By Bob Van Voris, Bloomberg
Everybody was out to get Sam Bankman-Fried after the collapse of his cryptocurrency exchange in 2022. At least that’s what his lawyers will tell an appeals court Tuesday as the FTX co-founder seeks to reverse his fraud conviction and 25-year prison sentence.
Bankman-Fried’s lawyers claim he was wrongly convicted in a rush to judgment by the press, prosecutors, the team that took over FTX in the wake of its stunning implosion, and, critically, US District Judge Lewis Kaplan.
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“Sam Bankman-Fried was never presumed innocent,” his lawyers argued in a brief previously filed with the 2nd US Circuit Court of Appeals in New York. “He was presumed guilty — before he was even charged.”
A jury in Manhattan found Bankman-Fried, 33, guilty in 2023 of seven criminal counts including fraud and conspiracy at his popular cryptocurrency exchange. The trial was closely watched by the industry and by the broader public, making him the perceived face of greed and mismanagement in the market for digital currencies.
The government claimed Bankman-Fried siphoned billions of dollars from FTX customers to the exchange’s sister hedge fund, Alameda Research, using the money for speculative investments, political donations and expensive real estate. Jurors found him guilty in less than five hours of deliberations, despite watching him take the stand in his own defense and testify that he never intended to defraud anyone.
Now, the three-judge panel is set to hear arguments from Alexandra Shapiro, a top criminal appeals lawyer who has won reversals this year for three executives convicted of white-collar crimes. She notched her most recent win on behalf of Iconix Brand Group founder Neil Cole, who was cleared by the 2nd Circuit last week after his conviction on charges he inflated the apparel licenser’s earnings and misled investors.
Shapiro is also working on appeals for music producer Sean “Diddy” Combs, Bill Hwang of Archegos Capital and Charlie Javice, who was convicted of defrauding JPMorgan Chase & Co in the sale of her online student-finance site.
In their appeals briefs, Bankman-Fried’s lawyers focused on Kaplan, 80, who has been a federal court judge since 1994. They accused the judge of “repeatedly putting a thumb on the scale to help the government and thwart the defense.” They’re asking for a new trial with a different judge.
Bankman-Fried’s team argued that the judge pressured jurors into a quick verdict by suggesting they could stay late on the first day of deliberations, offering them free dinner and a car service home. His lawyers said the judge “continually ridiculed Bankman-Fried, criticized his demeanor, and signaled his disbelief of Bankman-Fried’s testimony.”
At one point, Kaplan called Bankman-Fried’s testimony — that he didn’t run Alameda after stepping down as the hedge fund’s CEO — “a joke,” they said.
Witnesses against Bankman-Fried included three former close FTX friends and executives: his co-founder Gary Wang, engineering chief Nishad Singh and Caroline Ellison, Alameda CEO and Bankman-Fried’s sometime girlfriend. All three pleaded guilty to felony charges and took the stand to testify against Bankman-Fried in hopes of leniency.
Wang and Singh avoided prison, while Ellison was sentenced to two years.
Ellison’s testimony was particularly devastating. She described in detail how she worked with Bankman-Fried to deceive lenders and customers and their failed attempts to stop FTX’s slide into bankruptcy. Ellison walked jurors through the seven “alternative balance sheets” she said she prepared at Bankman-Fried’s direction to hide that $10 billion had been borrowed from FTX customers and $5 billion loaned to FTX executives and affiliated entities.
Bankman-Fried, who’s serving his sentence in California, isn’t expected to attend the hearing.
In addition to the appeal, Bankman-Fried’s parents have been exploring ways to secure a pardon from President Donald Trump, a person familiar with the matter said earlier this year. In March, Bankman-Fried appeared on former Fox News host Tucker Carlson’s podcast, bashing former President Joe Biden and ex-Securities and Exchange Commission Chair Gary Gensler.
On Tuesday, Shapiro is also expected to argue that Kaplan wrongly blocked Bankman-Fried from telling the jury that FTX had enough assets to repay exchange customers. But, prosecutors were allowed to claim Bankman-Fried had stolen billions of dollars, forcing FTX into bankruptcy and causing billions in losses.
In addition to the prison time, Kaplan ordered Bankman-Fried to pay back $11 billion, which is also part of the appeal.
Bankman-Fried didn’t intend to defraud customers, believing they’d be fully repaid, his team argues. Shapiro will also likely say that Kaplan should have let Bankman-Fried testify that he had followed the advice of FTX lawyers in good faith. The judge directed Bankman-Fried to take the stand, outside the jury’s presence, to preview his testimony on that point, giving prosecutors an unfair advantage, they claim.
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