Prosecutors Challenge FTX Founder’s Legal Advice Defense Ahead of Fraud Trial

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Sam Bankman-Fried’s legal team claimed last week that the FTX founder received assurances from lawyers his actions were lawful. However, federal prosecutors are now contesting the validity of Bankman-Fried’s defense strategy ahead of trial.

Bankman-Fried’s Legal Defense in Question After DOJ Objection

In a court filing published Tuesday, federal prosecutors questioned Bankman-Fried’s ability to rely on legal advice as part of his defense. They argued he has not provided sufficient details about the nature and scope of the legal assurances he allegedly received.

“The defendant’s August 23, 2023, letter does not provide sufficient notice of any contemplated reliance on counsel defense, and the defendant has not produced any discovery relating to such a defense,” the filing stated. Prosecutors contend Bankman-Fried needs to clarify which attorneys provided advice, what they advised, and when that advice was given.

The Department of Justice (DOJ) also suggested Bankman-Fried’s attorneys may have been unaware of key details about his management of FTX and Alameda Research. If so, their legal advice would not absolve the founder of wrongdoing. “Without evidence that the defendant told the attorney that the money being loaned was customer money, focusing the jury on the attorney’s involvement to make the loans seem benign would be misleading,” the filing read.

In their own filing last week, Bankman-Fried’s attorneys said he received legal approval on issues like company data policies, bank accounts, and customer terms of service. However, prosecutors consider these claims too vague without specifics on what lawyers knew and recommended.

The DOJ has requested written notice from Bankman-Fried about any formal legal defense he plans to mount. They also want all documents supporting an “advice of counsel” argument that could potentially undermine attorney-client privilege.

Bankman-Fried has not yet provided the disclosures requested by federal prosecutors. Their filing suggests his ability to cite legal advice at trial could be limited without further details.

The FTX founder has pleaded not guilty to fraud charges related to the alleged misuse of billions of dollars in FTX customer funds before the exchange’s bankruptcy. Jury selection for his trial is scheduled to begin on October 2nd.

What do you think about the DOJ’s argument against Bankman-Fried’s latest defense? Share your thoughts and opinions about this subject in the comments section below.