In a recent development, lawyers representing Sam Bankman-Fried are challenging the core of the fraud case against him, specifically questioning the existence of any trust or fiduciary relationship between the cryptocurrency exchange and its customers. The defense argues that under English law, which governs the terms of service for FTX, there was no trust relationship established. They state that the terms of service do not mention trust or beneficial interest, and any language about fiduciary duties explicitly disclaims such a relationship. The defense aims to counter the government’s claim that Bankman-Fried misappropriated customer deposits by diverting funds to his trading firm. According to the defense, subjective intentions are irrelevant in determining the existence of a trust under English law, and it is solely based on interpreting the contractual terms objectively. Bankman-Fried’s recent testimony, where he struggled to recall statements and decisions, adds complexity to the case.
Bankman-Fried’s Attorneys Question Trust Ties
In the ongoing case against Sam Bankman-Fried, his attorneys are challenging the core of the fraud allegations by questioning the existence of a trust or fiduciary relationship between FTX, the crypto exchange, and its customers. Under English law, which governs FTX’s terms of service, Bankman-Fried’s defense argues that there is no basis for a trust relationship. The defense points out that the terms of service do not mention trust, trust property, or beneficial interest, and explicitly disclaim any fiduciary duties. This line of argument seeks to counter the prosecution’s claim that Bankman-Fried defrauded customers by misappropriating their deposits, specifically alleging that FTX customer funds were diverted to Bankman-Fried’s trading firm, Alameda Research.
Terms of Service under English law
Bankman-Fried’s defense relies on the fact that the terms of service on FTX, governed by English law, do not explicitly establish a trust relationship between the exchange and its users. By highlighting the absence of certain keywords, such as trust, trust property, or beneficial interest, the defense argues that there is no legal basis for implying the existence of a trust. Additionally, the defense points out that the terms of service expressly disclaim any fiduciary duties, further undermining the prosecution’s claim of a fiduciary relationship between FTX and its customers.
Disclaiming fiduciary duties
Closely related to the absence of specific language establishing a trust relationship, Bankman-Fried’s defense highlights that the terms of service explicitly disclaim fiduciary duties. By stating that FTX and its employees do not owe any fiduciary duties to the users, the defense aims to negate the prosecution’s argument that Bankman-Fried defrauded customers by breaching fiduciary responsibilities. This argument emphasizes that the contractual agreement between FTX and its users did not create any fiduciary relationship, shielding Bankman-Fried from allegations of fiduciary misconduct.
Defense against misappropriation allegations
Bankman-Fried’s attorneys challenge the misappropriation allegations by asserting that subjective intentions are irrelevant in determining the existence of a trust under English law. They argue that the existence of a trust should be determined solely based on the objective interpretation of contractual terms. By dismissing subjective expectations or beliefs about the presence of a trust relationship, the defense seeks to undermine any claims of misappropriation by asserting that misappropriation can only occur when there is a legally recognized trust in place.
Relevance of subjective intentions
The defense’s argument regarding the relevance of subjective intentions aims to shift the focus from an individual’s beliefs to the objective assessment of the contractual terms. By contending that subjective intentions do not create a trust relationship, Bankman-Fried’s attorneys are reinforcing their position that the absence of explicit trust language in the terms of service precludes the existence of a trust. This line of reasoning supports their contention that Bankman-Fried cannot be held accountable for misappropriation if no legally recognized trust exists.
Objective interpretation of contractual terms
To further strengthen their argument, Bankman-Fried’s defense emphasizes the need for an objective interpretation of the contractual terms. By urging the court to consider the terms of service as they are written, without relying on external representations or subjective beliefs, the defense asserts that the absence of trust language in the contract is significant. They argue that a legally recognized trust can only be established based on the objective understanding of the contractual agreement, reinforcing their position that no trust relationship existed between FTX and its customers.
Representations outside the contract
In challenging the existence of a trust or fiduciary relationship, Bankman-Fried’s attorneys underscore that representations outside the contract cannot retroactively establish such a relationship. They contend that any claims or statements made outside the contractual agreement cannot alter the objective interpretation of the terms of service. This argument aims to discount any attempts by the prosecution to invoke statements or representations made by Bankman-Fried or FTX employees outside the confines of the contract to establish the existence of a trust or fiduciary relationship.
Definition of a formal trust under English law
Bankman-Fried’s defense provides a legal definition of a formal trust, also known as an express trust, under English law. They clarify that a formal trust arises when assets are placed under one party’s control for the benefit of another or for a special purpose. By explaining the legal requirements for a trust, the defense seeks to narrow the scope of what can be considered a trust relationship and highlight that the contractual terms do not meet these requirements. This definition further supports their argument that no trust relationship existed between FTX and its customers.
Testimony of Bankman-Fried
Bankman-Fried himself took the witness stand and faced extensive questioning. During his testimony, he encountered difficulties remembering specific statements and decisions, which the prosecution may attempt to use against him. However, the defense’s arguments regarding the absence of a trust relationship under English law and the objective interpretation of the contractual terms provide counterpoints to the prosecution’s case. Bankman-Fried’s testimony, combined with the legal arguments presented by his attorneys, form a comprehensive defense strategy aimed at challenging the core allegations of the fraud case.
Potential sentencing for Bankman-Fried
If convicted, Bankman-Fried faces the possibility of a lengthy prison sentence, with the charges against him carrying a cumulative maximum punishment of over 100 years. However, Bankman-Fried has pleaded not guilty to all the charges, and his defense team is vigorously challenging the prosecution’s case by questioning the existence of a trust or fiduciary relationship under English law. The outcome of the trial and any potential sentencing will depend on how the jury evaluates the arguments presented by both the prosecution and the defense.