the FTX collapse in November of 2022. FTX was a crypto exchange platform where people traded digital- or crypto-currencies for other assets like conventional money. In 2022, the exchange was valued at $32 billion and was being promoted by celebrities like Larry David, Tom Brady, and Steph Curry. In November of 2022, the crypto website CoinDesk published an article detailing the close ties between FTX and Alameda Research.

Alameda's balance sheet consisted largely of tokens created by FTX. That realization caused a massive sell-off of those tokens over customer fears that something was amiss, effectively creating the crypto version of a "bank run."

The collapse of FTX has drawn a great deal of interest not just because FTX was one of the largest crypto exchanges in the world, but because Bankman-Fried was also a major political donor who had been lobbying to guide potential regulation of the industry. He gave $40 million to Democrats in 2020, and has said he gave an equal amount to Republicans as "dark money" donations.

What happened: During the trial, prosecutors brought forward evidence and testimony by Bankman-Fried's closest friends and colleagues that he was siphoning money from FTX to pay the debts of hedge fund Alameda Research. He was also using the money to send hundreds of millions of dollars in political donations, make high-risk investments, and buy real estate. SBF's ex-girlfriend Caroline Ellison, who was the chief executive officer of Alameda, testified that SBF directly instructed her to alter balance sheets in a way that kept hedge fund investors and lenders off their scent. Ellison, FTX co-founder Gary Wang, and engineering chief Nishad Singh all pleaded guilty to felony charges and testified against Bankman-Fried to reduce or avoid their own prison sentences.

SBF's lawyers depicted him as an entrepreneur and nerd who made some mistakes but did not commit any crimes. With the prosecution landing blows during trial, SBF made the high-risk decision to take the stand and testify, telling jurors he had good intentions and was navigating an emerging industry. He insisted he never defrauded customers but also conceded that he regretted not having better risk management at FTX.

However, under cross examination, SBF gave evasive answers to prosecutors, who painted him as a liar and showed the jury how his public statements didn't align with the available evidence. SBF also admitted that he learned in 2020 that FTX customer funds were being held by Alameda but did not take any steps to protect those funds.

“Sam Bankman-Fried thought that he was above the law. Today’s verdict proves he was wrong,” U.S. Attorney General Merrick Garland said in a statement. “This case should send a clear message to anyone who tries to hide their crimes behind a shiny new thing they claim no one else is smart enough to understand: the Justice Department will hold you accountable.”

Bankman-Fried's lawyers indicated they plan to appeal.

“We are very disappointed with the result,” SBF's lawyer Mark Cohen said in a statement. “Mr. Bankman-Fried maintains his innocence and will continue to vigorously fight the charges against him.”

Today, we are going to examine some reactions to the news from the right and left, then my take.

What the right is saying.

The right is happy about the guilty verdict and frames SBF as a con artist in the mold of Elizabeth Holmes.
Some say this outcome should not be used to give more regulatory powers to the federal government.
Others criticize SBF for using his ill-gotten gains to boost Democratic politicians and influence elections.

In Townhall, Laura Hollis wrote “we are breeding generations of little tyrants” like SBF.

“Bankman-Fried is the latest entrepreneurial wunderkind who thought he was above the law. Elizabeth Holmes, disgraced founder of Silicon Valley blood-testing startup Theranos, was convicted last year of defrauding investors of hundreds of millions of dollars and sentenced to 11 years in prison,” Hollis said. “One of the most striking things about the FTX, Theranos, and WeWork case studies is not just the hubris of the founders but the utter lack of inquiry by those who should have been asking hard questions. With few notable exceptions… the media’s relationship with these young founders was worshipful adoration.”

“The second thing one notices when studying these stories is that the fraudsters all use the same shtick. They’ve figured out that the surest way to have the press —-- and everyone else — fawn all over you is to announce that you’re going to ‘change the world,’” Hollis wrote. “Behind the lofty sentiments is an ugly reality. It’s not that these self-appointed world-changers don’t believe their own hype; they are so convinced of their own importance that they see themselves as exempt from society’s rules.”

The Wall Street Journal editorial board argued that the SEC can “police crypto fraud without new regulatory powers” even after SBF’s guilty verdict.

SEC Chairman Gary Gensler has “spun Mr. Bankman-Fried’s fraud as a cautionary tale of the crypto ‘wild West.’ The SEC chief claims crypto currencies are securities—ergo, exchanges and token developers must submit to agency regulation. But a federal judge this year disagreed, and Congress hasn’t given the SEC authority to regulate crypto,” the board wrote. “Mr. Gensler has tried to regulate anyway, even before the FTX collapse. But regulators and prosecutors don’t need new powers to charge fraud under existing U.S. laws.

“And while Mr. Gensler charged crypto companies for marketing unregistered securities and operating unregistered trading platforms, that didn’t stop Mr. Bankman-Fried’s crimes,” the board added. “One question for Congress to investigate is whether Mr. Gensler’s preoccupation with expanding his regulatory and enforcement power caused the agency to overlook the FTX fraud in plain sight.”

In PJ Media, Victoria Taft called SBF a “Democrat bagman” who “helped destroy the crypto currency business.”

“The man touted as Warren Buffett incarnate was anything but. The jury decided he was running a racket. His mother, a bundler who ran an organization to supply money to Democrats, encouraged her son to give money to leftists, which made him the second-largest Democrat donor during the 2020 election cycle. It was just other people's money he was giving away. His brother, another executive at the Bahamas-based crypto exchange, also gave company money to political friends,” Taft said.

“CBS reported that SBF ‘donated $6 million to the House Majority PAC, the main outside group supporting House Democrats.’ Then he ‘gave $250,000 to the Democratic Congressional Campaign Committee and $66,500 to the Democratic Senatorial Campaign Committee. The bulk of his political donations — $27 million — bankrolled the “Protect Our Future PAC,” a group advocating for pandemic preparedness.’ It was ‘pandemic preparedness’ the same way Zuckbucks were for pandemic preparedness.”

What the left is saying.

The left is also glad SBF was found guilty but worries that the crypto industry still has a fraud problem.
Some call for greater regulation of the industry to proactively address malicious behavior.
Others say the saga should be a cautionary tale to any crypto firm that tries to take advantage of their customers.

In Bloomberg, Noah Feldman wrote “SBF’s fall isn’t just a morality tale. It’s a warning to regulators.”

“Bankman-Fried’s conviction should not be used to argue that crypto is now a safe space for investment, whether by ordinary folks or sophisticated players. The fact that one person has been found guilty does not have much, if any impact for other potential bad actors. Each will still make their own individual calculus about the costs and benefits of trying out potentially fraudulent strategies,” Feldman said. “The simple takeaway from the FTX collapse is that unregulated industries like crypto are incredibly risky.”

“Congress and the federal agencies could speed up the process by declaring an emerging sector to be subject to existing regulatory regimes until more situation-specific regulation can be produced. That could have happened in crypto; it just didn’t. Maybe it’s time to learn the lesson that we’re better off with imperfect rules that arrive quickly and can be altered later, rather than unregulated conduct that can only be adjudicated after bad actors have hurt people.”

The New York Daily News editorial board said prosecutors “established conclusively” that FTX was a criminal enterprise.

“Bankman-Fried’s paper empire relied on the oldest trick in the con man book: not only can you afford to invest in this newfangled technology, can you really afford not to?,” the board wrote. “Perhaps the fundamental question at the end of this saga is how Bankman-Fried managed to pull the wool over the eyes of so many supposed adults in the room. Retail customers are one thing, but he was embraced by elected officials, financial titans and prominent journalists, often without question even as the business that catapulted him to multi-billionaire status was rife with fraud going back to at least 2021.

“Let this be a lesson to policymakers that glitz and hype don’t equal substance, and to regulators that moving slow on fast-paced technological developments can harm a lot of people in little time. Let this be a shot across the bow to the remaining actors in the crypto space and other would-be scam artists in tech and elsewhere: you can keep it up for a while, but you can’t keep it up forever. Eventually, the rug gets pulled.”

In Bloomberg, Lionel Laurent argued SBF “won’t be the last crypto mogul behind bars.”

“I don’t believe for a second that this will be the last crypto fraud. We’ve closed one chapter of Covid-era laser-eyed true believers, yet market prices are stirring once more as [traditional finance] firms see an opening to offer Bitcoin and other products with the potential blessing of regulators,” Laurent said. “There are other parts to the story of FTX that explain the incentives beyond the individual. The crypto sub-culture, for example, and its overlap with the aggressive quantitative trading culture where Bankman-Fried cut his teeth.”

“What would Bankman-Fried have been without the long line of venture capitalists throwing more than $27 billion into crypto during 2021’s pandemic-fueled euphoria, clearly without serious due diligence? Or the institutional investors parking their funds at a trading venue in the Bahamas? Or the accounting firm based in the metaverse appointed to audit FTX? It’s easy to talk about ‘missed’ red flags, but there was willful blindness here.”

My take.

Reminder: "My take" is a section where I give myself space to share my own personal opinion. If you have feedback, criticism, or compliments, don't unsubscribe. Write in by replying to this email, or leave a comment.

This is a pretty shocking and surreal moment.
It has seemed clear for some time that SBF is guilty.
He’s done an unbelievable amount of damage to the crypto space.

I'll be honest: This whole thing is surreal.

I don't know SBF and I've never interviewed him, but I have been following the crypto space closely since 2015 and even made some money buying and trading crypto in the early days of Ethereum. Sam Bankman-Fried was the crypto nerd in the last few years. It is hard to overstate how central he felt to the future of the space, and how essential he seemed to crypto being accepted by mainstream society. He was the weird crypto genius who was sitting in meetings with high-ranking politicians and celebrities, building the bridge between the complicated, (sometimes) criminal offshoot world of crypto and mainstream regulators and investors.

Now he's going to jail. Probably for a long time. And, by all accounts, his sentence is well deserved.

Bloomberg's Matt Levine has been essential covering this beat. A lot of his writing is behind a paywall, but his early October piece titled "SBF's Defense Will Be Tough" encapsulated just how bad this looked for Bankman-Fried. Here is how Levine laid out the central charges in a way that cuts through the complicating factors:

Customers deposited billions of dollars at his crypto exchange, FTX, to buy crypto.

Bankman-Fried’s trading firm, Alameda Research, secretly took that money to gamble on crypto tokens and make weird illiquid venture investments.
Also a lot of the money seems to have been siphoned off to make political donations, buy celebrity endorsements, pay for Bahamas real estate for Bankman-Fried and his family, etc.
When customers started asking for their money back last November, it wasn’t there.

This is bad! The basic combination of ‘the customers’ money is gone’ and ‘you lived in a $30 million penthouse’ is really killer. That’s the most basic outline of a financial fraud: The customers don’t have the money anymore, and you do.

Roughly speaking, Bankman-Fried's defense was that he made some mistakes, didn't properly account for risk, and a massive (and unexpected) crash in the crypto markets led to a run on the exchange which caused FTX to lose all its customers' money (in the same way banks sometimes lose people's money without stealing it).

There’s just one problem with that defense: It just doesn't comport with reality. Exchanges like FTX need to keep collateral and manage their positions so they can always pay out the winners of bets. The money investors were putting in would have been there if SBF didn't spend it all making a bunch of other very risky investments, donating millions to political campaigns, buying expensive houses, propping up Alameda, and inventing other crypto tokens for people to buy and sell.

SBF’s defense was further undercut by the fact that pretty much every single high-ranking person at FTX and Alameda Research who was close to SBF said he was warned about what he was doing, ignored the warnings, and sometimes directly instructed people to try to obscure what they were doing from investors and the public. Frankly, I'm not surprised it only took the jury a few hours to find him guilty on all counts.

This whole thing is bad for everyone involved. It is ugly for the Democratic politicians who took money from a fraudster who just got caught in a Bernie Madoff-esque ponzi scheme. It is ugly for the thousands of legitimate players in the crypto space who are trying to build real use-cases for this technology, but are getting undermined by criminals like SBF. It is ugly for the celebrities who took a nice paycheck on a product they didn't understand and then enticed their fans and followers to invest in a scheme that cost them untold amounts of money.

Most of all, though, it is ugly for SBF. The prosecution used his own words against him with ease, showing that he was still willing to lie while testifying. His career is ruined, and there’s a chance he could go to prison for the rest of his life. I have no idea how long of a sentence he is realistically looking at, but all the charges stacked up on top of each other could put him in prison for more than 100 years. Given the damage he did and how many people lost their money on him, it's going to be hard for any judge to muster much sympathy.

Your questions, answered.

Q: I can't help but think that the whole primary process this cycle is just a waste of time. I know you make an effort to include a broad set of perspectives, and you've written about all the politicians and wannabe politicians involved...but it just feels like you're in the 2nd half of a blowout game and the end result is a foregone conclusion. I guess I'm asking...is there any value in following the primary process when we all already know what the end result is?

— Mike from Chicago, IL

Tangle: To extend the sports analogy briefly, it’s only the people who stick around to the end of blowout games who get to appreciate the most incredible comebacks. And while I definitely don’t expect anyone other than Donald Trump to win the Republican primary, there is still a chance — however slim — that another candidate does. As a political commentator, it’s interesting to me to watch the dynamics play out and see what that path might look like. This is true for Democrats, too, even though there is hardly any primary to speak of.

So, the value in following the primary depends on what you’re watching for and trying to learn about. If, like most people, you are interested only in who is going to get the Republican nomination, then no, following the primaries closely won’t be that interesting. Tracking the polls, watching the debates, and reading the coverage isn’t going to give you a more sophisticated understanding of “Trump’s almost definitely going to win” than a quick glance at the situation would tell you.

If you’re trying to learn more about what Republican voters are thinking (and, whether you’re a Republican or not, I think you probably should be, because that’s half of our country), then there’s a lot to learn by following the presidential primary. What kind of qualities will Republican voters prioritize? Which behaviors will they excuse? What issues matter the most to them? Which issues do they say matter but probably don’t? How do voters differ from state to state? And how do their opinions change over time?

Even if the race for the nomination isn’t dramatic, I’d say that all of those questions are important, and offer very interesting answers.

And finally, two important points: First, no matter what happens, it is basically guaranteed that neither Trump nor Biden will be in the 2028 presidential race. That means the Republican primaries and hypothetical Democratic alternatives give us a great opportunity to learn more about the people who will be shaping national politics over the next four years, and potentially give us a sneak peek into the 2028 election. The future of the Republican party probably won’t heavily feature Mike Pence, Chris Christie, Doug Burgum, or Asa Hutchinson, but it will probably include big roles for Vivek Ramaswamy, Nikki Haley, Tim Scott, and Ron DeSantis. And this primary gives you the best possible way to get to know them, how they think, and what issues are important to them.

Second, despite the fact Trump looks to have the nomination sealed and Democrats aren't running a real primary challenge to Biden, there are obvious situations where either may have to drop out or are forced out (Biden’s health and Trump's legal troubles). In that case, it'll be good to know who the options are on both sides.

As a quick reminder, the next Republican primary debate will be this Wednesday at 8 p.m. ET, and we’ll be breaking down what we learned about those candidates in Tangle the next day. Even if it’s the second half of a blowout game, there’s still a lot to learn about next year’s starting players.

Under the radar.

U.S. soldiers and Marines have been left with devastating post-war injuries from their own weapons, according to a new investigation by The New York Times. Research has shown that blast exposure from firing heavy weapons can cause traumatic brain injuries similar to the kinds NFL players get from repetitive contact. In 2016 and 2017, the U.S. strategy was to put fewer soldiers on the ground and instead have them fire continuous rounds of long-range artillery against the Islamic State in Iraq and Syria. But now those same soldiers are being plagued by nightmares, panic attacks, depression, and even hallucinations. Rather than getting treatment, many are being forced out of the military and cut off from health care after facing misconduct charges. In the meantime, the military has struggled to understand what is wrong. The New York Times has the story (Paywall).

Numbers.

140. The number of times Sam Bankman-Fried said he “could not recall” an incident while being questioned on the stand during his trial.
$26.5 billion. Bankman-Fried’s estimated net worth at FTX’s peak in 2022, according to Forbes.
$4 million. Bankman-Fried’s estimated net worth as of Nov. 6, 2023, according to Forbes.
$5.2 million. The amount that Bankman-Fried gave in support of Joe Biden's 2020 presidential bid.
$26 million. The amount that Bankman-Fried is alleged to have given his parents in the form of a home, cash, and other goods.
24%. The percent increase in the price of Bitcoin in the past month.
2%. The percent decrease in the price of Bitcoin after Bankman-Fried was found guilty, according to Markets Insider data.
$1.38 trillion. The global cryptocurrency market cap as of Nov. 6, 2023.

The extras.

One year ago today we didn't have a newsletter, but we'd just published a subscribers-only piece on why you should vote.
The most clicked link in Thursday's newsletter was the secrets of our two noses.
Who was following him?: 892 Tangle readers responded to our poll asking what action would have been most successful at preventing the mass shooting in Lewiston, Maine, with 47% saying better enforcement of existing laws. 19% said assault weapons bans, 16% said stronger red-flag laws, 13% said more mental health resources, and 2% said better reporting from the shooter's community. 3% said the shooting was largely unpreventable and 1% were unsure or had no opinion. "The military could have initiated the weapons confiscation as he had required medical referral and hospitalization for aberrant behavior and criminal intent months before. Who was following this guy?," one respondent said.
Nothing to do with politics: How a translation app's error led to a terror alert.
Take the poll. What do you think of Sam Bankman-Fried's conviction? Let us know!

Have a nice day.

More than 300 high school graduates signed up for a unique student exchange program this summer. Unlike the well known foreign-exchange model that allows teens the chance to study abroad, this program gives students the opportunity to soak in a brand-new culture without ever leaving the country. It's called the American Exchange Project, or AEP for short, and it was co-founded by 29-year-old David McCullough III, grandson of the late Pulitzer Prize-winning historian David McCullough. "We fund kids to spend a week in the summer after senior year in an American town that is politically and socio-economically and culturally very different from the one that they're growing up in," McCullough said. And the kids who participate say it’s a little weird at first, but ultimately worth it. "You have to do things that… even if it's talking to a new person…might make you uncomfortable,” said Californian Evan Quach, who traveled to Dodge City, Kansas. “But you have to, or else you're not going to make new friends, you're not going to be able to experience life." CBS News has the story.

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