Why is Sam Bankman-Fried’s defense not working?

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Former FTX CEO Sam “SBF” Bankman-Fried has been on trial since Oct. 3, but his legal counsel has yet to present a compelling narrative to support his defense.

Former FTX CEO Sam “SBF” Bankman-Fried has been on trial since Oct. 3 in a federal court in New York, accused of seven counts of fraud and conspiracy to commit fraud on FTX investors and customers. As expected, the Department of Justice (DOJ) is employing a forceful legal approach to demonstrate his offenses, while Bankman-Fried’s defense is offering minimal resistance so far. 

The defense team representing Bankman-Fried includes two attorneys with experience handling high-profile cases. Mark Cohen and Christian Everdell are two former federal prosecutors who also defended Ghislaine Maxwell, convicted of sex trafficking in 2021 for her association with Jeffrey Epstein. In spite of their experience, they haven’t performed at their best lately.

Through the defense counsel, jurors have been presented to Bankman-Fried as a young entrepreneur who made serious mistakes during the company’s rapid growth. According to Cohen’s opening statement, FTX was a startup lacking appropriate infrastructure, just as any other startup. “There was no theft,” Cohen said.

Prosecutors have been making their case to prove otherwise. Pieces of evidence presented last week include changes made to FTX’s code by Bankman-Fried’s request on July 31, 2019. These changes would grant Alameda Research special privileges as a client of FTX, including exemption from the liquidation engine, and the ability to have an unlimited negative balance on the exchange.

Also on July 31, 2019, however, Bankman-Fried took to Twitter to claim that Alameda’s account was “just like everyone else’s,” downplaying allegations of conflicts of interest:

Prosecutors used witnesses’ testimony, screenshots of FTX code and tweets to show that Bankman-Fried deliberately lied to investors, journalists and clients. Meanwhile, his defense counsel has said little, arguing that Alameda’s role as a market maker required it to have special privileges and that the relationship between them was legal.

It’s fair to note that prosecutors have the burden of proving the alleged crimes, meaning prosecutors must present evidence to support the allegations and convince the jury about the crimes committed. This concept protects defendants from being held liable or convicted without substantial evidence and ensures that they are presumed innocent until proven guilty.

Bankman-Fried’s counsel hasn’t provided much in the way of alternative theories to explain the evidence or mitigate accusations. It also lacks a strong narrative, an essential component in any trial that can be pivotal in influencing a verdict. The defense team, headed by Cohen, has yet to yield significant storytelling, despite reportedly charging millions of dollars to handle Bankman-Fried’s case. Bankman-Fried’s arrest in August after his bail was revoked for allegedly tampering with witnesses also hindered his defense.

The most aggressive approach from Cohen’s team has been to deny the credibility of witnesses, specifically Bankman-Fried’s former close friends such as Adam Yedidia and Gary Wang, both considered critical witnesses for prosecutors. Yedia and Wang pleaded guilty to fraud and conspiracy charges and have been cooperating with the DOJ since December 2022.

During the second day of trial, Cohen stated that the prosecution paints Bankman-Fried as the sole architect of the errors resulting in FTX’s bankruptcy, a claim he strongly refutes. According to him, Bankman-Fried took reasonable steps in good faith, while trusting his inner circle to handle any storm. Moreover, the defense has briefly pointed to Binance’s CEO Changpeng Zhao role in the bank run of early November.

“The severity of the sentence would largely depend on the specific charges and the evidence presented during the trial,” Joshua Garcia, Partner at Ketsal, told Cointelegraph. A possible appeal in the case would require his defense team to “identify legal errors or misconduct during the original trial.” According to Garcia, the appeal process “can be lengthy and involves a review of the trial proceedings and the application of legal principles.”

Another attorney observing the trial highlighted that when a case is initiated by the government, there is a 95% likelihood of indictment, underscoring the significant challenge faced by the defense.

As the trial unfolds, Bankman-Fried, known for his creative and aggressive marketing approach, will have to remain silent, restrain his instinctive leg-shaking, and rely on his defense team’s efforts.

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