Sam Bankman-Fried Needs to Lawyer Up, Get Smart, and Stop Talking

Sam Bankman-Fried was one of the world’s richest people before he lost more than $16 billion in a few days last month. Now, with just $100,000 in his bank account, he is “trying to figure out” how to pay a lawyer to represent him. We know this because he is talking to anyone who will listen about FTX and his role in its demise. So, what will his legal defense look like?

Stop Talking Now

You don’t need to be an attorney to understand why talking publicly and agreeing to testify under oath when you’re under investigation by the Department of Justice and the Securities and Exchange Commission is a bad idea. Everything he says can be used against him.

Some of his statements have been foolish, like his “f—k regulators” retort, but even his self-serving statements can come back to hurt him, as the son of two Stanford Law School professors should know.

The smart move would be to remain silent and let others—like his attorneys—do the talking because their words can’t be used against him at trial.

If Bankman-Fried, also known as SBF, ever wanted to take the stand in his own defense, he could do so, but at that point he would know the evidence amassed against him and would be able to work with his attorneys to craft testimony that did not contradict the written record. Right now, facing tough interviews, he’s just winging it.

Bankman-Fried may think he’s helping himself by making FTX’s collapse sound like a business mistake rather than a colossal fraud. But prosecutors can pick apart his public statements for inconsistencies and use his statements to show the extent of his knowledge or the facts that he has conveniently forgotten now that he faces scrutiny.

Under US rules of evidence, Bankman-Fried could not introduce his own statements in his defense at trial because they would constitute hearsay. But the government could use his statements against him.

This one-sided rule means that his statements can only hurt him and never help him. So, a good defense would start with remaining silent.

Keeping It Civil

I often represent clients who face potential liability on a number of different fronts at the same time, but I’ve rarely seen someone facing as many potential legal issues as Bankman-Fried. His former business has filed for bankruptcy, he is likely under investigation by regulators in several different countries, is already the defendant in lawsuits from alleged victims, and is reportedly the subject of a criminal investigation.

Given what we know publicly, Bankman-Fried has serious potential criminal liability. At this point, remaining out of prison is a “win” for him even if he ends up losing everything and faces crippling fines and civil penalties. The primary concern of his defense team should be a criminal indictment for fraud.

Simply put, fraud is when someone lies to you to get your money. But to obtain a conviction for fraud, prosecutors must prove beyond a reasonable doubt that the defendant knowingly made false statements with the intent to defraud. The Bankman-Fried defense would need to argue that he didn’t intend to defraud anyone and didn’t know that any of FTX’s customers were lied to.

Bankman-Fried has almost certainly been told this by lawyers, which likely explains why he couldn’t give a straight answer to ABC News’ George Stephanopoulos when he repeatedly asked if Bankman-Fried knew that FTX customer money was given to Alameda Research, a trading firm he co-founded.

FTX promised customers that their funds would remain available to them at FTX, so if Bankman-Fried knew those funds were used to help Alameda—as Alameda co-head Caroline Ellison claimed—he may be guilty of committing fraud.

For that reason, at trial, the Bankman-Fried defense team is likely to portray him as a bumbler who wasn’t focused on details and was in over his head. Unfortunately for them, that contradicts the carefully crafted public persona that Bankman-Fried built for years.

Don’t Know Anything

FTX’s new CEO, John Ray, claimed in a court filing that he had never seen “such a complete failure of corporate controls and such a complete absence of trustworthy financial information.” Payments were approved by emojis in an online chat, the company did not have an “accurate list” of its own bank accounts, and it used messaging platforms that automatically deleted messages and “encouraged employees to do the same.”

You can expect Bankman-Fried’s memory to fade just like the messages left by FTX and its employees. If Bankman-Fried had an experienced criminal defense attorney, his defense would be built around only what the government could prove.

If he had sufficient funds, which does not appear to be the case, he would pay for the legal defense of his associates. If all of them admitted nothing beyond what the government could prove, and told a consistent story, it could be possible to avoid a criminal indictment.

Instead, Bankman-Fried continues to box himself in with lengthy public statements. If he does not stop talking and hire a good attorney, he may miss the opportunity to mount a viable defense.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

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Renato Mariotti is a partner at Bryan Cave Leighton Paisner. A former federal prosecutor, he represents individuals and companies who are the subjects of criminal and regulatory investigations.