- Sam Bankman-Fried's appeal went before a three-judge panel on Tuesday.
- The judges appeared sceptical of his attorney's claim that his trial was biased.
- “The defence was cut off at the knees by the judge’s rulings," attorney Alexandra Shapiro argued.
New York-based DeFi Correspondent Aleks Gilbert reports from the court:
A panel of appellate judges grilled Sam Bankman-Fried’s attorney during a high-stakes hearing on Tuesday that could determine whether the former billionaire gets a new trial.
The judges have an informal six-month deadline to reach a decision. But they appeared sceptical of Bankman-Fried’s claim the original trial was effectively rigged against him.
Bankman-Fried is currently serving a 25-year prison sentence, and he was not present at Tuesday’s hearing. His parents, Stanford professors Joseph Bankman and Barbara Fried, both attended, as they had throughout his five-week criminal trial in 2023.
That year, Bankman-Fried was convicted on seven counts of fraud relating to the collapse of FTX, the crypto exchange he had co-founded four years earlier. FTX filed for bankruptcy in November 2022, when it was unable to honour a tsunami of customer withdrawal attempts.
Bankman-Fried appealed his conviction last year, arguing Judge Lewis Kaplan had not allowed him to mount a full defence at trial. Among other things, Kaplan had limited Bankman-Fried’s ability to discuss his belief he could repay FTX customers, as well as his reliance on FTX attorneys throughout his tenure as CEO.
Had he been able to discuss customer repayment and his attorneys’ involvement, jurors would have understood that victims would eventually be made whole and that Bankman-Fried was not intent on stealing customer money — just a flawed CEO acting in good faith amid a brutal industry-wide downturn, his attorney Alexandra Shapiro said on Tuesday.
“The trial of Sam Bankman-Fried was fundamentally unfair, because the jury only got to hear one side of the story — the prosecutors’ side,” Shapiro said.
“The prosecutors proclaimed that billions had been lost forever. This was false.”
Interrogation
A panel of three judges presides over appellate hearings, and it is routine for those judges to interrogate attorneys during their allotted speaking time.
At Tuesday’s hearing, however, Shapiro was subjected to more frequent and pointed questioning than other attorneys who appeared before the judges, who appeared sceptical of her claim that Bankman-Fried’s defense was “cut off at the knees” by Kaplan.
Shapiro’s allotted speaking time of 10 minutes stretched to more than 30 as the judges demanded to know why Bankman-Fried should have been granted the ability to discuss his lawyers’ involvement in dubious activities.
During his trial, Bankman-Fried did not pursue an advice-of-counsel defence, which would have required him to prove that his attorneys knew the full scope of his allegedly criminal behaviour, the judges noted on Tuesday.
Without mounting that defence, defendants are typically forbidden from saying they had relied on their attorneys’ advice, as it could lead jurors to exonerate people who are otherwise guilty.
Shapiro said Kaplan had allowed Bankman-Fried to mention his attorneys’ involvement regarding document retention policies, but forbade the FTX founder from saying those attorneys had also blessed the creation of certain shell companies and bank accounts he later used to facilitate dubious transactions.
Judge Barrington Parker asked why any of that was relevant if Bankman-Fried’s attorneys were unaware of how those companies or bank accounts were later used, calling the argument a “vaguely-there-were-attorneys-out-there-somewhere defence.”
Shapiro replied that it was simply evidence Bankman-Fried was acting in good faith and that jurors should have been allowed to decide for themselves whether they agreed.
“Are you seriously suggesting to us that if your client has been able to testify about the role attorneys played,” Parker said, “the ‘not guilties’ would have rolled in?”
Judge Maria Khan asked whether Shapiro believed the jurors were presented with enough evidence to convict Bankman-Fried.
Shapiro said that was beside the point.
“The trial was unfair,” she said. “The defence was cut off at the knees by the judge’s rulings.”
‘Counting game’
In his own presentation, Assistant US Attorney Thane Rehn said the evidence presented at trial was overwhelming, and disputed the notion that Kaplan’s rulings — which Shapiro had described as “asymmetric” — amounted to bias.
“It’s not a counting game,” he said. “Many of the arguments the defence made … are meritless. So the court appropriately ruled against the defence on those [arguments].”
Moreover, the fact that FTX customers would later be repaid in full did not disprove Bankman-Fried had committed fraud, he said. The government never claimed the money was gone forever — it had only claimed FTX could not repay its customers on demand, as Bankman-Fried had assured it could in congressional testimony, interviews with journalists, and company statements, according to Rehn.
The judges honed in on the $11 billion Bankman-Fried has been ordered to pay via restitution. They asked Rehn why the FTX founder was subject to such a high penalty if the bankruptcy estate had recovered enough money to fully repay customers.
Rehn noted that customers would only be repaid at the value of their crypto as of the November 2022 bankruptcy. At that time, crypto valuations were at multi-year lows, and customers have missed out on the industry’s incredible recovery in the years since. Any additional money Bankman-Fried paid could be used to bridge the gap between the value of a customer’s crypto in 2022, and the value of that crypto today.
“That’s the truly just recovery,” Rehn said.
The judges have an informal six-month deadline to issue their ruling after Tuesday’s oral arguments.
But Bankman-Fried’s odds of success are low: between 2011 and 2015, about 6% of federal criminal appeals succeeded, according to data from the US court system.
Aleks Gilbert is DL News’ New York-based DeFi Correspondent. Reach out to him with tips at aleks@dlnews.com.
