Oct 27, 2023 - Economy

SBF broadly disallowed from talking about counsel in defense

FTX founder Sam Bankman-Fried arrives at the U.S. federal courthouse in New York City in March. Photo: Ed Jones/AFP via Getty Images

Former FTX CEO Sam Bankman-Fried, now on trial on fraud charges in Manhattan, will not be allowed to discuss relying on counsel in almost all cases, the judge in the case ruled Friday.

Why it matters: The defense has been seeking to present evidence that SBF relied on conversations with company attorneys to verify the legality of decisions he made at the crypto exchange and its sister hedge fund, Alameda Research.

  • In short, SBF can discuss so called "advice of counsel" evidence on issues pertaining to document retention at FTX, but he can't with regard to any of the other four topics his lawyers had argued for.

What they're saying: To discuss advice of counsel on any of the other salient topics in the case, Judge Lewis Kaplan said, "That evidence would, in my judgment, be confusing and highly prejudicial."

  • In justifying his decision, the judge said that on issues such as, for example, the use of FTX customer funds by Alameda, involvement of attorneys would be relevant if those attorneys knew everything it was doing, if they had all the facts.
  • That's not, in the judge's view, the case with FTX.
  • "The relevance of all that material is tenuous, if it has any at all," he said.

Between the lines: Before the jury was admitted this morning, the judge engaged in a discussion with counsel on both sides about what testimony he would allow the defense to bring.

  • Yesterday's hearing — which featured SBF on the stand as if he were testifying, just with no jury present — gave the judge a chance to hear the defendant's testimony so that he could decide how much of the argument was admissible.
  • Judge Kaplan said that, in the event of a conviction, he plans to write on this topic extensively.

The scene: Once the jury was admitted, SBF was the only witness to present this morning. Axios was watching from an overflow room because turnout for today's testimony was enormous, with something like 100 or more people in attendance to watch.

  • SBF is wearing a lite grey suit and a lite purple tie. He largely seems confident on the stand so far, but he's still under direct examination by his own attorneys.
  • The judge has had to remind him several times to stick with answering attorneys questions rather than veering off and telling a larger story in response to each on.

The bottom line: As his testimony began, SBF's counsel asked him if he defrauded customers or took customer money. He answered "no" to both.

  • However, he admitted that the exchange's failure to institutionalize risk management had a price. "A lot of people got hurt. Customers. Employees," he said.
  • "I made a number of small mistakes and a number of large mistakes."

Editor's note: This story has been updated with additional details.

Go deeper: Sam Bankman-Fried could rely on an "advice of counsel" defense

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