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Setback for FTX Founder Sam Bankman-Fried as Judge Limits Expert Witnesses in Fraud Trial

In a significant setback for Sam Bankman-Fried, the founder of the FTX cryptocurrency exchange, a US District Judge has imposed restrictions on his ability to present expert witnesses at his ongoing criminal fraud trial. Bankman-Fried had aimed to bring seven experts to testify on various aspects of cryptocurrency markets and English contracts to convince the jury of his innocence in charges of misappropriating billions of dollars in FTX customer funds to cover losses at his Alameda Research hedge fund.

US District Judge Lewis Kaplan recently issued a written order that excluded three of the proposed expert witnesses, deeming their testimony either irrelevant or potentially confusing for the jury. This ruling came in response to a motion filed by the US Department of Justice to exclude Bankman-Fried’s suggested witnesses.

One of the witnesses, Peter Vinella, intended to discuss “FTX’s use of widely accepted practices in the financial services industry.” However, Judge Kaplan found this testimony to be irrelevant to the case.

Furthermore, Bankman-Fried’s attempt to call English barrister Lawrence Akka to testify about FTX’s terms of service, governed by English law, was denied. Kaplan reasoned that only a judge could guide jurors on matters of law. Akka’s testimony was considered an expression of “legal opinions” rather than aiding the jury’s comprehension of the terms of service.

The defense had also sought testimony on various aspects of FTX, including its financials, software, and document metadata, from consultants Thomas Bishop, Joseph Pimbley, and data analytics specialist Brian Kim. However, their potential testimony was rejected based on Rule 16, which requires the government to disclose specific evidence it intends to use during the trial.

Bankman-Fried’s legal team retains the option to request that certain witnesses be allowed to testify if they believe these witnesses can refute the testimony presented by government witnesses. However, the government may oppose such filings.

Court documents indicate that Bankman-Fried may argue that FTX’s terms of service did not explicitly prohibit customer funds for investments, drawing a parallel to how traditional banks use deposits to fund loans. This argument may contend that such practices were common within the cryptocurrency industry.

In the upcoming trial, the prosecution and the defense are expected to call upon expert witnesses to elucidate complex issues. The prosecution plans to present three former FTX and Alameda executives, who have already pleaded guilty to their roles in the alleged fraud, as witnesses in Bankman-Fried’s trial.

The trial is anticipated to span up to six weeks as it unfolds. Bankman-Fried, a 31-year-old former billionaire, has entered a not-guilty plea to the charges against him. While acknowledging deficiencies in risk management at FTX before its collapse in November 2022, he vehemently denies any wrongdoing in the alleged misappropriation of funds.


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