The appeals court seems oblivious to Sam Bankman-Fried’s claims of an unfair trial
NEW YORK—Former FTX CEO Sam Bankman-Fried’s chances of getting a fresh trial appear to be diminishing, judging by the pointed questions an appeals court asked during a hearing in Manhattan on Tuesday.
Bankman-Fried’s attorney, Alexandra Shapiro, told a trio of Second Circuit judges that the high-profile trial was “fundamentally unfair” because her client was prevented by District Judge Lewis Kaplan from telling the jury her side of the story, or showing the 17 jurors with “objective evidence” that FTX was, in November 2022.
Bankman-Fried’s push for a new trial rested largely on his long-standing argument that, since most of FTX’s creditors were made whole in the ongoing bankruptcy process—which relied heavily on the sale of undisclosed assets including real estate and venture capital investments—that there was, in fact, no actual theft.
During Shapiro’s presentation, the appellate judges repeatedly interrupted to question his arguments.
“There’s a right to present evidence about his intent, absolutely, but I don’t understand what you’re saying about that (being) objective correction, when the purpose of the corroboration seems to be that, well, after the loss, more money was made,” said Circuit Judge Eunice Lee.
When Shapiro responded saying that it was clear at the time of the bankruptcy that there were “very valuable assets in the FTX estate that corroborated Mr. Bankman-Fried’s view that (FTX and Alameda Research) were pushed,” another judge, circuit judge Maria Araújo Kahn, pushed back, saying:
“But the false statements of the Bankman-Fried’s) are not in solvency, but liquidity … part of the government’s theory of the case is that the defendant’s method is that the investors that their money is safe, in fact, used. So they do not pay attention to the issue of caution, what to ask, what to ask that it be asked of their money, they asked their money, they asked their money whatever to ask, whatever to ask of them.
Judge Kahn pointed out that a recent Supreme Court decision, Kousisis v. United States, found that fraud It does not necessarily result in economic loss to be considered fraud.
Blame the lawyers
Shapiro also tried to argue that the Bankman-Fried trial was unfair because he was not allowed to adequately argue his position that he was essentially led by FTX’s lawyers. Although Shapiro said that Bankman-Fried does not technically rely on a counsel-of-state defense (where the defendant claims that they cannot be held liable for fraud because they acted in good faith and relied on the counsel’s advice), he is legally entitled to “show a certain reliance on their advice.”
“This is evidence of good faith, and (bankman-fried) is entitled to show that the judge denied his ability to present evidence about, for example, the creation of North Dimension beings,” Shapiro added. North Dimension, a wholly-owned subsidiary of Alameda Research, is the entity that controls the bank accounts into which FTX customers are told to wire money to trade on the exchange.
“How does this relate to any of the counts in the indictment?” Interrupted circuit Judge Barrington Parker. “The fact that a lawyer drafted a certificate of incorporation or drafted an agreement between two of the subsidiaries – I understand how is this evidence related to any of the counts?”
Shapiro urged the court to consider the “combined picture” of Bankman-Fried’s decision-making.
“The government claimed that these entities were set up to take customer money so that the defendant could use it as he pleased,” Shapiro said. “So the fact that the lawyers were involved in the creation of the entities, the lawyers were involved in the drafting of the contract where the funds were deposited in the bank accounts for the benefit of FTX customers – of course, everything is related to the good faith of the defendant.”
While both judges Lee and Parker acknowledged that there was “some relevance” to the involvement of FTX attorneys, they pointed out that Bankman-fried specifically chose not to advance a counsel-of-state defense.
“If you advanced the advice-of-counsel defense, a lot of this stuff, I agree, would be more probative, but you gave that, and you just have that vague, you know, ‘There are lawyers out there somewhere,’ defense,” Parker said, adding that he wasn’t clear how Bankman-Fried’s evidence was supposed to be “good faith” that FTX’s lawyers were on staff.
“Are you seriously suggesting to us that if your client did
Testimony about the role played by lawyers in the creation of various documents, the ‘not guilty’ will come in? Parker asked.
Shapiro said Bankman-Fried’s inability to tell the jury about her attorneys’ involvement, combined with what she described as “Judge Kaplan’s asymmetric discretion,” had a cumulative effect on the trial’s outcome.
Parker pushed back, saying: “This was a high-profile trial, both sides represented by capable counsel. There was the usual back-and-forth and aggressive to-the-line advocacy. You won some things, you lost some things. And, I mean, it almost seemed at times that you spent more ink on Judge Kaplan than you did
Merits. “
“I disagree, your honor,” Shapiro said.
The prosecutors pushed back
Assistant US attorney Nathan Rehn, one of the lead prosecutors in the original Bankman-Fried trial, told the appeals court that the jury was presented with “overwhelming evidence” that the former FTX CEO had committed a large-scale fraud on exchange customers.
“None of the claims raised by bankman-fried on appeal provide any basis to overturn the conviction in this case, especially given the overwhelming evidence presented at trial,” he said.
Rehn argued that what Judge Kaplan prevented Bankman-Fried from trying at trial was the current value of certain investments Bankman-Fried was instructed to make with the customer’s money.
“As this court has proven for decades, evidence about potential ultimate recovery for victims or the defendant’s belief in potential ultimate recovery for victims is not a mere defense to fraud,” Rehn said. “The government did not make the argument that the money was lost.
Judge Parker asked Rehn to comment on Shapiro’s claim that Judge Kaplan was biased in favor of the prosecution. Rehn denied the allegations, saying many of the defense’s arguments at trial “were without merit, and thus the court appropriately ruled against the defense’s defense of those.” “Even if there was any error, and we submit there was not … this is a case if any where any error would be harmless beyond a reasonable doubt,” Rehn added. “There were four people who knew about the misappropriation of customer deposits. Three of them testified that they conspired with Sam Bankman-Fried to do that. A different result in this trial cannot be sustained on this record.”
The panel did not make a decision at Tuesday’s hearing. Court decisions can sometimes be published months after the hearings themselves.
