The public statements of FTX founder Sam Bankman-Fried pose a challenge to his lawyers



FTX founder Sam Bankmanfried, who is facing mounting legal challenges due to the collapse of the cryptocurrency exchange, may have hurt his defense by speaking out in recent days, legal experts said.

Bankman-Fried sought an explanation for the implosion of FTX And underrated government regulators in positions at Twitter and conversations with reporters. The lawyers said such statements would likely make life more difficult for defense attorneys seeking to manage the fallout from the stock market crash and navigate multiple federal investigations.

“There is a saying that a lawyer who represents himself has a foolishness toward his client. The opposite is also true. A person who is under investigation and tries to defend himself in a court of law,” said Justin Danilowitz, white-collar defense attorney at the law firm Saul Ewing Arnstein & Lehr. Public opinion has a fool for a lawyer.”

In conversation with a Vox reporter published This week, Bankman-Fried blamed FTX’s collapse in part on “messy accounting,” regretted its decision to file for bankruptcy and denigrated US regulators with obscenities. He later said he did not intend to make the conversation public.

Sources told Reuters that FTX is now facing investigations from the US Department of Justice, the Securities and Exchange Commission and the Commodity Futures Trading Commission. On Tuesday, a group of encryption The investors filed a class action lawsuit against Bankman-Fried and others who promoted FTX.

Bankman-Fried’s statements have already been cited in FTX’s US bankruptcy proceedings. The exchange’s attorneys said in court papers Thursday that he was undermining their efforts with his “incessant and disturbing tweets.”

He has become the latest high-profile figure to continue to speak out despite facing serious legal scrutiny, joining a group that has included Tesla And the Twitter Executive Director Elon MuskFormer Pharmaceutical CEO Martin Shkreli and former US President Donald Trump.

Take control of the story

Clients in litigation or facing government investigations are always advised by attorneys not to talk about issues related to the case. Such statements can become evidence in court and can undermine a carefully crafted defence. Experts said social media has made it easier for clients with large public platforms to try to defend themselves.

“The fundamental question is who is in control of the story?” said Stephen Gellers, a law professor at New York University and an expert in legal ethics. “From a lawyer’s point of view, once appointed, it is the lawyer who controls the story as far as public consumption goes.”

At least one attorney, Martin Flumenbaum of the law firm Paul, Weiss, Rifkind, Wharton & Garrison, has broken up with Bankman-Fried, though the attorney has not blamed the 30-year-old businessman for the controversial remarks.

“Mr Bankman Fried informed us several days ago after FTX filed for bankruptcy that conflicts had arisen that prevented us from representing him,” Flumenbaum said in a statement to Reuters.

Flumenbaum declined to describe the conflicts. Flumenbaum, who was a former attorney for convicted financier Michael Milken, defended Christian Larsen, founder and president of cryptocurrency exchange and exchange firm Ripple Labs Inc, in a high-profile lawsuit filed by the Securities and Exchange Commission. His law firm represents many other financial industry clients.

Bankman Fried, who did not respond to questions about his legal team this week, has named Gregory Joseph, a criminal defense attorney at the New York law firm of Joseph Hague Aronson, and Stanford University law professor David Mills as members of his legal team, according to a report from Semaphore. Bankman-Fried’s parents both work at Stanford Law School.

Joseph is a past president of the American College of Trial Lawyers who has written on racketeering law and rules of evidence. Mills specializes in criminal law and white collar crime.

Neither Joseph nor Mills responded to requests for comment.

© Thomson Reuters 2022

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