In his defense against fraud allegations, Sam Bankman-Fried, the founder of cryptocurrency exchange FTX, plans to assert that he followed the counsel of Silicon Valley legal firm Fenwick & West. According to Bloomberg, Bankman-Fried’s defense team has asked prosecutors for access to correspondence between the company and the government from 2017 to 2022, claiming that this legal guidance is essential for building a solid case against him.
In the event that the government ignores the request, Bankman-Fried’s attorneys are requesting authorization to subpoena Fenwick & West. Guidance on encrypted messaging apps, multimillion dollar loans to FTX executives, and the exchange’s compliance with US banking rules are apparently among the records that have been sought. These are all important allegations made against Bankman-Fried.
A long-running fraud operation reportedly involves utilizing billions of dollars in FTX client cash for hazardous investments, private expenditures, and political contributions, according to the claims made against Bankman-Fried. Bankman-Fried’s defense team plans to use the “advice-of-counsel” argument to refute claims that he broke the law on purpose, contending that he thought his conduct were permissible based on the guidance given to him by his attorneys.
The connection between FTX and Fenwick & West is under even closer examination now as a result of the current request for papers. FTX’s hedge fund subsidiary Alameda Research, which served as a conduit for a large portion of the alleged fraud, was first represented by the legal firm in 2017. After its founding in 2019, Fenwick & West took over as FTX’s principal outside legal counsel. Law enforcement has sent subpoenas to the company, and investors have accused it of supporting Bankman-Fried’s fraudulent actions in a class-action complaint.
The attorneys for Bankman-Fried are primarily looking for documentation on alleged false statements made to Silvergate Bank in 2020 to create an account and accept client deposits for FTX’s foreign exchange. The bank had said that Bankman-Fried would not be permitted to establish the account until FTX had obtained a US money services license. Fenwick & West allegedly informed Bankman-Fried that FTX’s foreign subsidiary did not need registration in the US since it did not accept US clients at the time, according to reports.
According to the prosecution, Bankman-Fried filed a fake application to the bank and founded a new business called North Dimension to get over Silvergate’s restrictions. However, Bankman-Fried claims that Fenwick & West offered in-the-moment guidance while the North Dimension account was being opened.
Recently, Bankman-Fried submitted a request to a federal court in New York asking for the dismissal of the bulk of the criminal accusations that had been brought against him. He said that some of the allegations had been unnecessarily sensationalized and turned civil and regulatory matters into federal crimes. Bankman-Fried depends on his legal defense to refute the accusations as the case progresses.
