FTX's Sam Bankman-Fried's Defense In His Own Words

I was in the Manhattan courthouse where Sam Bankman-Fried got sent to jail, sitting one row behind his mother as she held her head in her hands.

Three weeks prior, I was sitting with Sam in his parents’ Palo Alto home as he gave me an outline of his defense.

We’ve been pouring through the documents with experts to get a sense of how SBF’s defense stacks up and this week we went deep on the second pillar of his defense: Blame the lawyers.

As Bernie Madoff’s former prosecutor Marc Litt tells us, an “advice of counsel” defense is not all that uncommon in white collar criminal cases. That said, they aren’t usually all that effective. Usually, they are more like Hail Mary passes. If they work, great. But the odds of success are infinitesimally small.

Then again, as I read through what Sam gave me, it didn’t seem all that crazy.

For one, even a bipartisan group of senators had written the judge in FTX’s bankruptcy calling out the same exact thing he was calling out: Why is the law firm that also consulted with FTX before the collapse, also now leading it through bankruptcy after the collapse?

To use the senators words, including Sen. Elizabeth Warren, “given their longstanding legal work for FTX, they may well bear a measure of responsibility for the damage wrecked on the company’s victims.”

Sam’s proposed defense is scant on details in court filings — something the prosecution lamented in motions before the Judge in the case. But with me, Sam was much more forthcoming with details.

Mainly, Sam’s defense appears set to dig into their presentation that former FTX attorneys were well aware of the banking relationships FTX established. As Sam says, not only were they fine with it from the outset, they continued to act like nothing was wrong and signed off on everything — until the collapse.

SBF, in the exclusive documents provided to Coinage, claims that lawyers at Fenwick & West and Sullivan & Cromwell worked to submit a report to the Commodities Futures Trading Commission that gave Alameda’s trading accounts on FTX International a “clean bill of health” sometime in 2022. SBF speculates that SullCrom worried it might have liability in FTX’s ensuing liquidity crisis, which occurred mere months later.

Since the collapse, SullCrom has downplayed the firm’s relationship with FTX. One of the firm’s top lawyers, Andrew Dietderich, who just days before FTX halted customer withdrawals called the exchange “rock solid,” has argued in a filing that the firm never considered FTX a regular client. A closer look at the facts reveals several allegations of impropriety have been leveled against the firm.

Dietderich, in his filing, states that SullCrom assisted FTX in “responding to information requests from the [CFTC] regarding the availability of FTX Trading’s cryptocurrency exchange to persons in the United States and Know Your Customer policies and procedures.” A FOIA request Coinage sent to the CFTC to obtain this document was denied; the agency said it was unable to share documents that “could interfere with the conduct of federal agency law enforcement activities.”

Legal experts have also raised questions about SullCrom’s work representing SBF in purchasing nearly $500 million worth of Robinhood. SBF used an offshore vehicle registered in Antigua in order to hold the shares, in a possible attempt to obscure the connection between the shell company and FTX. At the time, SullCrom was also representing Robinhood.

Dietderich admits in his filing, “S&C advised Mr. Sam Bankman-Fried in connection with Hart-Scott-Rodino compliance and public reporting obligations arising out of a position that had been established in the stock of Robinhood Markets, Inc.” The Justice Department has since seized the stock.

So amidst these apparent conflicts of interest, how did SullCrom become FTX’s now primary counsel? According to SBF, through the machinations of Ryne Miller, who was a partner at S&C for eight years before joining FTX.

WATCH PART II OF OUR EXPLORATION OF SBF’S DEFENSE BELOW ⬇️

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