Court Limits Testimony of Samuel Bankman-Fried in FTX Crypto Fraud Trial to Avoid Jury Confusion
On Wednesday, February 7, 2024, the United States District Court for the Southern District of New York issued a ruling on the testimony that could be presented in the trial of Samuel Bankman-Fried. Bankman-Fried, who founded the cryptocurrency exchange FTX and trading firm Alameda Research, was indicted on charges of fraud, money laundering and other financial crimes related to the collapse of both companies.
In the lead-up to his trial, prosecutors filed a motion seeking to limit Bankman-Fried’s defense that could imply he had received legal advice sanctioning his actions. Specifically, they wanted to prevent him from arguing that lawyers being present or involved in company decisions somehow proved he did not have criminal intent. The court agreed to defer making a decision until hearing the planned testimony. It also ordered Bankman-Fried notify the prosecution and court about any evidence regarding attorney involvement before presenting it.
During the trial, Bankman-Fried signaled his intent to testify about lawyers assisting with certain FTX and Alameda matters. This included creating document retention policies, forming a subsidiary, handling loans, and drafting terms of service. However, he did not provide many specifics. To evaluate what could be admitted, the judge had Bankman-Fried provide an offer of proof outside the jury’s presence.
In his testimony, Bankman-Fried stated that attorneys helped establish policies for deleting electronic communications after a period of time. The court ruled this portion could be presented to jurors, finding it unlikely to cause confusion. However, it excluded the other topics Bankman-Fried listed. While attorneys may have been tangentially involved in areas like forming a new company or drafting loan documents, the key charges centered around the use of customer funds. Bankman-Fried acknowledged in cross-examination that crucial decisions like spending deposit money had not been discussed with counsel.
The judge determined testimony on the excluded topics would have low probative value but a high risk of misleading jurors into thinking lawyers had implicitly approved of all conduct. Presenting such evidence could have unfairly benefited Bankman-Fried’s case without requiring him to prove an actual advice of counsel defense. In the end, the court only permitted a narrow scope of testimony it found did not pose issues of confusing legal standards or prejudicing the prosecution’s position.
The court concluded:
“For the foregoing reasons, as well as those stated on the record on October 27, 2023, the Court granted the defendant’s motion insofar as it concerned the participation of attorneys in drafting and implementing data retention policies, and it denied the defendant’s motion in all other respects.”
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