Sam Bankman-Fried’s defence have submitted a new court filing to cross-examine FTX co-founder Gary Wang about the legal advice he received over a series of loans from Alameda Research.
SBF is set to argue that his lawyer’s advice and involvement meant he did not realise that loans from the closely connected hedge fund were fraudulent.
This move comes as the Bankman-Fried trial moves into its second week, with the defence hoping to persuade a judge who, in the past, has blocked the FTX founder from attributing the alleged fraud to his legal advisors.
New line of questioning for Wang
The government has previously questioned Wang about a series of personal loans he had received from Alameda Research. These loans, ranging between $200 to $300million, were sourced from the hedge fund to support venture investments by FTX and to facilitate his purchase of property in the Bahamas.
Now, the defence aims to delve deeper and “cross-examine” Wang. They are keen to understand the role of the lawyers in these transactions, specifically which attorneys were engaged, the conditions of the loan, and whether Wang had any concerns.
“Mr. Wang’s understanding that these were actual loans – structured by lawyers and memorialized in formal promissory notes that imposed real interest payment obligations – is relevant to rebut the inference that these were simply sham loans directed by Mr. Bankman-Fried to conceal the source of the funds,” the court filing said.
It added that this “undercuts the government’s money laundering theory and corroborates Mr. Bankman-Fried’s own understanding that the loans were not improper.”
SBF blames lawyers
Bankman-Fried has pleaded not guilty in the multi-billion fraud trial that is now taking place. His defence puts the blame on his legal counsel and argues he wasn’t aware of any improper activity at FTX or Alameda.
Detailing their client’s stance, the defence noted last August that the fault rested on both the internal legal team of FTX and attorneys from the firm Fenwick & West.
It was said that they were involved in various fraudulent decisions. This included the use of self-deleting messaging apps like Signal, the creation of “North Dimension” entities, the banking ties between FTX entities and Silvergate Bank, loans to key figures in FTX and Alameda Research, internal agreements, and the terms of service laid out by FTX.
However, the Department of Justice (DOJ) has countered, stating that the defence for Bankman-Fried hasn’t provided sufficient specifics of its argument and, therefore, should be restricted from presenting it.
Judge Lewis Kaplan, overseeing the case, decided that debates revolving around counsel advice might prejudice or bias the jury.
The judge expressed concerns over the framing of several filings which could inadvertently suggest that the attorneys had implicitly approved certain actions. As a result, he banned it from the defence’s opening remarks.
The testimony from Mr. Wang is set to conclude later this Tuesday, after which Caroline Ellison, the ex-chief of Alameda Research and Bankman-Fried’s former romantic partner, will take the stand.
Both Wang and Ellison have pleaded guilty and are currently assisting the investigation.
The trial, which started last week, is predicted to stretch for another four to five weeks before a final decision is reached.