Evaluation: the logic guiding SBF’s protection of following legal advice – Ledger Insights

Right now Sam Bankman-Fried’s (SBFs) lawyers filed a letter reiterating ideas to use an ‘advice-of-counsel’ defensein the FTX fraud demo. In get for the Government to argue its scenario, it has to establish fraudulent intent past a fair doubt. If a person can exhibit they relied on suggestions in great faith, that could possibly undermine the Government’s situation.

But there’s a second possible cause which is pretty individual to the SBF scenario. A person of FTX’s essential lawyers was Dan Friedberg, who has a vibrant earlier. A extensive time ago, he labored for a company embroiled in an on the internet poker rip-off which authorized a handful of persons to see the poker cards of other players. Friedberg provided controversial suggestions to the poker agency on how to lessen publicity. A magic formula recording of the discussions is out there on YouTube.

Ahead of signing up for FTX, Friedberg was a husband or wife at Fenwick & West, advising SBF and his firms from 2017 to 2019. The legislation organization continued to be FTX and Alameda outdoors counsel just after Friedberg joined the companies – he worked for both of those.

Friedberg profited handsomely from his tenure at FTX. He acquired a $1.4 million signing reward, an 8% stake in FTX.US and a wage of $300,000 on joining in January 2020.

In advance of relocating on to his other generous payment, it is really worth noting that two yrs afterwards, FTX.US raised funding at a valuation of $8 billion, earning Friedberg’s stake really worth in the location of $640 million. [If anyone has details of insider FTX stock sales, please get in touch.]

In June 2021, he been given a $3 million funds bonus from Alameda. The FTX Team in bankruptcy alleges that in June 2020 Friedberg was granted 102 million Serum tokens minted by the Solana Basis, with out paying for them. FTX experienced a near affiliation with Solana. Just after a appreciable price drop, the Serum tokens ended up really worth virtually $34 million at the time of the personal bankruptcy. Even now, they are valued at around $3 million.

FTX Personal bankruptcy lawyers plant the seed of the protection

The FTX individual bankruptcy attorneys could inadvertently have assisted to supply the defense.

In June they filed a lawsuit against Friedberg, generating many allegations, including breach of fiduciary duties. 

“Friedberg directed the preparing of bank account opening files with wrong statements, silenced whistleblowers, and supported the fraudulent transfers that enriched Bankman-Fried and other FTX Insiders opposite to the passions of the entities to which Friedberg owed fiduciary responsibilities,” the lawsuit reads.

It does not prevent there. It outlines the allegations of silencing whistleblowers. For illustration, Alameda and FTX ended up sued around a pump and dump plan in 2019. The lawsuit alleges that Friedberg organized to interact the Plaintiff’s lawyer, shelling out $3.3m between 2019 and 2022 “to obtain Plaintiffs’ Legal professional-1’s silence”.

In December 2021, a former FTX US staff who experienced worked there for considerably less then two months designed allegations about the company and been given an “extraordinary settlement” though the total was redacted. In spite of currently being employed by FTX US, she acquired the payout from Alameda. The lawsuit also alleges that Friedberg “bought off” the ex employee’s attorneys by contracting to shell out them $200,000 a thirty day period for five years, a full of $12 million. 

A freshly employed Alameda lawyer began asking inquiries about governance and regulatory concerns in December 2021. The queries were being specially about why Alameda affiliate marketers were being sending resources without the need of a revenue transmitter license. Allegedly, Friedberg fired him with a generous deal (amount of money was redacted), regardless of only remaining utilized for three months.

The Wall Avenue Journal (posting unlocked) also revealed other allegations.

Does this SBF defense have legs?

Just one non-factual observation is that CEOs establish teams of persons that they choose to do the job with. That consists of men and women with similar fascination and ethics. So, the men and women SBF hired demonstrates on SBF, specially persons he worked with for yrs. That’s why the buck stops at the CEO.

Nonetheless, the lawsuit claims that SBF’s father Joe Bankman urged SBF to seek the services of Friedberg “to give Friedberg a central part and to keep Friedberg ‘in the loop . . . so we have just one particular person on best of anything.’”

Friedberg anticipated to testify

An additional observation is that most of the FTX internal circle has been indicted, but not Friedberg. In January, Reuters claimed that Friedberg briefed two dozen investigators from Justice, the FBI and SEC at a meeting on 22 November 2022, which was incredibly soon immediately after FTX and Alameda filed for individual bankruptcy. “He has not been charged and has not been instructed he is less than prison investigation,” Reuters described. 

Alameda’s Caroline Ellison and former FTX CTO Gary Wang pled guilty to felony fraud on 22 December.

Friedberg is predicted to testify as a federal government witness in the trial starting off in Oct.