On Wednesday, lawyers representing Sam Bankman-Fried unveiled their client's proposed testimony should he be called as a witness in the FTX fraud trial. In a six-page letter submitted to Judge Lewis Kaplan, the defense specified what topics the testimony would cover, including Bankman-Fried's contention that he followed the advice of the former legal team in allowing certain practices that ultimately precipitated the collapse and bankruptcy of the cryptocurrency exchange.
Lawyers for Sam Bankman-Fried disclosed details of his proposed testimony on Wednesday, in case he opts to take the witness stand in his FTX fraud trial. The defendant's legal team informed Judge Lewis Kaplan in a six-page letter that he would mention three important topics, such as his depending on FTX's former legal team in implementing operations that led to the firm's bankruptcy, his comprehension of the usual business practices, and his commitment to complying with Bahamian authorities. Bankman-Fried is facing a total of seven criminal accusations, including wire fraud, securities fraud, and money laundering. If convicted, he could receive more than 100 years in prison. Bankman-Fried, the son of two Stanford legal scholars, has declared not guilty.
Mark Cohen, one of Bankman-Fried's two chief trial attorneys, said in a conference call Wednesday that his client and three other people would testify. However, in a letter Wednesday evening, Cohen cast doubt on whether the disgraced crypto billionaire would take the witness stand. Cohen wrote, "Accordingly, should Mr. Bankman-Fried decide to testify in his defense, he should be permitted to testify as to his understanding of industry practices regarding use of omnibus wallets to show his good faith and lack of criminal intent." This implies that Bankman-Fried might not testify if the defense's requests are declined.
Kaplan had previously decided that Bankman-Fried's lawyers would not be allowed to make a so-called "advice of counsel" argument in their opening remarks, as it could risk prejudicing the jury. But Cohen, in a new letter, informed Kaplan that although prosecutors had taken steps to prevent Bankman-Fried from presenting evidence or arguments regarding the involvement of attorneys, the defendant's "knowledge of the involvement of counsel in these matters" was still "directly relevant" to "his state of mind and good faith at the time". Cohen then cited instances in which Bankman-Fried had, at the behest of FTX's legal counsel, adopted policies that the government argued suggested his criminality; for instance, the company-wide policy on the encrypted messaging-app Signal. Caroline Ellison - Bankman-Fried's ex-girlfriend and the manager of a crypto hedge fund - had testified that SBF had directed FTX and Alameda employees to use Signal's self-deleting message setting. Other testimonials from lesser-known co-founder and ex-CTO Gary Wang and senior FTX developer Adam Yedidia further attested to this directive. The government had also argued during their opening remarks to the jury that the 30-day auto-deletion policy centred around Bankman-Fried's attempt to avoid leaving a "paper trail for his crimes". However, according to Cohen, Bankman-Fried's understanding was that these policies had been "instituted under the guidances of lawyers". Similarly, the defense had argued that Bankman-Fried's actions in relation to the billions of dollars of FTX customer deposits, which had gone straight into an account controlled by Alameda, had been done with the knowledge and guidance of lawyers - and, consequently, SBF had acted in good faith without criminal intent.
At his trial, Wang testified that on Nov. 12, 2020, Bankman-Fried asked him to take a drive with him to the Bahamas Securities Commission meeting. During the journey, Bankman-Fried instructed Wang to transfer assets to Bahamian liquidators since he thought this would allow him to retain power over the company. Wang clarified that he was not at the conference with the securities commission, though Bankman-Fried's father was there. The next day, Wang returned to the US and met with American prosecutors. He is liable for up to fifty years of jail time when he is sentenced by the judge post trial. Wang mentioned that he had signed a six-page deal which obliged him to meet with prosecutors, answer their questions truthfully and offer any evidence if called for. Furthermore, the government stated that SBF had put certain creditors' payment first, including the Bahamian authorities. This came to light in the preparatory motion of the government that highlighted Bankman-Fried's "criminal intention" as well as the "untrue nature of his statements" that he wanted to "do right by customers." Cohen wrote that it was expected that Bankman-Fried would be testifying regarding his "good faith intentions" on Nov. 12, 2020 with respect to compliance with requests from the Bahamian authorities to transfer assets from FTX to the Securities Commission of The Bahamas against the advice of FTX's in-house counsel and US bankruptcy counsel. He added that such testimony would require Bankman-Fried to speak of his conviction that the Bahamian authorities had FTX customers' best interests at heart, as opposed to FTX's in-house counsel and outside bankruptcy counsel from the US who were potentially conflicted.
Prosecutors argued that FTX's utilization of a collective storage system (omnibus wallets) is critical to this case. They asserted that Mr. Sun, FTX's former general counsel, was not of the opinion that FTX's customer deposits could be blended with other funds of the business, and that FTX used a collective storage system (omnibus wallets) for customer digital assets. Accordingly, the defense argued that Bankman-Fried's knowledge of the industry's practices concerning omnibus wallets is related to his genuine belief that his and FTX's activities were permissible. His perception of whether FTX's actions were in line with the crypto industry's practices with regard to the use of omnibus wallets is considered probative of his good faith assumption that FTX's (and his own) actions were justifiable.
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