Bankman-Fried Wants 2nd Crack at ‘Bad Legal Advice’ Defense

Sam Bankman-Fried wants another shot at mounting a “bad legal counsel” defense.

In a filing Monday (Oct. 9) evening, attorneys for the former FTX head have asked the court’s permission to question company co-founder Gary Wang about legal advice he received when agreeing to loans from Alameda Research, FTX’s sister company.

As PYMNTS has reported, Judge Lewis Kaplan has already blocked Bankman-Fried from introducing evidence in support of an “advice of counsel defense” at his trial, which begins its second week on Tuesday (Oct. 10).

“Bankman-Fried and his lawyers had been hoping to argue that the involvement of FTX’s own lawyers in many of the matters under scrutiny belies the ability of the FTX CEO to have acted with criminal intent,” that report said.

In the court filing, the attorneys argue that the prosecution has already gotten Wang to testify about the $200 million to $300 million of loans from Alameda, which he used for venture investments and purchase of a house in the Bahamas.

Wang had told the FBI he “didn’t think the lawyers would tell him to sign something that was illegal,” the filing said.

“Mr. Wang’s understanding of the lawyers’ involvement in the loans is directly relevant to Mr. Bankman-Fried’s good faith and lack of criminal intent,” defense attorneys wrote.

“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.”

Wang, FTX’s former chief technology officer, is one of three former high-level FTX executives who have pleaded guilty to their role in the exchange’s collapse and have agreed to cooperate in the prosecution of what the government has called “one of the biggest financial frauds in American history.”

In court last week, Wang testified about what he said were false assurances from Bankman-Fried to FTX customers and investors that the exchange was a safe trading platform with sophisticated risk mitigation measures to safeguard customer assets.

And although he was allegedly aware of the multi-billion-dollar deficit at Alameda Research and FTX, Bankman-Fried repeatedly told customers and investors that “FTX was fine.”

“FTX was not fine,” Wang told the jury, “because FTX did not have enough assets for customer withdrawals.”