- Sam Bankman-Fried’s lawyers late Wednesday announced details of his planned testimony should he appear as a witness in his FTX fraud trial.
- Bankman-Fried’s legal team told Judge Lewis Kaplan in a six-page letter that he would address three key areas in such a deposition, including suggesting that he was wrong in allowing some actions that later led to FTX’s implosion and bankruptcy , relied on the former legal team of FTX cryptocurrency exchange.
Sam Bankman-Fried’s lawyers late Wednesday announced details of his planned testimony should he appear as a witness in his FTX fraud trial.
Bankman-Fried’s legal team told Judge Lewis Kaplan in a six-page letter that he would address three key areas in such a deposition, including suggesting that he was wrong in allowing some actions that later led to FTX’s implosion and bankruptcy , relied on FTX’s former legal team cryptocurrency exchange.
Lawyers for the disgraced FTX boss also said he would also cite his understanding of common industry practices as well as his intent to comply with Bahamian authorities.
Bankman-Fried is charged with seven crimes, including wire fraud, securities fraud and money laundering, that could send him to more than 100 years in prison if convicted at his trial in Manhattan federal court.
Bankman-Fried, the son of two Stanford law students, has pleaded not guilty in the case.
The letter to Kaplan appears to cast doubt on whether the disgraced crypto billionaire will take the witness stand.
Earlier Wednesday, one of Bankman-Fried’s two lead trial attorneys, Mark Cohen, said in a conference call that his client would testify, as would three other people.
But in his letter Wednesday evening, Cohen wrote: “Should Mr. Bankman-Fried decide to testify in his defense, he should be permitted to testify about his understanding of industry practices regarding the use of omnibus wallets to demonstrate his good faith.” . “Absence of criminal intent.”
The statement suggests Bankman-Fried may refrain from testifying if the defense’s motions are denied.
Kaplan had previously ruled that Bankman-Fried’s lawyers could not make a so-called advisory argument in their opening statements because it could prejudice the jury.
But Cohen told Kaplan in the new letter that while prosecutors had “previously attempted to prevent Mr. Bankman-Fried from presenting evidence or arguments regarding the involvement of attorneys,” Bankman-Fried’s “knowledge of the involvement of attorneys in these.” Matters” but “immediately” was relevant” to “his state of mind and goodwill at that time.”
Cohen cited specific examples in which Bankman-Fried, under the guidance of FTX lawyers, pursued policies that prosecutors said demonstrated his criminality.
One example was the company-wide policy on the encrypted messaging app Signal.
Caroline Ellison, Bankman-Fried’s ex-girlfriend who also ran crypto hedge fund Alameda Research, testified that SBF instructed FTX and Alameda employees to use the disappearing message setting on Signal. She said he told them to be very careful what they put in writing because of the potential legal jeopardy.
Lesser-known FTX co-founder and former chief technology officer Gary Wang and FTX lead developer Adam Yedidia also commented on the instruction to set Signal communications to auto-delete.
The government also argued in its opening statement to the jury that Signal’s 30-day auto-deletion policy was because Bankman-Fried “didn’t want a paper trail for his crimes.”
But Cohen wrote that Bankman-Fried assumed these auto-deletion policies “were put in place under the guidance of attorneys.”
In another example, Cohen pointed to billions of dollars worth of FTX customer deposits going directly into a bank account controlled by Alameda.
Prosecutors say customer funds were funneled to Alameda through two channels: users depositing cash directly into Alameda accounts and through a secret backdoor built into the FTX code.
However, Bankman-Fried’s lawyers contend that SBF’s “understanding of attorneys’ involvement in the formation” of these accounts and in the payment agreement reached between FTX and Alameda is “directly relevant” to the defendant’s “good faith belief” that “There is nothing wrong with using Alameda-controlled entities to accept FTX customer deposits.”
In these and other examples involving the guidance of a former FTX lawyer, Bankman-Fried’s defense attorneys come back to the same argument that the former FTX boss acted in good faith and not in the criminal conduct alleged by the government acted intentionally.
Wang testified that on November 12, after FTX filed for bankruptcy, Bankman-Fried asked Wang to go with him to a meeting at the Bahamas Securities Commission.
On the trip, Bankman-Fried urged Wang to transfer assets to Bahamian liquidators because he believed they would allow him to retain control of the company. Wang said he did not attend the meeting with the securities regulator, although Bankman-Fried’s father was present. Wang said he returned to the United States and met with American prosecutors the next day.
He faces up to 50 years in prison when he goes before a judge for sentencing following this trial. He told jurors that he had signed a six-page cooperation agreement requiring him to meet with prosecutors, answer their questions truthfully and present evidence.
The Feds also allege that SBF prioritized paying certain creditors, including the Bahamian authorities. In its pretrial motion, the government pointed to Bankman-Fried’s “criminal intent” as well as the “false nature of his representations” that he wanted to “make things right to customers.”
Cohen writes: “We expect to seek testimony from Mr. Bankman-Fried on November 12, 2022 regarding his good faith intentions in complying with orders from the Bahamian authorities to transfer assets of FTX to the Securities Commission of the Bahamas , against FTX’s objections.” Corporate lawyer and US insolvency advisor.”
“Such a statement would require Mr. Bankman-Fried to outline his belief that the Bahamian authorities acted in the best interests of FTX customers while FTX’s in-house counsel and external insolvency counsel in the United States had conflicts of interest,” it said the letter continues.
Bankman-Fried’s understanding of generally accepted industry practices may also figure prominently in his testimony.
In crypto slang, a collective account is a collective account where multiple users’ digital assets are held together in a single account. Cryptocurrency exchanges and others in the industry typically use this type of collective storage strategy to reduce costs and streamline workflow.
In the case of FTX, the commingling of customer and company assets has become a key point of contention between the government and the defense.
Prosecutors argued that FTX’s “use of omnibus wallets is relevant to this case,” the letter said.
“For example, the government obtained Mr. Sun’s testimony that he did not believe that FTX customer deposits could be lawfully commingled with the company’s other funds… and that FTX used a collective wallet for all of customers’ digital assets,” it said The document continues, referring to FTX’s former general counsel, Can Sun.
“We respectfully believe that Mr. Bankman-Fried’s knowledge of industry practices regarding the use of omnibus wallets is relevant to his good faith belief that his conduct was permissible,” the letter continued.
“Mr. Bankman-Fried’s understanding of whether FTX’s actions were consistent with crypto industry practices regarding the use of omnibus wallets is evidence of his good faith that FTX’s actions (and his own ) were correct.”