Legal experts claimed that the creator of FTX, Sam Bankman-Fried, who is facing increasing legal repercussions for the failure of his crypto exchange, may have jeopardized his defence by speaking out recently.
In tweets and meetings with the media, Bankman-Fried has criticized government regulations and attempted to explain why FTX crashed. Such statements, according to lawyers, will probably make it more challenging for the defence attorneys to handle the repercussions of the exchange’s failure and navigate numerous criminal probes.
A lawyer who defends themselves has a fool for a client, by an old proverb. The opposite is also accurate. A fool for a lawyer, as per Justin Danilewitz, a notable white-collar defence attorney with the firm Saul Ewing Arnstein & Lehr, is someone who is under investigation and seeks to defend themselves in front of the general public.
In an interview with a Vox reporter that was aired this week, Bankman-Fried profanely disparaged US regulators, expressed regret about his choice to file for bankruptcy, and blamed the failure of FTX in part on “messy accounting.” Later, he claimed he had not intended for anyone to hear the chat.
According to sources who spoke in secrecy, the US Justice Department, the Securities and Exchange Commission, and the CDTC – Commodity Futures Trading Commission are currently looking into FTX. A class action lawsuit was launched on Tuesday against Bankman-Fried and other individuals who pushed FTX by a group of cryptocurrency investors.
The allegations made by Bankman-Fried have already been used in the American bankruptcy proceedings for FTX. His constant and disruptive tweeting was hurting their efforts, the lawyers for the exchange claimed in court documents filed on Thursday.
He has joined a select group of high-profile individuals, like Elon Musk, CEO of Twitter and Tesla Inc. (TSLA.O), former pharmaceutical executive Martin Shkreli, and former U.S. President Donald Trump, who have sustained to talk publicly amid penetrating judicial scrutiny.
Lawyers virtually universally advise clients involved in legal proceedings or under investigation by the authorities not to discuss case-related topics. Such declarations might be used as evidence in court, which would be detrimental to a well-prepared defence. As per experts, social media makes it simpler for customers with substantial popular platforms to remount their own defence.
Owing to Stephen Gillers, law professor at New York University and a specialist in legal ethics, the fundamental query is who controls the narrative. From the lawyer’s perspective, once they have been retained, they have complete control over how the case is portrayed to the general public.
Martin Flumenbaum of the law firm Paul, Weiss, Wharton, Rifkind, & Garrison is one lawyer who has already left Bankman-Fried, albeit the lawyer did not place the blame on the 30-year-old entrepreneur’s contentious remarks.
Flumenbaum said in a statement that Mr Bankman-Fried was informed a few days ago following the declaration of the FTX bankruptcy that disputes had developed that prevented someone from representing him.
Flumenbaum declined to go into detail about the disputes. Christian Larsen, the chairman and founder of the cryptocurrency payment and exchanging company Ripple Labs Inc., is being defended by Flumenbaum, a former attorney for the imprisoned financier Michael Milken, in a well-publicized litigation brought by the SEC. Many other customers in the financial business are represented by his legal company.
A Semafor article showed that Bankman-Fried has added David Mills, a law professor at Stanford University, and Gregory Joseph, a criminal defence attorney with the New York firm Joseph Hage Aaronson, to his legal team. Bankman-Fried did not reply to inquiries concerning his legal team this week. Bankman-parents Fried’s are both Stanford Law School professors.
Joseph, a past president of the American Academy of Trial Lawyers, has authored articles on evidence law and racketeering law. White-collar crime and criminal law are Mills’ areas of expertise.
Requests for comment from Joseph and Mills were not answered.