Examination: the logic guiding SBF’s defense of pursuing legal tips – Ledger Insights
Today Sam Bankman-Fried’s (SBFs) lawyers filed a letter reiterating options to use an ‘advice-of-counsel’ defensein the FTX fraud trial. In order for the Federal government to argue its circumstance, it has to confirm fraudulent intent over and above a acceptable question. If anyone can exhibit they relied on information in fantastic religion, that may well undermine the Government’s case.
But there is a second prospective rationale which is rather certain to the SBF circumstance. A single of FTX’s critical lawyers was Dan Friedberg, who has a colorful past. A lengthy time back, he worked for a firm embroiled in an on-line poker scam which authorized a number of folks to see the poker cards of other players. Friedberg provided controversial tips to the poker firm on how to lower publicity. A key recording of the conversations is readily available on YouTube.
In advance of joining FTX, Friedberg was a companion at Fenwick & West, advising SBF and his corporations from 2017 to 2019. The legislation company continued to be FTX and Alameda outside the house counsel immediately after Friedberg joined the companies – he worked for the two.
Friedberg profited handsomely from his tenure at FTX. He received a $1.4 million signing bonus, an 8% stake in FTX.US and a income of $300,000 on joining in January 2020.
In advance of going on to his other generous payment, it’s well worth noting that two yrs afterwards, FTX.US raised funding at a valuation of $8 billion, earning Friedberg’s stake worthy of in the location of $640 million. [If anyone has details of insider FTX stock sales, please get in touch.]
In June 2021, he gained a $3 million income bonus from Alameda. The FTX Group in personal bankruptcy alleges that in June 2020 Friedberg was granted 102 million Serum tokens minted by the Solana Basis, without the need of paying out for them. FTX experienced a shut affiliation with Solana. Soon after a substantial value fall, the Serum tokens had been truly worth practically $34 million at the time of the personal bankruptcy. Even these days, they are valued at close to $3 million.
FTX Individual bankruptcy lawyers plant the seed of the protection
The FTX bankruptcy attorneys might inadvertently have served to provide the protection.
In June they submitted a lawsuit against Friedberg, making numerous allegations, including breach of fiduciary obligations.
“Friedberg directed the preparing of lender account opening paperwork with bogus statements, silenced whistleblowers, and supported the fraudulent transfers that enriched Bankman-Fried and other FTX Insiders contrary to the passions of the entities to which Friedberg owed fiduciary responsibilities,” the lawsuit reads.
It does not end there. It outlines the allegations of silencing whistleblowers. For instance, Alameda and FTX were sued in excess of a pump and dump scheme in 2019. The lawsuit alleges that Friedberg organized to engage the Plaintiff’s legal professional, spending $3.3m involving 2019 and 2022 “to acquire Plaintiffs’ Lawyer-1’s silence”.
In December 2021, a former FTX US employee who had labored there for fewer then two months manufactured allegations about the company and gained an “extraordinary settlement” while the sum was redacted. Despite becoming used by FTX US, she received the payout from Alameda. The lawsuit also alleges that Friedberg “bought off” the ex employee’s attorneys by contracting to shell out them $200,000 a month for 5 many years, a overall of $12 million.
A freshly hired Alameda attorney began asking issues about governance and regulatory problems in December 2021. The queries were being specially about why Alameda affiliate marketers had been sending cash devoid of a funds transmitter license. Allegedly, Friedberg fired him with a generous package deal (amount was redacted), irrespective of only staying utilized for 3 months.
The Wall Street Journal (short article unlocked) also printed other allegations.
Does this SBF protection have legs?
A person non-factual observation is that CEOs build teams of persons that they choose to operate with. That features persons with identical fascination and ethics. So, the individuals SBF employed displays on SBF, specially people today he labored with for many years. That is why the buck stops at the CEO.
However, the lawsuit promises that SBF’s father Joe Bankman urged SBF to employ Friedberg “to give Friedberg a central purpose and to keep Friedberg ‘in the loop . . . so we have 1 person on top rated of every little thing.’”
Friedberg expected to testify
A further observation is that most of the FTX interior circle has been indicted, but not Friedberg. In January, Reuters noted that Friedberg briefed two dozen investigators from Justice, the FBI and SEC at a conference on 22 November 2022, which was quite soon soon after FTX and Alameda submitted for bankruptcy. “He has not been charged and has not been informed he is less than felony investigation,” Reuters claimed.
Alameda’s Caroline Ellison and previous FTX CTO Gary Wang pled responsible to legal fraud on 22 December.
Friedberg is anticipated to testify as a federal government witness in the trial starting off in October.
