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 charges and claiming that the high-profile law firm representing FTX in its bankruptcy was done to government bidding.
In court filings late Monday, lawyers for Mr. Bankman-Fried said FTX and its attorneys at Sullivan & Cromwell have become de facto agents for federal prosecutors building a criminal case against him and may be withholding crucial evidence.
“FTX’s legal advisors went to the government to accuse Mr. Bankman-Fried behind his back without knowing the full facts, and eventually forced him to step down as CEO,” the lawyers wrote.
For months, Sullivan and Cromwell had been turning documents and other evidence over to the prosecution, the files say. Lawyers for Mr Bankman-Fried alleged that prosecutors were only looking for the most damning documents, though FTX may also be sitting on material that could help the defence.
In effect, they argued, prosecutors had “outsourced” the legal requirement to provide material potentially useful 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 Bankman Fried with orchestrating a massive fraud that misappropriated billions of dollars in client funds from FTX. Authorities have also accused him of money laundering, bribing the Chinese government and overseeing an illegal campaign finance scheme that lavished tens of millions of dollars on Democratic and Republican candidates.
Bankman Fried, 31, has pleaded not guilty to the charges. His attorneys at Cohen & Gresser in New York said they are ready to appear in federal court in Manhattan as soon as possible in October.
Mr. Bankman-Fried was granted bail in December but was confined to his parents’ home in Palo Alto, California. He faces an uphill legal battle. Three of his senior colleagues have pleaded guilty and are cooperating with prosecutors. If convicted, he could spend decades in a federal prison.
The petitions filed Monday are likely the first of many attempts by Bankman-Fried’s legal team either to request more documentation from prosecutors or to persuade Judge Louis A. 13 counts against him.
In all, Mr. Bankman Fried is seeking 10 of the charges to be dismissed. The filings allege that four of the charges — including a foreign bribery charge, a campaign finance charge, and a bank fraud charge — violated elements of the extradition process between the US and the Bahamas, where Bankman-Fried was arrested. In extradition cases, prosecutors are usually limited in bringing new charges after the accused has been transferred.
Defense attorneys argued that six of the other charges should be dropped for being too vague or having other legal flaws. They said that prosecutors had shown “an eagerness to bring charges against Mr Bankman Fried”.
Much of the early defense strategy also focused on Sullivan and Cromwell’s roles in the case. Mr. Bankman Fried hired attorneys from the firm to assist with a range of legal assignments prior to the collapse of FTX. When the stock market imploded, Sullivan and Cromwell’s attorneys took control, hiring veteran restructuring expert, John Jay Ray III, to replace Mr. Bankman Fried. One of Mr. Ray’s first actions was to issue a scathing report that said FTX under Mr. Bankman-Fried was lacking internal controls.
But in January, the US trustee in the bankruptcy case raised objections to the law firm’s representation of FTX, arguing that it did not fully disclose the extent of his previous legal work on the exchange. One of FTX’s former in-house attorneys claimed in a lawsuit that Sullivan and Cromwell’s previous work created a significant conflict of interest.
A judge eventually ruled that the company could continue with bankruptcy supervision.
In court filings Monday, Bankman-Fried depicts Ray, FTX and attorneys at Sullivan and Cromwell working against him, with the government’s blessing.
The filings say Mr. Wray, FTX and the attorneys “acted as spokespersons for the government” and “assumed the role of attorney general by publicly labeling” Mr. Bankman-Fried as “the villain”.
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