FTX co-founder Sam Bankman-Fried is laying the groundwork for a protection that argues he relied upon the recommendation of a distinguished Silicon Valley regulation agency in taking most of the actions for which he’s now dealing with fraud expenses.
Bankman-Fried’s protection legal professionals on Tuesday requested the choose overseeing his prison case to power prosecutors handy over paperwork given to the federal government by former FTX regulation 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 the usage of encrypted messaging apps, the supply of multimillion-dollar loans to FTX executives and the cryptocurrency change’s compliance with US banking laws, the protection stated. These are all key components of the costs in opposition to 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 getting ready a protection,” his legal professionals stated 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 prison defendant meant to interrupt the regulation, New York College regulation Professor Stephen Gillers stated.
“In different phrases, the defendant’s argument is ‘my legal professionals informed me it was authorized, and I believed it was authorized,’” stated Gillers. That will lower in opposition to the federal government’s competition that the defendant knowingly acted illegally — a vital aspect of many prison 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 response to prosecutors, the conduit for a lot of Bankman-Fried’s fraud, in 2017 and have become the primary 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 in the course of the investigation have additionally referred to Fenwick & West authorized memos that they declare guided their choices, in response to two individuals with information of the case. Regulation 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 crumble in early November, Friedberg approached federal prosecutors providing his help, in response to an individual aware of 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 stated 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 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 prospects, in response to a authorized memo filed in courtroom.
To get round Silvergate’s situations, prosecutors allege, Bankman-Fried integrated a brand new firm, North Dimension, and informed the financial institution he wished 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. Prices associated to a conspiracy to commit financial institution fraud had been added to Bankman-Fried’s indictment earlier this 12 months.
Bankman-Fried stated in Tuesday’s submitting that Fenwick & West offered “real-time recommendation” on the opening of the North Dimension account.
