Sam Bankman-Fried made his initial appearance in court on Thursday for his fraud trial, but the jury wasn't present as Judge Lewis Kaplan decided whether some lines of defense should be allowed.It is the most recent occurrence of the defense team's effort to make a difference in the criminal fraud case being investigated.
On Thursday, Sam Bankman-Fried appeared in a New York courtroom, where he and his defense team presented their legal material to U.S. District Judge Lewis Kaplan. They had initially planned for SBF to testify before the jury, but the Judge excused them early in order to determine the admissibility of some of Bankman-Fried's testimony, related to the legal advice he received while running FTX. During this mini-hearing, defense attorney Mark Cohen posed questions to Bankman-Fried in an attempt to demonstrate his innocence, including attributing his actions to the then-chief regulatory officer and in-house attorney, Dan Friedberg. SBF stands accused of seven criminal charges including wire fraud, securities fraud and money laundering, which may lead to prison time exceeding 100 years if found guilty by the Manhattan federal court.
Renato Mariotti, former prosecutor at the U.S. Justice Department's Securities & Commodities Fraud Section and current trial partner at Bryan Cave Leighton Paisner, stated prior to the trial that it was highly likely for Bankman-Fried to be convicted. Four weeks into the trial, witnesses in the C-suite of crypto exchange FTX and hedge fund Alameda Research have named SBF as the culprit, with some already pleading guilty to crimes committed while employed, such as Bankman-Fried's ex-girlfriend Caroline Ellison who faces a maximum sentence of 110 years. Prosecutors have introduced evidence including encrypted Signal messages and documents which seem to confirm Bankman-Fried's role in FTX customer money spending.
The defense's case relies on SBF's testimony along with two other witnesses, and will depend on whether the jury believes the defendant. Mariotti noted that traditionally, Bankman-Fried has presented himself as a 'visionary genius', yet for the trial he should be portraying himself as 'clueless, inattentive, and in over his head'.Judge Kaplan previously ruled that Bankman-Fried's lawyers could not use an advice of counsel argument in their opening remarks since it could prejudicially influence the jury. Nonetheless, on Thursday, the judge sent the jury home early to discuss in a closed-door session whether to permit this line of testimony.During the direct examination led by Cohen, Bankman-Fried appeared to put much of the criminal fault onto FTX's chief regulatory officer, Friedberg, as well as the outside counsel Fenwick & West, which gave advice to the crypto exchange. The former FTX head talked about Friedberg's participation in everything from the company-wide auto deletion policy on messaging services such as Signal, to the development of Alameda's North Dimension bank account, where billions of dollars worth of FTX client funds were transferred.Additionally, Bankman-Fried mentioned that the hundreds of millions of dollars in personal loans to himself and other founders of the platform were organized through promissory notes composed by his in-house legal team and discussed together with his general counsel and Friedberg. SBF expressed that he "took comfort in" having the endorsement of his legal representatives.Although taking the stand provides Bankman-Fried the chance to tell his side of the story to jurors, it also facilitates federal prosecutors to single him out during cross-examination. After some incriminating testimony from Bankman-Fried's former confidants and high-ranking assistants, defense lawyers for the FTX initiator have been unable to alter the narrative in cross-examining critical witnesses or to weaken the most grave claims related to their customer.The encounter on Thursday was difficult to watch. Although he delivered direct and believable answers in his direct examination, the questioning by prosecutors was extreme and successful. At several times, the judge seemed exasperated by Bankman-Fried's replies, once saying that the defendant had an "unconventional way of responding."The defendant's attitude changed drastically when U.S. assistant attorney Danielle Sassoon began her questioning. He moved back and forth in his chair, nervously jostled a piece of paper he held in his hands, consistently reached for his water bottle ahead of responding, and avoided many questions by saying he could not remember what had taken place.Judge Kaplan interjected at one point, telling the defendant to "listen to the question and answer the question straight away."The judge will give a ruling on Friday morning regarding what is permissible from the defense's list of topics – as well as Bankman-Fried's initial appearance before the jury from the stand."Given that he looks to be headed for defeat, taking the stand can be a 'Hail Mary' of sorts," stated Mariotti."SBF will be restricted by his numerous prior statements, which may be used to discredit him. It will be challenging for SBF to shape his testimony around those prior assertions."This week's testimony is just the most recent instance of the defense team's difficulty in making a dent in the criminal fraud trial.Prosecutors spent four weeks of the trial leading ex-leaders of FTX and Alameda Research through precise actions taken by their boss that caused clients to lose billions of dollars late last year.In trying to punch holes in witness accounts, Bankman-Fried's attorneys have repeatedly jumped around, unable to keep a consistent timeline or logical argument, while also giving witnesses the opportunity to present additional testimony to bolster what they had earlier told the jury.The inconsistent method is potentially damaging for Bankman-Fried, who is relying on his defense attorneys to keep him out of prison in what could amount to a life sentence if convicted. The central claim the defense has been unable to discredit is that Bankman-Fried purposely employed billions of dollars in FTX customer funds to pay for his luxurious lifestyle, to make political donations and, most significantly, to plug a huge hole in Alameda's accounts following the crashing of cryptocurrency prices last year.
— This report was contributed to by Dawn Giel from CNBC.
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