Seven has not been a lucky number for disgraced FTX founder Sam Bankman-Fried lately.
The curly-haired whiz kid’s failed crypto exchange FTX lost over $7 billion of customer funds. And he has been charged with a seven-count superseding indictment ranging from wire fraud to securities fraud and more, and now, the U.S. government wants to strike all seven of his expert witnesses.
This, as in a court filing earlier this week (Aug. 28), the U.S. Department of Justice (DOJ) requested that all of Bankman-Fried’s proposed expert witnesses be excluded from testifying at his fast-approaching criminal trial this October.
“The defense’s proposed experts and accompanying disclosures suffer from an array of deficiencies that warrant preclusion of all seven witnesses … they serve no other purpose than to provide an expert patina to inadmissible hearsay testimony about the defendant’s supposed lack of criminal knowledge or intent,” wrote the federal prosecution in a 45-page filing.
“The Court should exercise its gatekeeping authority and preclude such impermissible expert testimony,” the covernment’s lawyers added.
A video conference to discuss the matters is set for Wednesday (Aug. 30) afternoon.
Bankman-Fried’s list of witnesses include the British barrister Lawrence Akka; two consultants, Thomas Bishop and Joseph Pimbley; data analytics and forensics expert Brian Kim; Bradley Smith, a law professor at Capital University Law School; Andrew Di Wu, an assistant professor at the University of Michigan; and Peter Vinella, who is being presented as a financial services expert.
The former web3 founder’s legal defense team has also moved to bar one of the government’s proposed witnesses, Peter Easton, from testifying as well.
“Professor Easton’s opinions constitute an impermissible factual narrative that does no more than repeat the Government’s theory of the case without any proffered, admissible analysis to aid the jury,” the defense wrote.
Read also: A Crypto Crime Chronicled: Prosecutors Lay Out Case Against Bankman-Fried
Certain of the witnesses disclosed in court filings their hourly fees for preparing and providing their testimony, with Akka costing Bankman-Fried $1,010 per hour; Smith $1,200; Bishop billing $400; Kim $650; Pimbley charging $720; Wu asking $650; and Vinella having worked out an agreement with Bankman-Fried’s team where his fees are contingent on the outcome of the case.
It remains unclear where Bankman-Fried, who once claimed to have less than $100,000 in his bank account after his digital fortune — and the funds his customers trusted FTX with — vanished, is getting the money to pay for his defense from.
For their part, the government’s witness, Easton, is charging $1,175 an hour for his testimony and services.
Suppose the court does not grant the motions to preclude Bankman-Fried’s assembled experts or the government’s own. In that case, both legal teams are “respectfully requesting” that the court conduct Daubert hearings for each of the witnesses being put forward by either side.
A Daubert hearing “permits the parties to examine the challenged expert in open court to develop his or her testimony for purposes of evaluating its admissibility.”
Each of Bankman-Fried’s seven witnesses was strongly critiqued in the government’s filing.
Vinella, in particular, received flak for his role in providing testimony on, but not limited to, “the development of new financial products and services, the practices and rules of cryptocurrency markets compared to other traditional financial systems, the nature of the cryptocurrency industry prior to the emergence of FTX, the content of the defendant’s advocacy for cryptocurrency regulation, the nature of “FTX’s competitive position compared to other crypto exchanges, the services provided by FTX, and his perception that ‘FTX appeared to have been successful prior to November 2022.’”
Per the government’s filing, Vinella would also opine that there was a “lack of clarity concerning potentially applicable legal and regulatory frameworks,” that “FTX was domiciled offshore and FTX International operated outside of the U.S.,” that “FTX’s operational workarounds, programming bugs, and other shortcomings were predictable,” that “senior executives who are not software engineers typically do not know or direct the inner workings of their company’s software,” that “FTX took commercially reasonable steps to protect the interests of U.S. consumers,” and that “many of the allegations set forth or implied in the indictment are, in fact, widely-accepted practices in the financial services industry” including “using third-party agents,” “commingling of customer assets,” “unrestricted use of customer assets,” “preferential treatment provided to certain customers,” and “loans to founders.”
Read Also: Bankman-Fried Gears Up ‘Lawyers Made Me Do It’ Defense Strategy
As PYMNTS reported, Bankman-Fried’s defense team has argued for his temporary release because he is “unable to adequately prepare for trial and prepare the defense, which is a violation of Mr. Bankman-Fried’s Sixth Amendment rights” given that he is currently in jail.
“This is a document-heavy case and Mr. Bankman- Fried is entitled to defend himself,” the defense wrote to the court. “The Government pretending that his current circumstances are not interfering with his right to counsel is false.”
“There is … no basis to grant the defendant the extraordinary accommodations unavailable to other inmates that he requests, let alone to grant him temporary release,” the government responded.
And while Bankman-Fried’s legal team goes fishing for ways to free their client, customers of Bankman-Fried’s crypto platform are getting phished themselves after a recent hack of the claims agent in the FTX bankruptcy case, Kroll.
“FTX learned that Kroll, the claims agent in the bankruptcy, experienced a cybersecurity incident that compromised non-sensitive customer data of certain claimants in the pending bankruptcy case,” the platform’s current management tweeted.
Several FTX customers have been sharing the phishing emails and behavioral scams they have since been subject to, which inform them that they are eligible to withdraw their FTX funds.
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