Could 31 (Reuters) – Indicted FTX founder Sam Bankman-Fried appears to be gearing as much as blame the legal professionals who helped him set up the crypto alternate.
That’s the subtext of a movement filed on Tuesday by his legal professionals at Cohen & Gresser, who’re defending Bankman-Fried in opposition to federal prices of fraud, conspiracy and bribery. They’re asking for entry to paperwork from Fenwick & West, the Silicon Valley legislation agency that represented FTX and sister hedge fund Alameda Analysis from the businesses’ inception by means of their collapse in November 2022.
Fenwick & West didn’t reply to my e mail queries. The agency has not but filed a response to a civil swimsuit by FTX prospects who named Fenwick as a defendant.
Bankman-Fried has pleaded not responsible to the fees. The protection movement claims that Fenwick & West suggested him, FTX and Alameda on not less than 4 issues on the coronary heart of the Manhattan federal courtroom indictment in opposition to the onetime crypto billionaire.
The California legislation agency, as an illustration, allegedly supplied counsel to FTX on the creation of shell firms that opened accounts at Silvergate Financial institution (SILV.UL) to obtain deposits from FTX prospects, in response to Tuesday’s movement. These shell firm financial institution accounts are a vital factor of the federal government’s financial institution fraud conspiracy cost.
Fenwick & West additionally allegedly suggested FTX that it was not required to register with the U.S. authorities as a cash transmitting enterprise, in response to the brand new movement. Prosecutors have charged Bankman-Fried with conspiring to violate wire switch legal guidelines by failing to register however his legal professionals stated within the new movement that Fenwick’s alleged recommendation “straight contradicts the federal government’s idea.”
Bankman-Fried’s submitting equally contends that Fenwick & West reviewed inner agreements during which Alameda loaned cash to Bankman-Fried and different FTX executives. The federal government alleges that the loans had been an unlawful misappropriation of buyer deposits as a part of a scheme to violate federal marketing campaign finance legal guidelines. Bankman-Fried’s new movement argues that Fenwick & West’s authorized recommendation on the tax penalties of the loans would possibly rebut the federal government’s competition that the loans had been improper.
Lastly, the movement asserts that it was Fenwick that instructed Bankman-Fried to speak with different FTX and Alameda executives through Sign and different ephemeral messaging apps. That alleged recommendation would undercut the federal government’s declare that Bankman-Fried directed his colleagues to make use of Sign and different encrypted communication apps to cover proof of his crimes.
Bankman-Fried’s legal professionals acknowledged within the movement that their assertions about Fenwick & West are based mostly on a really restricted set of paperwork.
The submitting doesn’t particularly invoke the phrases “recommendation of counsel” to refute authorities claims that Bankman-Fried acted with legal intent. However Bankman-Fried’s legal professionals appear to be headed in that course, telling U.S. District Choose Lewis Kaplan of Manhattan that they should know extra about Fenwick’s work for FTX and Alameda to find out if the legislation agency’s paperwork exonerate their consumer.
These paperwork might assist Bankman-Fried later argue at trial that he was following recommendation from FTX’s legal professionals.
Tuesday’s submitting asks Kaplan to order the federal government to show over proof from Fenwick & West or to authorize Bankman-Fried to subpoena paperwork from the legislation agency.
The agency would nearly actually relatively not flip over consumer recordsdata to Bankman-Fried. Amongst different causes, Fenwick & West has been named as a defendant in a sweeping class motion by FTX prospects. The plaintiffs’ lawyer who filed that case, Kerry Miller of Fishman Haygood, informed me on Wednesday that he plans to observe the Bankman-Fried legal case for any Fenwick & West paperwork which may increase the category allegations.
Bankman-Fried’s legal professionals from Cohen & Gresser declined touch upon the brand new movement by means of a spokesperson. The Manhattan U.S. Lawyer’s workplace additionally declined to remark.
Lawyer-client privilege is commonly a complication for white-collar defendants who wish to blame their firms’ legal professionals for offering dangerous recommendation. Corporations – relatively than particular person executives or outdoors legislation companies — management the proper to insist that communications with their counsel stay confidential. Corporations are sometimes reluctant to waive privilege for concern that their legal professionals’ paperwork could be utilized in different instances.
Bankman-Fried’s new movement stated his legal professionals are in negotiations with FTX’s new counsel about whether or not the corporate intends to say legal professional consumer privilege over related Fenwick & West paperwork. (The movement didn’t identify FTX’s new legislation agency however it’s Sullivan & Cromwell.) Protection counsel additionally stated that Fenwick & West informed them it will not flip over any paperwork with out FTX’s permission.
The movement floats two theories for why Bankman-Fried is entitled to entry to sure Fenwick & West communications even when FTX claims privilege. Bankman-Fried stated the legislation agency represented him personally along with serving as counsel to FTX and Alameda. That assertion appears to trace that Bankman-Fried will declare that he can personally waive privilege over some Fenwick & West communications.
Protection legal professionals additionally argued that FTX, which is in Chapter 11 chapter, has already waived its privilege over sure paperwork by turning them over to prosecutors. If that’s right, stated former federal prosecutor Harry Sandick of Patterson Belknap Webb & Tyler, it is going to be simpler for Bankman-Fried to acquire Fenwick’s communications.
“It’s laborious to see why the protection must be denied entry,” Sandick stated.
If Bankman-Fried’s legal professionals consider that Fenwick paperwork may help them refute the federal government’s proof of legal intent, Sandick stated, they’ll ultimately should make a strategic determination about the way to get the legislation agency’s communications in entrance of a jury.
The paperwork should be launched by means of a witness – presumably Bankman-Fried himself or a Fenwick & West lawyer. The strongest protection case, Sandick stated, would in all probability characteristic testimony from a Fenwick & West witness to bolster testimony from Bankman-Fried about his reliance on recommendation from FTX legal professionals. However contradictory testimony from a legislation agency witness might undermine Bankman-Fried’s advice-of-counsel protection.
That’s a priority for one more day. Proper now, Sandick stated, Bankman-Fried’s legal professionals simply wish to know whether or not Fenwick & West’s recordsdata will assist their consumer.
“It’s an comprehensible movement,” he stated. “They’re saying, ‘Let’s see what the paperwork say, then we’ll resolve the way to use them.’”
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Reporting By Alison Frankel
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