FTX co-founder Sam Bankman-Fried is laying the groundwork for a protection that argues he relied upon the recommendation of a outstanding Silicon Valley legislation agency in taking lots of the actions for which he’s now dealing with fraud prices.
Bankman-Fried’s protection legal professionals on Tuesday requested the decide overseeing his felony case to power prosecutors at hand over paperwork given to the federal government by former FTX legislation agency Fenwick & West. If the federal government doesn’t agree, Bankman-Fried desires permission to subpoena the Mountain View, California-based agency.
That recommendation included using encrypted messaging apps, the supply of multimillion-dollar loans to FTX executives and the cryptocurrency change’s compliance with US banking laws, the protection mentioned. These are all key parts of the costs towards Bankman-Fried, who’s accused of orchestrating and concealing a yearslong fraud through which he used billions of {dollars} in FTX buyer funds for dangerous investments, private bills and political donations.
The authorized recommendation Fenwick & West offered to FTX and Bankman-Fried between 2017 and 2022 is “materials to making ready a protection,” his legal professionals mentioned of their Tuesday submitting.
Bankman-Fried has pleaded not responsible to his 13-count indictment and is because of stand trial in October.
A so-called advice-of-counsel protection can be utilized to rebut ideas a felony defendant supposed to interrupt the legislation, New York College legislation Professor Stephen Gillers mentioned.
“In different phrases, the defendant’s argument is ‘my legal professionals advised me it was authorized, and I believed it was authorized,’” mentioned Gillers. That might lower towards the federal government’s competition that the defendant knowingly acted illegally — a crucial factor of many felony prices, together with these towards Bankman-Fried.
Such a protection would place additional scrutiny on the connection between FTX and Fenwick & West. The agency began representing Alameda Analysis, the change’s hedge fund affiliate and, in keeping with prosecutors, the conduit for a lot of Bankman-Fried’s fraud, in 2017 and have become the primary exterior counsel to FTX after its 2019 founding.
Fenwick & West didn’t instantly reply to a request for remark.
Former staff interviewed by federal prosecutors through the investigation have additionally referred to Fenwick & West authorized memos that they declare guided their selections, in keeping with two folks with data of the case. Legislation enforcement has additionally despatched subpoenas to the legislation agency, and it has been accused by buyers in a category motion lawsuit of aiding Bankman-Fried’s fraud.
Dan Friedberg, FTX’s former chief regulatory officer, joined the change in 2020 after beforehand representing it as an out of doors lawyer with Fenwick & West. Because the cryptocurrency change started to disintegrate in early November, Friedberg approached federal prosecutors providing his help, in keeping with an individual conversant in change. FTX’s former normal counsel Can Solar was additionally poached from the agency.
Some materials Bankman-Fried’s legal professionals are asking for pertains to a cost that he lied to Silvergate Financial institution to open an account in 2020 to obtain buyer deposits for FTX’s worldwide change. The financial institution mentioned on the time that he couldn’t open such an account if FTX wasn’t licensed as a cash companies enterprise within the US.
Fenwick & West offered authorized recommendation to FTX about such registration. The change’s US platform was registered as a cash companies enterprise in 2020, however the legislation agency suggested Friedberg in February 2020 that FTX’s worldwide division didn’t have to register within the US because it didn’t settle for US prospects, in keeping with a authorized memo filed in courtroom.
To get round Silvergate’s circumstances, prosecutors allege, Bankman-Fried included a brand new firm, North Dimension, and advised the financial institution he needed to open a buying and selling account related to Alameda. Alameda staff, allegedly at Bankman-Fried’s behest, filed an utility to the financial institution with this false info. Fees associated to a conspiracy to commit financial institution fraud had been added to Bankman-Fried’s indictment earlier this yr.
Bankman-Fried mentioned in Tuesday’s submitting that Fenwick & West offered “real-time recommendation” on the opening of the North Dimension account.
