Sam Bankman-Fried (SBF), the founder and former CEO of bankrupt cryptocurrency exchange FTX, is going to attempt to get off the hook by saying he was acting in “good faith” by following the advice of his former lawyers.
SBF was charged by the US Department of Justice on numerous accounts of fraud following the collapse of FTX last year.
As per reports in the crypto press, SBF will argue that he was following the advice of his lawyers, including from firm Fenwick & West, when he loaned funds to executives at FTX and his hedge fund Alameda and set up North American entities.
FTX collapsed when users pulled their funds from the exchange after getting wind that SBF had been using user funds to prop up the weakened balance sheet of his hedge fund Alameda.
Fenwick Attorneys Involved in Reviewing and Approving Decisions
SBF’s defense team announced the disgraced FTX founder’s “advice of council” strategy on Wednesday, revealing that they will produce evidence in trial that shows FTX’s own and Fenwick attorneys “were involved in reviewing and approving decisions related to these matters”.
Bankman-Fried’s trial is set to start in October, where he will be tried on eight criminal counts.
If found guilty on all counts, he could face life in prison and would go down as crypto biggest-ever fraudster.
SBF was recently sent back to jail over alleged witness tampering.
Prior to that, Bankman-Fried had been staying at his parents’ house in California on a $250 million bail.
FTX’s Sad History
FTX is estimated to owe over $3 billion in funds to the users and investors that it defrauded.
Bankman-Fried stands accused having commingled customer funds (and squandered them) with his hedge fund Alameda Research, as well as for misleading investors over FTX’s risk management practices.
FTX collapsed, froze withdrawals and declared bankruptcy last November after the crypto exchange’s users rushed to pull their funds following reporting from CoinDesk that highlighted uncomfortably close financial ties between FTX and Alameda Research.
The exchange’s collapse is probably the crypto industry’s biggest ever scandal – FTX was at the time one of the world’s largest and most famous exchanges, backed by dozens of A-list celebrities, Super Bowl commercials and some of the crypto industry’s most prolific hedge funds.
The exchange’s collapse caused a short-term drop in the price of Bitcoin of around 25%, lows which appear to have formed the bottom of the 2022 bear market.
The exchange’s collapse has arguably left a lasting dent on retail investor confidence in crypto and web3 markets.
Meanwhile, thanks to Bankman-Fried and FTX’s close ties to politicians on both sides of the isle in Washington, the exchange’s collapse also appears to have left a stain on the crypto industry’s reputation in the eyes of politicians and across various US government agencies.
Some speculate that the SEC’s more aggressive push to regulate the crypto industry in 2023 may be part of a “revenge mission” from the agency, having been scorned by FTX.
After all, FTX was arguably one of the most influential crypto firms in Washington prior to its untimely collapse.
FTX recently submitted plans to reboot its exchange under its new CEO John Ray III.