Sam Bankman-Fried’s Appeal for New Trial Faces Skeptical Judges

TLDR

• Former FTX CEO Sam Bankman-Fried’s appeal for a new trial was met with skepticism from three appellate judges in Manhattan on Tuesday
• Bankman-Fried’s lawyer argued he was prevented from presenting evidence about FTX’s solvency and lawyer involvement, claiming the trial was unfair
• Judges questioned his argument that FTX was solvent at bankruptcy, noting fraud doesn’t require economic loss under recent Supreme Court precedent
• Prosecutors said overwhelming evidence showed Bankman-Fried defrauded customers of $8 billion that went to Alameda Research
• The appeals court will issue a ruling on the retrial request in the coming months

Sam Bankman-Fried appeared to lose ground in his effort to overturn his fraud conviction during an appeals court hearing on Tuesday. The former FTX CEO is currently serving a 25-year prison sentence after being found guilty on all seven criminal counts in November 2023.

Defense attorney Alexandra Shapiro told the three Second Circuit judges that Bankman-Fried received an unfair trial. She claimed District Judge Lewis Kaplan prevented her client from presenting evidence to the jury about FTX’s solvency at the time of bankruptcy.

Bankman-Fried’s appeal centers on his claim that FTX creditors were eventually repaid through bankruptcy proceedings. His legal team argues this proves there was no actual theft. The bankruptcy estate recovered funds through sales of real estate and venture capital investments.

Circuit Judge Eunice Lee questioned this logic during the hearing. She asked how money recovered after bankruptcy could serve as evidence of Bankman-Fried’s intent at the time of the alleged crimes.

Circuit Judge Maria Araújo Kahn pushed back on the solvency argument entirely. She pointed out that the fraud charges focused on liquidity, not solvency. The government’s case centered on whether customers could access their money when requested.

The Lawyer Defense

Shapiro also argued that Bankman-Fried should have been allowed to present more evidence about FTX lawyers’ involvement in setting up company entities. She said this would have shown he acted in good faith. The lawyer involvement related to North Dimension, an Alameda Research subsidiary that controlled bank accounts where FTX customers sent money.

Circuit Judge Barrington Parker questioned how lawyer involvement was relevant to the fraud charges. He asked how attorneys drafting incorporation documents proved anything about Bankman-Fried’s intent. Shapiro responded that lawyers helped create the entities that prosecutors claimed were designed to misuse customer funds.

Parker noted that Bankman-Fried chose not to use an advice-of-counsel defense at trial. This legal strategy would have allowed more evidence about lawyers’ roles. Instead, the defense took a vaguer approach about lawyers being present.

Parker asked Shapiro directly if she believed testimony about lawyers would have resulted in not guilty verdicts. Shapiro maintained that combined with other factors, the excluded evidence affected the trial outcome.

Prosecution Responds

Assistant U.S. Attorney Nathan Rehn defended the original trial and conviction. He told the court that jurors saw overwhelming evidence of large-scale fraud against FTX customers.

Rehn explained that Judge Kaplan prevented testimony about current investment values, not evidence of good faith. He said recovery for victims is not a legal defense to fraud charges. Courts have upheld this principle for decades.

The prosecutor emphasized that the fraud occurred during FTX’s 2022 collapse. Customers could not withdraw their money despite assurances from the exchange. Three co-conspirators testified that they worked with Bankman-Fried to misappropriate customer deposits.

Rehn addressed claims of judicial bias. He said many defense arguments at trial lacked merit, which explained why the judge ruled against them. He called the suggestion that excluded evidence would have changed the verdict unsustainable given the trial record.

Prosecutors said $8 billion in customer funds went to Alameda Research for investments and political donations. Four people knew about the misappropriation of customer deposits. Three testified against Bankman-Fried at trial.

The appeals panel did not make a ruling during Tuesday’s hearing. Court opinions on appeals cases typically publish several months after oral arguments conclude.

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