Sam Bankman-Fried might testify to bolster weak defense.
FTX Founder Sam Bankman-Fried Faces Uphill Battle in Criminal Case
It may be up to FTX founder Sam Bankman-Fried to save himself.
Lawyers for the former crypto billionaire have done little in the past three weeks to poke holes in the government’s criminal case against him. They have sat back and watched as prosecutors paraded Bankman-Fried’s closest friends, colleagues, and confidants to the witness stand, where they have all testified under oath that Bankman-Fried called the shots at the crypto exchange and at Alameda Research, the hedge fund he owned when both imploded.
“The case has turned out to be not only as strong as it was expected to be but, if anything, stronger,” Samuel Buell, a former federal prosecutor and a law professor at Duke University, said. “Defense lawyers can’t make strong evidence go away. I don’t know where they go from here.”
Bankman-Fried is accused of illegally diverting billions of dollars from client accounts for his personal use, which he spent on shopping sprees, celebrity endorsement deals, and risky trades. He’s also accused of making illegal donations to lawmakers on Capitol Hill, shelling out more than $70 million in less than 18 months in a bid to buy power and influence regulation of the crypto market. He was the second overall top donor to Democrats behind billionaire George Soros.
Bankman-Fried has pleaded not guilty to two counts of fraud and five conspiracy counts tied to FTX’s catastrophic collapse in 2022. If convicted of all the charges against him, the 31-year-old could be sentenced to a century behind bars.
As the government continues its pile-on, Bankman-Fried may be cornered into making one of his riskiest bets yet: to take the stand in his own defense. Doing so would expose him to prosecutors who won’t pull punches in their effort not only to convict him but also to use him as an example of what can happen when people in the crypto world play fast and loose with the law.
Jordan Estes, a former prosecutor for the Southern District of New York, which is prosecuting the case against Bankman-Fried, told the Washington Post that it is “very difficult for the defense when you have a star witness in the inner circle who has completely embraced that they have been involved with wrongdoing.”
In Bankman-Fried’s case, almost his entire close-knit circle has pleaded guilty to similar charges, and most have worked with the government in its case against the former crypto boss.
Four of his closest associates have testified against him so far, including Adam Yedida, a college friend who went to work for him at FTX; FTX co-founders Gary Wang and Nishad Singh; and Caroline Ellison, Bankman-Fried’s former girlfriend and CEO of Alameda.
“It’s very hard if the prosecution has a strong case to do nothing,” Estes said, adding that Bankman-Fried could be in a situation where he needs to “shake it up to change the game.”
Doing so, however, comes with great risk.
“That will be really, really tough to get through unscathed when he’s on the stand and contradicting a whole ton of evidence that the government has already presented,” Buell, who served as the lead prosecutor for the Justice Department’s Enron Task Force, said. “It’s very rare that a defendant can turn a case around from the witness stand.”
Bankman-Fried’s defense attorney Mark Cohen wrote to the judge presiding over the case late Sunday asking for more Adderall for his client. Adderall is a prescription drug that helps people with attention-deficit/hyperactivity disorder feel more calm and focused.
Cohen added that whether Bankman-Fried takes the stand in his defense is directly related to receiving additional doses. He argued that the medicine Bankman-Fried receives wears off by the time the trial day starts, leaving him unfocused and fidgety, two traits that could be the death knell for his defense should he take the stand.
“Bankman-Fried has been doing his best to remain focused during the trial for the past two weeks, despite not having his prescribed dose of Adderall during trial hours,” Cohen wrote. “However, as we approach the defense case and the critical decision of whether Mr. Bankman-Fried will testify, the defense has a growing concern that because of Mr. Bankman-Fried’s lack of access to Adderall, he has not been able to concentrate at the level he ordinarily would and that he will not be able to meaningfully participate in the presentation of the defense case.”
The prosecution expects to wrap its case by Oct. 26, and then all eyes will be on the defense to see if Bankman-Fried takes the stand to become the hero of his own story.
What is Bankman-Fried’s defense strategy, and why may it have limited effectiveness in undermining the testimonies of the witnesses?
Clear that the prosecution has built a strong case against Bankman-Fried,” said Estes. “With his closest allies and confidants testifying against him, it will be an uphill battle for his defense team to counter the overwhelming evidence presented.”
Bankman-Fried’s defense strategy, thus far, has focused primarily on attacking the credibility of the witnesses and attempting to cast doubt on their motives. However, legal experts believe that this approach may have limited effectiveness, given the consistency and coherence of the testimonies.
“The witnesses who have testified so far have provided compelling and consistent accounts of Bankman-Fried’s involvement in the alleged illegal activities,” said Buell. “The defense will need to present a strong alternative narrative or produce evidence that undermines the credibility of these witnesses if they hope to undermine the prosecution’s case.”
Taking the stand in his own defense could be a high-stakes move for Bankman-Fried. While it would allow him to directly address the allegations and present his version of events, it also exposes him to aggressive cross-examination by the prosecution. Moreover, given the mounting evidence against him, it remains uncertain whether his testimony alone would be enough to sway the jury in his favor.
The outcome of this case has broader implications for the crypto industry as a whole. Prosecutors are seeking not only to hold Bankman-Fried accountable for his alleged crimes but also to send a message to others in the industry. The increasing scrutiny and regulatory attention on cryptocurrencies and digital assets make it imperative for industry participants to adhere to strict compliance and ethical standards.
Bankman-Fried’s trial serves as a cautionary tale about the importance of transparency, accountability, and ethical conduct in the rapidly evolving world of cryptocurrencies. As the industry continues to mature and gain wider adoption, it is crucial for its leaders to prioritize integrity and compliance to ensure its long-term sustainability.
Regardless of the outcome of this trial, it is likely to leave a lasting impact on both Bankman-Fried’s personal life and the broader cryptocurrency landscape. The legal battle he currently faces underscores the need for industry leaders and participants to navigate the evolving regulatory landscape with caution, prudence, and a commitment to upholding the highest ethical standards. Only by doing so can they hope to build trust and maintain the credibility necessary for the continued growth and success of the blockchain and cryptocurrency industry.
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