NEW YORK – In a recent development, defense attorneys representing disgraced FTX founder Sam Bankman-Fried (SBF) have motioned to dismiss 10 of the 13 charges against their client citing claims that prosecutors rushed to accuse SBF in the downfall of his crypto exchange. The 31-year-old entrepreneur pleaded not guilty to all charges in January. 

SBF’s Legal Defense

His counsel argued that some of these fraud charges are based on a legal theory invalidated by the US Supreme Court on May 11. The “right to control” theory focuses on depriving victims of economically-valuable information rather than tangible property.

According to the Cardozo Law Review, the theory “holds that one’s ‘right to control’ his or her assets qualifies as ‘property.’ Thus, even if defendants did not intend harm, they may be convicted if they withheld from the putative victims ‘potentially valuable economic information,’ thereby depriving them of their right to control their assets.”

The defense counsel has moved to dismiss:

1. Counts 1-2: Conspiracy and commission of wire fraud on FTX customers.

2. Counts 3-4: Conspiracy and commission of wire fraud using the purchase and sale of derivatives.

3. Counts 7-9: Conspiracy and commission of wire fraud on Alameda Research lenders; committing bank fraud.

4. Count 10: Conspiracy to operate an unlicensed money-transmitting business.

5. Counts 12-13: Conspiracy to make unlawful political campaign contributions, defraud the Federal Election Commission, and bribe foreign actors. 

Defense attorneys claim the government’s response was excessive and that civil and regulatory processes are what is relevant in the case, not federal law. The defense also argued that some of the charges were outside the scope of the original extradition agreement and required the consent of the Bahamas, where FTX was headquartered. 

U.S. Prosecutors Argue Against Dismissal

U.S. Prosecutors have filed a 100-page response calling the defense’s motion “meritless.” They emphasized that the allegations in the indictment are sufficient and legally sound, stating “the defendant’s alleged misconduct falls within the heartland of what these [federal] statutes prohibit.”

They reject the notion that the charges were made in haste and assert that SBF and his co-conspirators made false and misleading representations to lenders regarding the financial condition of his hedge fund, Alameda Research. They further argued that specificity is not required to substantiate the strong charges.

Prosecutors also filed a separate court document regarding the claim that the Bahamas had to consent to the original extradition. Per the U.S.-Bahamas treaty, prosecutors argued, “The treaty expressly reflects only an agreement between the two countries that the extradited person will not be ‘detained, tried, or punished’ without the consent of the executive authority of the extraditing country.”

Challenges & Future Proceedings

Legal expert and former federal prosecutor Tim Howard spoke to Reuters about the hurdles in the defense’s motion. Howard surmised, “SBF has an uphill battle [...] He’s going to have to prove that one of these theories of fraud are applicable to escape liability.”

While admitting guilt over subpar risk management at FTX, SBF has vehemently denied any wrongdoing or misappropriation of funds. He has also distanced himself from the collapse of Alameda Research, the hedge fund he owned. 

Oral arguments for the defense’s motion on the validity of the criminal charges will begin on June 15. A formal trial is slated to begin on October 2. SBF is under house arrest at his parents’ Palo Alto, California home.