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 fees.
Bankman-Fried’s protection legal professionals on Tuesday requested the decide overseeing his legal case to drive 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 using encrypted messaging apps, the availability of multimillion-dollar loans to FTX executives and the cryptocurrency trade’s compliance with US banking rules, the protection stated. These are all key parts of the fees towards 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 solutions a legal 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 assumed it was authorized,’” stated Gillers. That might lower towards the federal government’s rivalry that the defendant knowingly acted illegally — a essential component of many legal fees, together with these towards Bankman-Fried.
Such a protection would place additional scrutiny on the connection between FTX and Fenwick & West. The agency began representing Alameda Analysis, the trade’s hedge fund affiliate and, in line with 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 throughout the investigation have additionally referred to Fenwick & West authorized memos that they declare guided their selections, in line with two individuals with information of the case. Legislation enforcement has additionally despatched subpoenas to the regulation agency, and it has been accused by traders in a category motion lawsuit of aiding Bankman-Fried’s fraud.
Dan Friedberg, FTX’s former chief regulatory officer, joined the trade in 2020 after beforehand representing it as an out of doors lawyer with Fenwick & West. Because the cryptocurrency trade started to collapse in early November, Friedberg approached federal prosecutors providing his help, in line with an individual accustomed to trade. FTX’s former basic 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 trade. 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 trade’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 line with a authorized memo filed in court docket.
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 linked to Alameda. Alameda staff, allegedly at Bankman-Fried’s behest, filed an utility to the financial institution with this false data. Expenses 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.