Appeals judges react skeptically to Sam Bankman-Fried’s bid to overturn fraud conviction

Federal Appeals Court Skeptical of Bankman-Fried’s Bid to Overturn Fraud Conviction

Federal appeals court judges expressed deep skepticism Tuesday as attorneys for disgraced cryptocurrency entrepreneur Sam Bankman-Fried argued that his fraud conviction should be overturned due to unfair trial limitations.

During the hearing at the 2nd U.S. Circuit Court of Appeals in Manhattan, Bankman-Fried’s lawyer, Alexandra Shapiro, claimed the defense was “cut off by the knees” at his 2023 trial when Judge Lewis A. Kaplan restricted evidence about legal advice Bankman-Fried had received.

“Mr. Bankman-Fried’s trial was fundamentally unfair because the jury only got to hear one side of the story,” Shapiro told the three-judge panel.

The 33-year-old former crypto mogul is currently serving a 25-year prison sentence after a jury found him guilty of defrauding customers and investors of billions of dollars while operating FTX, once the world’s second-largest cryptocurrency exchange. The company’s spectacular collapse into bankruptcy in November 2022 came just months after it appeared to be thriving, with high-profile Super Bowl advertisements and celebrity endorsements.

Circuit Judge Barrington D. Parker appeared unconvinced by the defense’s arguments, noting that his review of the trial record revealed “very substantial evidence” supporting the conviction. In a pointed exchange, Parker asked: “Are you seriously suggesting to us that if your client had been able to testify about the role that attorneys played in preparing these various documents, the not-guilty verdicts would have rolled in?”

Parker’s skepticism was echoed by fellow judges Eunice C. Lee and Maria Araujo Kahn. Parker further criticized the defense strategy, suggesting attorneys had “gave up” on asserting that Bankman-Fried relied on legal advice for all decisions, instead offering what he described as a “vague there-were-attorneys-out-there-somewhere defense.”

Shapiro countered that the government unfairly portrayed the case to the jury by emphasizing that thousands of investors lost billions of dollars they could never recover. “The picture the government painted was a false one,” she said. “Mr. Bankman-Fried should have been able to tell his story… The jury should have had the full picture. And yet, Mr. Bankman-Fried sits in prison.”

The defense attorney further claimed that Judge Kaplan improperly limited Bankman-Fried’s testimony, preventing jurors from understanding the full role attorneys played in his decision-making. She also argued that customer funds were never stolen and that what occurred at FTX was merely a temporary liquidity crisis. According to Shapiro, 98% of all creditors have already received 120% of their investment, and the bankruptcy estate still has $8 billion available to pay approximately $2 billion in remaining claims.

Federal prosecutor Nathan Rehn vigorously disputed these characterizations, maintaining that the trial was fair and the evidence against Bankman-Fried overwhelming. Rehn highlighted that three of the four people who knew Bankman-Fried was illegally using billions in customer deposits to fund investments and political donations testified against him at trial.

The case represents one of the most significant fraud prosecutions in the cryptocurrency industry’s short history. Bankman-Fried’s fall from grace has been particularly dramatic considering his former status as an industry wunderkind who had graced magazine covers and was once worth an estimated $26 billion.

The cryptocurrency industry has faced increasing regulatory scrutiny in the wake of FTX’s collapse, with federal agencies stepping up enforcement actions against digital asset firms. The outcome of this appeal could have implications for how future crypto-related fraud cases are prosecuted and defended.

The appeals court is expected to issue a ruling in the coming months, though no specific timeline was announced. Bankman-Fried remains incarcerated as he awaits the court’s decision.