FTX co-founder Sam Bankman-Fried lays the groundwork for a defense that says he relied on advice from a top Silicon Valley law firm to take many of the actions for which he now faces fraud charges.
Defense attorneys for Bankman-Fried on Tuesday asked the judge handling his criminal case to compel prosecutors to turn over documents given to the government by former law firm FTX Fenwick & West. If the government doesn’t agree, Bankman-Fried wants permission to subpoena the Mountain View, Calif.-based company.
That advice included using crypto messaging apps, granting multimillion-dollar loans to FTX executives, and ensuring the cryptocurrency exchange complied with U.S. banking regulations, the defense said. These are all key elements of the charges against Bankman-Fried, who is accused of orchestrating and covering up a year-long fraud in which he used billions of dollars in FTX client funds for risky investments, spending personal and political donations.
The legal advice Fenwick & West provided to FTX and Bankman-Fried between 2017 and 2022 is “significant in preparing a defense,” its lawyers said in their filing on Tuesday.
Bankman-Fried has pleaded not guilty to his 13-count indictment and is due to stand trial in October.
A so-called attorney’s opinion defense can be used to refute suggestions by a defendant intending to break the law, said New York University law professor Stephen Gillers.
“In other words, the defendant’s argument is ‘my lawyers told me it was legal, and I thought it was legal,'” Gillers said. This would run counter to the government’s claim that the defendant knowingly acted unlawfully – a necessary component of many criminal charges, including those against Bankman-Fried.
Such a defense would place further scrutiny into the relationship between FTX and Fenwick & West. The firm began representing Alameda Research, the exchange’s hedge fund subsidiary and, according to prosecutors, the conduit for much of the Bankman-Fried fraud, in 2017 and became FTX’s lead outside counsel after its creation in 2019.
Fenwick & West did not immediately respond to a request for comment.
Former employees interviewed by federal prosecutors during the investigation also referenced Fenwick & West’s legal memoranda that they say guided their decisions, according to two people with knowledge of the matter. Law enforcement also served subpoenas on the law firm, and he was accused by investors in a class action lawsuit of aiding the Bankman-Fried fraud.
Dan Friedberg, former chief regulatory officer of FTX, joined the exchange in 2020 after previously representing it as outside counsel at Fenwick & West. As the cryptocurrency exchange began to crumble in early November, Friedberg approached federal prosecutors to offer help, according to a person familiar with the exchange. Former FTX general counsel Can Sun was also poached from the company.
Some documents requested by Bankman-Fried’s attorneys relate to an accusation that he lied to Silvergate Bank to open an account in 2020 to receive customer deposits for FTX’s international exchange. The bank said at the time that it could not open such an account if FTX was not licensed as a money services business in the United States.
Fenwick & West provided legal advice to FTX regarding this recording. The exchange’s US platform was registered as a money services business in 2020, but the law firm advised Friedberg in February 2020 that FTX’s international division did not need to register for United States because it did not accept American customers, according to a legal note. filed in court.
To circumvent Silvergate terms, prosecutors say, Bankman-Fried incorporated a new company, North Dimension, and told the bank he wanted to open an Alameda-linked trading account. Alameda employees, allegedly at the behest of Bankman-Fried, filed a request with the bank with this false information. Charges relating to a conspiracy to commit bank fraud were added to Bankman-Fried’s indictment earlier this year.
Bankman-Fried said in Tuesday’s filing that Fenwick & West provided “real-time advice” on opening the North Dimension account.
