FTX’s Sam Bankman-Fried Might Blame Agency’s Legal professionals in Fraud Trial

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FTX’s Sam Bankman-Fried Might Blame Agency’s Legal professionals in Fraud Trial


Indicted FTX founder Sam Bankman-Fried appears to be gearing as much as blame the legal professionals who helped him set up the crypto alternate.

That is the subtext of a movement filed on Tuesday by his legal professionals at Cohen & Gresser, who’re defending Bankman-Fried towards federal prices of fraud, conspiracy and bribery. They’re asking for entry to paperwork from Fenwick & West, the Silicon Valley regulation agency that represented FTX and sister hedge fund Alameda Analysis from the businesses’ inception by means of their collapse in November 2022.

Fenwick & West didn’t reply to my electronic mail queries. The agency has not but filed a response to a civil swimsuit by FTX prospects who named Fenwick as a defendant.

Bankman-Fried has pleaded not responsible to the costs. The protection movement claims that Fenwick & West suggested him, FTX and Alameda on not less than 4 issues on the coronary heart of the Manhattan federal court docket indictment towards the onetime crypto billionaire.

The California regulation agency, as an illustration, allegedly supplied counsel to FTX on the creation of shell firms that opened accounts at Silvergate Financial institution to obtain deposits from FTX prospects, in accordance with Tuesday’s movement. These shell firm financial institution accounts are a essential ingredient of the federal government’s financial institution fraud conspiracy cost.

Fenwick & West additionally allegedly suggested FTX that it was not required to register with the U.S. authorities as a cash transmitting enterprise, in accordance with the brand new movement. Prosecutors have charged Bankman-Fried with conspiring to violate wire switch legal guidelines by failing to register however his legal professionals mentioned within the new movement that Fenwick’s alleged recommendation “immediately contradicts the federal government’s concept.”

Bankman-Fried’s submitting equally contends that Fenwick & West reviewed inside agreements by which Alameda loaned cash to Bankman-Fried and different FTX executives. The federal government alleges that the loans had been an unlawful misappropriation of buyer deposits as a part of a scheme to violate federal marketing campaign finance legal guidelines. Bankman-Fried’s new movement argues that Fenwick & West’s authorized recommendation on the tax penalties of the loans would possibly rebut the federal government’s competition that the loans had been improper.

Lastly, the movement asserts that it was Fenwick that instructed Bankman-Fried to speak with different FTX and Alameda executives through Sign and different ephemeral messaging apps. That alleged recommendation would undercut the federal government’s declare that Bankman-Fried directed his colleagues to make use of Sign and different encrypted communication apps to cover proof of his crimes.

Bankman-Fried’s legal professionals acknowledged within the movement that their assertions about Fenwick & West are based mostly on a really restricted set of paperwork.

The submitting doesn’t particularly invoke the phrases “recommendation of counsel” to refute authorities claims that Bankman-Fried acted with felony intent. However Bankman-Fried’s legal professionals appear to be headed in that course, telling US District Decide Lewis Kaplan of Manhattan that they should know extra about Fenwick’s work for FTX and Alameda to find out if the regulation agency’s paperwork exonerate their shopper.

These paperwork might assist Bankman-Fried later argue at trial that he was following recommendation from FTX’s legal professionals.

Tuesday’s submitting asks Kaplan to order the federal government to show over proof from Fenwick & West or to authorize Bankman-Fried to subpoena paperwork from the regulation agency.

The agency would nearly actually quite not flip over shopper information to Bankman-Fried. Amongst different causes, Fenwick & West has been named as a defendant in a sweeping class motion by FTX prospects. The plaintiffs’ lawyer who filed that case, Kerry Miller of Fishman Haygood, instructed me on Wednesday that he plans to watch the Bankman-Fried felony case for any Fenwick & West paperwork which may enhance the category allegations.

Bankman-Fried’s legal professionals from Cohen & Gresser declined touch upon the brand new movement by means of a spokesperson. The Manhattan U.S. Legal professional’s workplace additionally declined to remark.

Legal professional-client privilege is commonly a complication for white-collar defendants who need to blame their firms’ legal professionals for offering unhealthy recommendation. Firms – quite than particular person executives or exterior regulation corporations — management the appropriate to insist that communications with their counsel stay confidential. Firms are usually reluctant to waive privilege for concern that their legal professionals’ paperwork may be utilized in different circumstances.

Bankman-Fried’s new movement mentioned his legal professionals are in negotiations with FTX’s new counsel about whether or not the corporate intends to say legal professional shopper privilege over related Fenwick & West paperwork. (The movement didn’t identify FTX’s new regulation agency however it’s Sullivan & Cromwell.) Protection counsel additionally mentioned that Fenwick & West instructed them it might not flip over any paperwork with out FTX’s permission.

The movement floats two theories for why Bankman-Fried is entitled to entry to sure Fenwick & West communications even when FTX claims privilege. Bankman-Fried mentioned the regulation agency represented him personally along with serving as counsel to FTX and Alameda. That assertion appears to trace that Bankman-Fried will declare that he can personally waive privilege over some Fenwick & West communications.

Protection legal professionals additionally argued that FTX, which is in Chapter 11 chapter, has already waived its privilege over sure paperwork by turning them over to prosecutors. If that is right, mentioned former federal prosecutor Harry Sandick of Patterson Belknap Webb & Tyler, it will likely be simpler for Bankman-Fried to acquire Fenwick’s communications.

“It is arduous to see why the protection ought to be denied entry,” Sandick mentioned.

If Bankman-Fried’s legal professionals imagine that Fenwick paperwork can assist them refute the federal government’s proof of felony intent, Sandick mentioned, they’ll ultimately need to make a strategic resolution about how you can get the regulation agency’s communications in entrance of a jury.

The paperwork should be launched by means of a witness – presumably Bankman-Fried himself or a Fenwick & West lawyer. The strongest protection case, Sandick mentioned, would most likely function testimony from a Fenwick & West witness to bolster testimony from Bankman-Fried about his reliance on recommendation from FTX legal professionals. However contradictory testimony from a regulation agency witness might undermine Bankman-Fried’s advice-of-counsel protection.

That is a priority for one more day. Proper now, Sandick mentioned, Bankman-Fried’s legal professionals simply need to know whether or not Fenwick & West’s information will assist their shopper.

“It is an comprehensible movement,” he mentioned. “They’re saying, ‘Let’s examine what the paperwork say, then we’ll resolve how you can use them.’”

© Thomson Reuters 2023


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