Federal Prosecutors Take Aim at Bankman-Fried’s ‘Advice-of-Counsel’ Defense

In Sam Bankman-Fried’s ongoing legal proceedings, the Department of Justice (DOJ) has contested the validity of the FTX founder’s defense strategy.

The DOJ, represented by U.S. Attorney Damian Williams, said on Tuesday that the court should preclude any “irrelevant, confusing, or prejudicial” questioning, evidence, or arguments concerning the involvement of attorneys unless further details are provided by Bankman-Fried.

The disgraced crypto founder’s legal team issued an “advice-of-counsel” line of defense, which means that Bankman-Fried didn’t intend to break any law as his lawyers at the time assured him that he was within legal bounds during the rise of FTX. Federal prosecutors have sought clarity on this line of defense.

“Additional disclosure is necessary to determine whether the evidence the defendant hopes to elicit or offer will be relevant and not confusing or prejudicial,” reads the Tuesday filing. “Regardless of whether the defendant intends to argue a ‘formal’ advice of counsel defense, he will need to establish the relevance of evidence relating to attorneys’ involvement.”

The crux of the DOJ’s argument revolves around how aware Bankman-Fried’s lawyers were of Bankman-Fried’s intent to allegedly misuse FTX customers’ funds.

To that end, Williams pointed out that Bankman-Fried allegedly provided false information to Silvergate Bank while opening an account for his company, North Dimension. The involvement of lawyers in this process, according to the DOJ, is only pertinent if they were aware of Bankman-Fried’s intention to use the account to allegedly process customer funds improperly.

Bankman-Fried has pleaded not guilty to charges accusing him of illegally diverting massive investor funds from his cryptocurrency exchange, FTX. After bail was revoked earlier this month, the fallen crypto mogul has been confined to a small cell in a Brooklyn federal jail.

The DOJ made similar assertions regarding “data retention policies at FTX, including the use of auto-delete policies and ephemeral messaging applications,” such as Signal, as well as the drafting of loan agreements for founders and other executives of FTX and its affiliated company Alameda, which allegedly utilized customer funds.

Bankman-Fried’s indication that he might implicate his former counsel at the Fenwick & West law firm as part of his defense prompted the DOJ to assert the irrelevance of these details unless a clear connection to the alleged wrongdoing is established.

Bankman-Fried defense hits back

In a filing early on Wednesday, Bankman-Fried’s lawyer, Mark Cohen, responded to the government’s concerns, emphasizing the importance of adequate access to evidence and constitutional rights.

Cohen asserted that he had already provided “sufficient” disclosures about the defense strategy while waiting for the government to provide the complete bundle of evidence.

He further stated that Bankman-Fried’s conditions in jail were in violation of his Sixth Amendment rights under the U.S. Constitution.

Last week, SBF’s defense argued that the FTX founder is the only one who has complete knowledge of the companies and facts in question, meaning he needs access to essential online documents.

The motion asked for Bankman-Fried’s “temporary release,” or, at least a setup that would allow him to meet with his attorneys on a daily basis.