The Sam Bankman-Fried Legal Team Moved to Pursue Theory on FTX’s Terms of Service

Attorneys representing former FTX CEO Sam “SBF” Bankman-Fried want to bring up certain information from the crypto exchange's terms of service during testimony.

In an Oct. 12 filing in the U.S. District Court for the Southern District of New York, SBF's legal team said the request is aimed at resolving “certain evidentiary issues” in the ongoing criminal trial. The case at issue involves competing theories by prosecutors and the defense team regarding the misappropriation of FTX funds.

According to Bankman-Fried's attorneys, prosecutors intend to call witnesses and confirm their “understanding and consideration” of how the money they deposited at FTX will be used. Defense attorneys said that regardless of whether users had any understanding of FTX's terms of service, “adherence to these terms is a defense to the crime charged.”

“It is the defense's position that the rights and obligations of the parties to the commercial relationship, due to their attorney and understanding, do not establish a theory of abuse of the federal fraud statutes,” the filing added.

“The defense expects to ask questions for Alameda from witnesses and creditors who are customers and investors of FTX.

Defense attorneys have asked the court to subpoena prosecution witnesses and not provide “truth witnesses” based on FTX's terms of service. He cited Paradigm founder Matt Huang's testimony as saying he provided “expert opinion” rather than “daily experience” on FTX services.

“The government is attempting to shift its burden to prove a misappropriation through testimony from customers and others about their beliefs and expectations to prove an essential element of the embezzlement theory beyond a reasonable doubt,” the filing said. “Indeed, evidence of customers' beliefs about their legal relationship with FTX would only serve to distract and confuse the jury in considering the facts in light of the meaning of the terms of service.”

Related: Changpeng Zhao's tweet ‘contributed' to FTX collapse, says Carolyn Ellison

October 13 marked the eighth day of Bankman-Fried's criminal trial, for which he was found not guilty of all charges. This week, the former CEO of Alameda Research and SBF's ex-girlfriend, Caroline Ellison, pleaded guilty to committing fraud at the direction of Bankman-Fried by submitting false documents and making misleading statements about Alameda using FTX funds.

Zach Prince, the founder and CEO of Blockchain. Late on Oct. 12 and Oct. 13, the firm witnessed ripples from the collapse of its $400 million credit line to FTX US in July 2022 and the collapse of Terraform Labs and Three Arrows Capital. . The hearing was adjourned till October 16.

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