Sam Bankman-Fried’s lawyers reveal his scheduled testimony in the FTX fraud trial

Lawyers for Sam Bankman-Fried late Wednesday revealed details of his scheduled testimony if he takes the witness stand in FTX’s fraud trial.

Bankman-Fried’s legal team told Judge Lewis Kaplan In a six-page letter He would address three key areas in such testimony, including noting that he relied on FTX’s former legal team in authorizing certain actions that subsequently led to the collapse and bankruptcy of the cryptocurrency exchange.

Lawyers for the disgraced FTX boss also said he would also cite his understanding of common industry practices, as well as his intent to comply with Bahamian authorities.

Bankman-Fried faces seven criminal charges, including wire fraud, securities fraud and money laundering, which could land him in prison for more than 100 years if convicted during his trial in Manhattan federal court.

Freed Bankman, the son of two Stanford legal scholars, has pleaded not guilty in the case.

The letter to Kaplan appears to cast doubt on whether the disgraced billionaire will take the witness stand.

Earlier Wednesday, Mark Cohen, one of Bankman-Fried’s lead lawyers, said on a conference call that his client would testify as well as three other people.

But in his letter Wednesday evening, Cohen wrote: “Accordingly, if Mr. Bankman-Fried decides to testify in his defense, he should be permitted to testify regarding his understanding of industry practices regarding the use of comprehensive portfolios to demonstrate his good faith and good faith.” Absence of criminal intent.”

The statement indicates that Bankman-Fried may withdraw from testifying if the defense requests are rejected.

Kaplan previously ruled That Bankman-Fried’s attorneys could not make the so-called advice-of-counsel argument in their opening remarks because it might risk prejudicing the jury.

But Cohen told Kaplan in the new letter that although prosecutors “previously moved to prevent Mr. Bankman-Fried from presenting evidence or argument regarding the attorneys’ involvement, Bankman-Fried’s knowledge of the attorney’s involvement in these matters” is “direct.” Relevant to his mental state and good faith at the time.

Cohen cited specific examples where Bankman-Fried, at the direction of FTX’s attorneys, adopted a policy that prosecutors said demonstrated his criminality.

One example of this was the company-wide policy on encrypted messaging app Signal.

Carolyn Ellison, a former friend of Bankman-Fried who also ran cryptocurrency hedge fund Alameda Research, testified that SBF directed FTX and Alameda employees to use the disappearing messages setting on Signal. She said they were asked to be very careful about what they wrote because of potential legal exposure.

Gary Wang, FTX’s lesser-known co-founder and former CTO, as well as FTX chief developer Adam Yedidia, also testified to the directive to set Signal connections to auto-delete.

The government similarly asserted in its opening argument to the jury that the 30-day automatic deletion policy on Signal was because Bankman-Fried “did not want paper evidence of his crimes.”

But what Bankman-Fried understood, Cohen wrote, was that these automatic deletion policies “were established at the direction of lawyers.”

In another example, Cohen pointed to billions of dollars in FTX customer deposits that went directly into a bank account controlled by Alameda.

Prosecutors say customer funds were transferred to Alameda through two channels: users deposited funds directly into accounts maintained by Alameda and through a secret backdoor inserted into the FTX code.

But Bankman-Fried’s lawyers claim that SBF’s “understanding regarding counsel’s involvement in the formation” of these accounts and in the payment arrangements between FTX and Alameda would be “directly relevant” to the defendant’s “good faith belief that there was nothing improper in its use of the entities.” Controlled by Alameda to accept FTX client deposits.”

In these examples and others involving guidance from FTX’s former attorneys, Bankman-Fried’s defense attorneys return to the same rationale that the former FTX president was acting in good faith and not with the criminal intent alleged by the government.

Wang testified that last November 12, after FTX declared bankruptcy, Bankman-Fried asked Wang to drive with him to the Bahamas Securities Commission for a meeting.

While driving, Bankman-Fried asked Wang to transfer assets to liquidators in the Bahamas because he believed they would allow him to maintain control of the company. Wang said he was not present at the meeting with the Securities Commission, although Bankman’s father Fred was present. Wang said he returned to the United States and met with US prosecutors the next day.

He faces up to 50 years in prison when he faces a judge for sentencing after this trial. He told jurors he signed a six-page cooperation agreement that required him to meet with prosecutors, answer their questions truthfully and present evidence.

The Fed also alleges that SBF prioritized payment to certain creditors, including Bahamian authorities. In its pretrial motion, the government cited Bankman-Fried’s “criminal intent,” as well as the “false nature of his representations” that he wanted “to do right by clients.”

“We expect to receive certification from Mr. Bankman-Fried of his good faith on November 12, 2022 with respect to complying with orders from Bahamian authorities to transfer assets from FTX to the Bahamas Securities Commission over the objections of FTX’s in-house counsel and U.S. bankruptcy counsel,” Cohen writes.

“Such testimony would require Mr. Bankman-Fried to discuss his belief that the Bahamian authorities were acting in the best interests of FTX’s clients, while FTX’s in-house counsel and outside U.S. bankruptcy counsel had a conflict of interest.” continuous.

Bankman-Fried’s understanding of generally accepted industry practices also appears prominently in his testimony.

In cryptocurrency parlance, a global account is where the digital assets of multiple users are held collectively in one account. Cryptocurrency exchanges and others in the industry typically use this type of crowdstoring strategy in order to cut costs and simplify workflow.

In the case of FTX, the confusion between client and company assets has become a major point of contention between government and defense.

Prosecutors argued that FTX’s use of umbrella portfolios is relevant to this case, the letter said.

“For example, the government obtained testimony from Mr. , Can Sun.

“We respectfully assert that Mr. Bankman-Fried’s knowledge of industry practices regarding the use of comprehensive portfolios is relevant to his good faith belief that his conduct is permissible,” the letter added.

“Mr. Bankman-Fried’s understanding of whether FTX’s actions were consistent with the cryptocurrency industry’s practices regarding the use of Omnibus wallets is evidence of his good faith belief that FTX’s actions (and his own) were correct.”