Potential Legal Defenses in the FTX Cryptocurrency Case

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Potential Legal Defenses in the FTX Cryptocurrency Case

FTX Founder Sam Bankman-Fried was recently arrested in the Bahamas and has been charged with 8 counts of federal fraud and the “FTX Cryptocurrency Case” is at the top of the news in every major news outlet on a daily basis. The arrest of the man known by his followers as the “Cryptocurrency King” occurred following investigations by several government agencies, including the Department of Justice, the Commodity Futures Trading Commission, and the Securities and Exchange Commission (SEC).

Sam Bankman-Fried is accused of intentionally diverting billions of consumer dollars for his own personal use.  According to the Washington Post, Bankman-Fried allegedly sent billions to his hedge fund, Alameda Research, before filing for Chapter 11 Bankruptcy in November of 2022.  

Sam Bankman-Fried will need to choose among experienced, knowledgeable, and aggressive fraud lawyers for any shot at beating or lessening these charges.  Some very powerful investors lost millions of dollars due to this collapse, so there will be a very powerful political and policy benefit for the prosecutors to achieve a maximum sentence against Bankman-Fried. Without adequate legal representation, he could be sentenced to up to 115 years behind bars.

Sam Bankman-Fried Faces Federal Fraud Charges

FTX crypto enterprise collapsed after investors discovered that Alameda Research had been using consumer funds to cover losses. The cryptocurrency enterprise involved over 100 entities, including two that were co-founded by Sam-Bankman-Fired himself, Alameda Research and FTX Trading Ltd.

The former billionaire is facing 8 counts of criminal fraud, including conspiracy to commit fraud, wire fraud, securities fraud, money laundering, and conspiracy to avoid campaign finance laws. These allegations surfaced after it was reported that Bankman-Fried made financial contributions to dark political groups.

1). Lack of Intent to Defraud

FTX Cryptocurrency Case

Sam Bankman-Fried’s fraud defense lawyer could argue that his crimes were not committed intentionally. Fraud is defined as obtaining another person’s assets through illegitimate tactics, including, lying, stealing, and/or another intentional act.

Intent is a mandatory element in criminal fraud cases. Without intent, fraud charges could be reduced to a simple business mistake.

Issues with Lack of Intent to Defraud Defense

Building an effective defense case is going to be difficult and there are several issues that could arise. One issue with claiming a lack of intent is that Sam Bankman-Fraud is also accused of conspiring to mislead and defraud FTX lenders.

These charges occurred after the former Chief-Executive assured lenders that FTX had enough funds to cover their investments. This situation could be especially damaging if the prosecution can prove that Bankman-Fried lied to consumers while he knew that funds were being directed to Alameda Research

2). Innocence Based on Lack of Evidence

The prosecution cannot secure a conviction on federal fraud charges unless they can prove without any reasonable doubt that Bankman-Fried committed fraud.

An experienced criminal defense attorney will work to build a case around only the evidence that is available to the prosecution. Bankman-Fried’s fraud defense lawyer may utilize the innocence defense if a lack of evidence exists, regarding any of the 8 counts involved in the case.

3). Incompetence

An experienced criminal defense lawyer could build an effective defense strategy that focuses on Sam Bankman-Fried’s incompetence. The former executive has already admitted that he was sloppy and poorly managed his financial accounts.

To utilize this information to build a defense case on impotence, a criminal defense attorney could defend Sam Bankman-Fried based on claims that he was simply bad at his job and did not intentionally defraud investors.

Case Details that Support an Incompetence Defense Strategy

There are several details in Sam Bankman-Fried’s case that support an incompetence strategy. For example, FTX has faced scrutiny for its illegitimate finance and bookkeeping practices. Sam Bankman Fried’s multi-billion-dollar platform failed to keep financial records for any of its accounts.

FTX employees were also reported to participate in several sketchy business practices, including communicating through messaging platforms that automatically deleted conversations. These lazy and unprofessional business practices support a defense of incompetence.  These details will be important in their fraud defense lawyer’s attempts to present facts that show the defendant’s inexperience may have been negligent, but that Bankman-Fried did not have any intention to defraud investors.  

Dallas Fraud Defense Lawyer

Are you facing either state or federal fraud charges in the Dallas area? Financial fraud can result in severe criminal penalties if convicted, including thousands in fines and mandatory state or federal prison sentencing.  

Contact an experienced fraud defense lawyer in Dallas who has the skills, knowledge, and resources to defend you against serious criminal charges. Award-winning defense attorney Gregg Gallian has years of experience fighting aggressively for his clients and winning cases on their behalf. Call Gallian Firm today at 214-432-8860 to schedule a free case review.