In a recent development regarding the federal fraud case against Sam Bankman-Fried, co-founder of FTX, U.S. District Judge Lewis Kaplan has blocked Bankman-Fried’s bid to obtain crucial documents from Silicon Valley law firm Fenwick & West LLP.
This denial comes as Bankman-Fried sought to use these documents as part of his defense strategy. Further, he claimed that he relied on legal advice while engaging in the activities for which he is now being prosecuted.
However, Judge Kaplan dismissed the request made by Bankman-Fried’s legal team, labeling it a “fishing expedition” that lacked justification.
Bankman-Fried’s bid defense had hoped to acquire the documents either through the prosecution or via a subpoena. The judge rejected their plea. He further emphasized that they would not warrant such an endeavor.
Moreover, Bankman-Fried’s legal team had intended to argue that their client acted upon the advice provided by Fenwick & West as a defense strategy. This approach is commonly employed by criminal defendants to counter allegations of deliberate lawbreaking made by prosecutors.
Notably, the counsel from Fenwick & West reportedly covered a range of topics. These included the use of encrypted messaging apps, multimillion-dollar loans to FTX executives, and compliance with U.S. banking regulations. Also, Bankman-Fried’s lawyers contend that these aspects are crucial to the charges leveled against their client.
FTX Allegations and Lawsuit
Bankman-Fries is facing two criminal trials. Firstly, he stands accused of orchestrating an intricate fraud scheme involving the misappropriation of billions of dollars in FTX customer funds. Allegedly, these funds were diverted towards high-risk investments, personal expenses, and even political donations.
Furthermore, on June 22, FTX took legal action by filing a lawsuit in the U.S. Bankruptcy Court for the District of Delaware. The lawsuit seeks to recover over $700 million from investment firms connected to the company. Among the entities targeted in the lawsuit are K5 Global, Mount Olympus Capital, SGN Albany Capital, along with their affiliated entities and K5 co-owners Michael Kives and Bryan Baum.
FTX alleges that funds were transferred from its affiliated firm, Alameda Research, to these entities through shell companies. The company aims to reclaim the funds as avoidable transactions.