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 regulation agency in taking lots of the actions for which he’s now going through fraud expenses.
Bankman-Fried’s protection legal professionals on Tuesday requested the decide overseeing his felony case to drive prosecutors at hand over paperwork given to the federal government by former FTX regulation agency Fenwick & West. If the federal government doesn’t agree, Bankman-Fried needs permission to subpoena the Mountain View, California-based agency.
That recommendation included the usage of encrypted messaging apps, the availability of multimillion-dollar loans to FTX executives and the cryptocurrency change’s compliance with US banking rules, the protection mentioned. These are all key components of the costs in opposition to Bankman-Fried, who’s accused of orchestrating and concealing a yearslong fraud wherein he used billions of {dollars} in FTX buyer funds for dangerous investments, private bills and political donations.
The authorized recommendation Fenwick & West supplied to FTX and Bankman-Fried between 2017 and 2022 is “materials to getting 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 options a felony defendant supposed to interrupt the regulation, New York College regulation 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 may lower in opposition to the federal government’s competition that the defendant knowingly acted illegally — a obligatory component of many felony expenses, together with these in opposition to 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 accordance with prosecutors, the conduit for a lot of Bankman-Fried’s fraud, in 2017 and have become the principle outdoors counsel to FTX after its 2019 founding.
Fenwick & West didn’t instantly reply to a request for remark.
Former staff interviewed by federal prosecutors throughout the investigation have additionally referred to Fenwick & West authorized memos that they declare guided their choices, in accordance with two individuals with data of the case. Legislation enforcement has additionally despatched subpoenas to the regulation 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 outdoor lawyer with Fenwick & West. Because the cryptocurrency change started to collapse in early November, Friedberg approached federal prosecutors providing his help, in accordance with an individual conversant in change. FTX’s former common 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 providers enterprise within the US.
Fenwick & West supplied authorized recommendation to FTX about such registration. The change’s US platform was registered as a cash providers enterprise in 2020, however the regulation agency suggested Friedberg in February 2020 that FTX’s worldwide division didn’t must register within the US because it didn’t settle for US clients, in accordance with a authorized memo filed in court docket.
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 software to the financial institution with this false data. 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 supplied “real-time recommendation” on the opening of the North Dimension account.
