In the three weeks since his trial began, Sam Bankman-Fried, founder of crypto exchange FTX, has watched in near silence as a parade of ex-colleagues, peers and other witnesses have taken the stand. They have testified to his greed, recklessness, bullying and chicanery. His lawyers have offered relatively little in the way of riposte—and have been pilloried for it. But the strategy and ambitions of the defense, ex-prosecutors say, have been misinterpreted.
Bankman-Fried is charged with multiple counts of fraud in connection with the collapse of FTX. The exchange fell to pieces in November after users found they could not withdraw their funds, worth billions of dollars in aggregate. The money was missing, the US government claims, because Bankman-Fried had swept it into a sibling company, Alameda Research, where it was used to bankroll high-risk crypto trades, venture bets, personal loans, political donations, debt repayments and other expenses.
Tasked with defending Bankman-Fried are Mark Cohen and Christian Everdell of law firm Cohen & Gresser, which specializes in corporate and white collar cases. Their cross-examination of key prosecution witnesses—particularly Caroline Ellison, CEO of Alameda and one-time girlfriend to Bankman-Fried—has been described in the press as “meandering,” “confused,” and “lacklustre”. The defense has also aggravated the judge with repetitious questioning, groundless objections and requests for sidebars: “I’ve given you a lot of latitude,” judge Lewis Kaplan told the defense on October 5, “but you’re wearing out the welcome.”
In a case like this, though, says Joshua Naftalis, a former US prosecutor and partner at law firm Pallas Partners, where the evidence against the defendant seems “unbelievably overwhelming,” the defense isn’t expected to have it easy. It is “unfair,” therefore, to suggest Bankman-Fried’s counsel is “fumbling it,” says Naftalis. “They have been dealt a challenging hand.”
In its opening statement, the defense implied it would try to defend Bankman-Fried by undermining the credibility of key witnesses, deflecting blame for fraudulent acts onto members of his inner circle, and demonstrating he acted in a way that any rational businessperson might have. Much of the criticism of the defense has focused on its failure to achieve the first objective: to call into question the reliability of the insider witnesses, who will benefit from plea deals in exchange for their testimony.
Ellison left the stand practically unscathed, as did Gary Wang, FTX co-founder and CTO. On October 17, the defense scored only minor points against Nishad Singh, FTX director of engineering, who had testified to his distress at the reckless spending of FTX, but also, Cohen pointed out, took a large personal loan from the company after having discovered the alleged theft of customer funds.