Sam Bankman-Fried, in first detailed defence, seeks to dismiss charges
Sam Bankman-Fried, the founder of collapsed cryptocurrency exchange FTX, has issued his first detailed legal defense since prosecutors charged him with fraud, seeking to dismiss several of the charges and claiming that the high-powered law firm representing FTX in bankruptcy has done the government’s bidding .
In court documents late Monday, lawyers for Mr. Bankman-Fried said that FTX and its lawyers at the firm of Sullivan & Cromwell had become de facto agents of federal prosecutors building the criminal case against him and that they may be withholding crucial evidence.
“FTX’s legal counsel went to the government to accuse Mr. Bankman-Fried behind his back without knowing all the facts, ultimately forcing him to resign as CEO,” the lawyers wrote.
For months, Sullivan & Cromwell has sent documents and other evidence to prosecutors, the filings say. Mr. Bankman-Fried’s lawyers argued that the prosecution had sought only the most incriminating documents, although FTX may also be sitting on material that could help the defense.
In effect, they argued, prosecutors have “outsourced” the legal requirement to provide potentially useful material to the defense team, shifting that responsibility to a “private party” without any obligation to Mr. Bankman-Fried.
Representatives for FTX, Sullivan & Cromwell and the US Attorney’s Office in Manhattan did not immediately respond to requests for comment.
Federal prosecutors have charged Mr. Bankman-Fried with orchestrating a massive fraud that misappropriated billions of dollars in customer money from FTX. Authorities have also accused him of money laundering, bribing the Chinese government and overseeing an illegal campaign finance scheme that showered tens of millions of dollars on Democratic and Republican candidates.
Mr. Bankman-Fried, 31, has pleaded not guilty to those charges. His lawyers at the New York firm Cohen & Gresser have said they are prepared to go to trial in federal court in Manhattan as soon as October.
Mr. Bankman-Fried was released on bail in December but confined to his parents’ home in Palo Alto, California. He faces an uphill legal battle. Three of his top colleagues have pleaded guilty and are cooperating with prosecutors. If convicted, he could spend decades in a federal prison.
The motions filed Monday are likely to be the first of many attempts by Mr. Bankman-Fried’s legal team, either to seek the production of more documents from the prosecution or to persuade Judge Lewis A. Kaplan of the Federal District Court in Manhattan to dismiss any of 13 counts against him.
In all, Mr. Bankman-Fried seeks to dismiss 10 of the charges. The filings argue that four of the counts — including the foreign bribery charge, the campaign finance charge and a bank fraud charge — violated elements of the extradition process between the United States and the Bahamas, where Mr. Bankman-Fried was arrested. In extradition cases, the prosecution is usually limited to taking out new charges after a defendant has been transferred.
The defense attorneys argued that another six of the charges should be dismissed for being too vague or having other legal flaws. They said prosecutors had shown an “eagerness to bring charges against Mr. Bankman-Fried.”
Much of the defence’s early strategy also focuses on the role of Sullivan & Cromwell in the case. Mr. Bankman-Fried had hired lawyers from the firm to help with a variety of legal tasks before FTX collapsed. When the stock market imploded, Sullivan & Cromwell lawyers took control, appointing a veteran restructuring expert, John Jay Ray III, to replace Mr. Bankman-Fried. One of Mr. Ray’s first acts was to issue a scathing report saying that FTX under Mr. Bankman-Fried had lacked internal controls.
But in January, the US trustee in the bankruptcy case raised objections to the law firm’s representation of FTX, claiming it had not fully disclosed the extent of its previous legal work to the exchange. One of FTX’s former in-house lawyers claimed in a lawsuit that Sullivan & Cromwell’s previous work created major conflicts of interest.
A judge ultimately ruled that the firm could continue to oversee the bankruptcy.
In court documents on Monday, Mr. Bankman-Fried portrays Mr. Ray, FTX and the lawyers at Sullivan & Cromwell as all working against him, with the government’s blessing.
Mr. Ray, FTX and the lawyers “have served as a public mouthpiece for the authorities” and “have assumed the role of prosecutor by publicly branding” Mr. Bankman-Fried as the “villain,” the filings state.