Sam Bankman-Fried targets Sullivan and Cromwell in appeal against conviction

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Sam Bankman-Fried's criminal conviction over the collapse of FTX should be vacated in part because former lawyers at cryptocurrency exchange Sullivan & Cromwell “did a great deal of investigative work for the prosecution,” the former billionaire's attorneys have argued.

In a brief filed Friday with the U.S. Court of Appeals for the Second Circuit, Bankman-Fried's attorneys claim she was denied a fair trial by “federal prosecutors eager for a quick headline” who co-opted former colleagues at the elite New York firm as evidence for the government. to collect

S&C, which advised FTX before it filed for bankruptcy of the cryptocurrency exchange, “worked hand-in-hand with prosecutors to indict and incarcerate Bankman-Fried, in ways that went beyond normal 'cooperation,'” they wrote.

In one instance, S&C lawyers “repeatedly recommended new areas of investigation and helped guide prosecutorial strategy,” Bankman-Fried's lawyers claimed, citing a December 2022 email to prosecutors in which the law firm highlighted data “that Sam Bankman discussed in a transfer. Similar.-fried in signal chat” about a $45mn hole in an FTX balance sheet.

The firm collected more than 27 million documents for the government and provided prosecutors with notes of interviews with 24 FTX employees, they added.

Bankman-Fried, once one of the most famous American entrepreneurs, was sentenced to 25 years in prison in March for his role in the spectacular collapse of FTX, after pleading guilty last year to seven counts of fraud and money laundering.

In their appeal of his conviction on Friday, Bankman-Fried's lawyers contended that FTX was “facing a liquidity crisis, not a solvency crisis” during its implosion and that the government's charge at trial that $10 billion was “missing” was wrong, the former account holders said. Officials are set to get more than 100 percent of the demand in cash.

“The alleged victims did not 'lose all their money,'” they wrote, adding that many of Bankman-Fried's investments with customer deposits, such as a $500 million bet on AI start-up Anthropic, “were genuine.”

They blamed S&C and John Ray III, who was installed to oversee the bankruptcy, claiming the law firm was part of a disturbing trend in which prosecutors are handed guilty pleas “on a silver platter” while exculpatory evidence is withheld.

S&C has faced repeated questions over its role as FTX's bankruptcy counsel, doing legal work for the exchange in the months leading up to its implosion in November 2022.

In a research paper published in March, two prominent law professors claimed that S&C put its own interests ahead of the exchange's stakeholders, writing that the firm's “apparent conflicts of interest permeated every aspect of FTX's bankruptcy filing and litigation”.

The law firm's alleged conflicts are being investigated by independent auditor and former prosecutor Robert Cleary, who was asked to look into the matter by the judge overseeing FTX's bankruptcy.

In the first version of his report in May, Cleary essentially cleared the S&C of ineligible conflicts of interest that would have undermined its restructuring advice. He recommended further investigations into other matters, including some pre-bankruptcy transactions involving S&C, and is due to deliver his second report later this month.

In a previous court filing in Bankman-Fried's criminal case, US prosecutors said FTX Borrower and S&C had “no involvement in any significant aspect of the government's investigation and prosecution”. Sullivan and Cromwell called the charges against him “baseless”.

Sullivan & Cromwell, the FTX debtor, and the US Attorney's Office for the Southern District of New York, which brought the suit, declined to comment.