FTX Founder Sam Bankman-Fried’s Public Speeches Challenge His Lawyers

FTX founder Sam Bankman-Fried, who is facing mounting legal challenges over the fall of the cryptocurrency exchange, may have damaged his defense by speaking out publicly in recent days, legal experts say.

Bankman-Fried sought to explain the FTX implosion and disparaged government regulators in tweets and interviews with reporters. Lawyers said statements like these could make life more difficult for defense attorneys who want to control the exchange’s demise and investigate more federal cases.

“There is an old saying that a lawyer is a fool to a client. The opposite is also true. Someone who’s being investigated and trying to defend themselves in the court of public opinion is an idiot for a lawyer,” said Justin Danilewitz, white-collar attorney at the law firm Saul Ewing Arnstein & Lehr.

In an interview with a Vox reporter published This week, Bankman-Fried blamed FTX’s downfall in part on “sloppy accounting,” expressed regret for his decision to file for bankruptcy and insulted US regulators with profanity. Later, he said that he did not intend for this conversation to become public.

FTX is now facing investigations from the US Department of Justice, the Securities and Exchange Commission and the Commodity Futures Trading Commission, sources told Reuters. On Tuesday, a group of crypto investors filed a class action against Bankman-Fried and other promoters of FTX.

Bankman-Fried’s statements have already been cited in the FTX bankruptcy proceedings in the US. Attorneys for the exchange said in court papers Thursday that he is undermining their efforts with his “incessant and disruptive tweets.”

He has become the latest high-profile figure to continue speaking publicly despite facing an intense legal investigation, joining a group that includes Tesla and Twitter CEO Elon Musk, former medical executive Martin Shkreli and former US President Donald Trump.

Controlling the Story

Lawyers almost always advise clients in lawsuits or government investigations not to talk about matters related to the case. Such statements may become evidence in court and can undermine a carefully crafted defense. Social media has made it easier for customers with large social networks to try to protect themselves, experts say.

“The fundamental question is who controls the issue,” said Stephen Gilers, a law professor at New York University and an expert on legal principles. “From a lawyer’s point of view, once hired, the lawyer is in control of the matter in terms of public use.”

At least one attorney, Martin Flumenbaum of the law firm Paul, Weiss, Rifkind, Wharton & Garrison, has already parted company with Bankman-Fried, although the attorney did not blame the 30-year-old businessman’s controversial statements.

“We informed Mr. Bankman-Fried several days ago after FTX’s bankruptcy filing that there were disputes that prevented us from representing him,” Flumenbaum said in a statement sent to Reuters.

Flumenbaum declined to elaborate on the disputes. A former attorney for convicted financier Michael Milken, Flumenbaum is currently defending Christian Larsen, the founder and chairman of crypto payment and exchange company Ripple Labs Inc, in a high-profile lawsuit filed by the SEC. His law firm represents many other clients in the financial industry.

Bankman-Fried, who did not respond to questions about her legal team this week, has hired Gregory Joseph, a criminal defense attorney at the Joseph Hage Aaronson law firm in New York, and Stanford University law professor David Mills as members of her legal team. , according to a report from Semafor. Both Bankman-Fried’s parents are on the faculty of Stanford Law School.

Joseph is a former president of the American College of Trial Lawyers who has written on the law of fraud and the rules of evidence. Mills specializes in criminal law and white-collar crime.

Neither Joseph nor Mills responded to requests for comment.

© Thomson Reuters 2022

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