December 2, 2023

Sam Bankman-Fried, founder of collapsed cryptocurrency exchange FTX, has released his first detailed legal defense since prosecutors charged him with fraud, seeking to dismiss multiple allegations and claiming The powerful law firm representing FTX in bankruptcy has been at the beck and call of the government.

In a court filing late Monday, lawyers for Mr. Bankman-Fried said that FTX and its lawyers at the law firm of Sullivan & Cromwell had effectively become the de facto entity for federal prosecutors to bring criminal charges against him. Agents, may withhold key evidence.

“Without knowing the full facts, FTX’s legal counsel went to the government to accuse Mr. Bankman-Fried behind his back and ultimately forced him to resign as CEO,” the lawyers wrote.

Sullivan & Cromwell has provided documents and other evidence to prosecutors for several months, the filing said. Mr. Bankman-Fried’s lawyers claim that prosecutors have been looking for the most incriminating documents, although FTX may also have material that would help the defense.

In effect, they argue, prosecutors have been “outsourcing” the legal requirement to provide potentially useful material to defense teams, shifting that responsibility to “private parties” for which Mr Bankman-Fried is under no obligation.

Representatives for FTX, Sullivan & Cromwell and the U.S. Attorney’s Office in Manhattan did not immediately respond to requests for comment.

Federal prosecutors charged Mr. 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 funneled tens of millions of dollars to Democratic and Republican candidates.

Mr Bankman-Fried, 31, pleaded not guilty to the charges. His lawyers at the New York law firm Cohen & Gresser said they were preparing to appear in federal court in Manhattan as soon as October.

Mr. Bankman-Fried was released on bail in December but is confined to his parents’ home in Palo Alto, California. He faces an uphill legal battle. Three of his senior associates have pleaded guilty and are cooperating with prosecutors. If convicted, he could spend decades in federal prison.

The motion, filed Monday, is likely the first of many attempts by Mr. Bankman-Fried’s legal team to either seek more documents from prosecutors or persuade Judge Lewis A. Kaplan of the U.S. District Court in Manhattan to dismiss some of the claims . 13 counts were against him.

In all, Mr. Bankman-Fried sought to dismiss 10 of the charges. Four of the counts — including foreign bribery charges, campaign finance charges and bank fraud charges — violated elements of extradition proceedings between the U.S. and the Bahamas, where Mr. Bankman-Fried was arrested, the filing said . In extradition cases, prosecutors can usually only file new charges after the defendant is handed over.

Defense attorneys argued that the other six charges should be dismissed as being too vague or having other legal flaws. Prosecutors showed “an eagerness to press charges against Mr Bankman-Fried”, they said.

Much of the defense’s early strategy also focused on the roles of Sullivan and Cromwell in the case. Prior to FTX’s collapse, Mr. Bankman-Fried had hired the company’s lawyers to help with a series of legal assignments. When the exchange collapsed, lawyers at Sullivan & Cromwell took over control, appointing veteran restructuring specialist John Jay Ray III to replace Mr Bankman-Fried. Mr. Ray’s first move was to issue a scathing report alleging that FTX under Mr. Bankman-Fried lacked internal controls.

But in January, the U.S. trustee for the bankruptcy case took issue with the law firm representing FTX, saying it had not adequately disclosed the scope of its previous legal work for the exchange. A former in-house lawyer for FTX claimed in a court filing that Sullivan & Cromwell’s early work created a significant conflict of interest.

The judge ultimately ruled that the company could continue to oversee bankruptcy.

In court papers filed on Monday, Mr Bankman-Fried portrayed Mr Ray, Mr FTX and lawyers for Sullivan & Cromwell as all opposing him with the backing of the government.

The filing states that Mr. Wray, FTX and the lawyers “acted as the government’s public mouthpiece” and “assumed the prosecutor’s role by publicly labeling Mr. Bankman-Fried a ‘villain.'”

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