In December 2022, the U.S. government indicted Mr. Bankman-Fried on eight counts, including wire fraud, securities fraud, money laundering, and conspiracy to violate federal campaign finance laws. After agreeing to an expedited extradition procedure, Sam Bankman-Fried (“SBF”) returned to the U.S. to face charges, but the government sought to proceed on all original charges and added new ones, which SBF's defense claims are improperly brought.

On May 8, 2023, Sam Bankman-Fried’s criminal defense lawyers filed 7 motions to dismiss seeking to dismiss the charges against the FTX founder:  Crypto Criminal Defense Lawyer Blog 

Pretrial Motion No. 1: Motion to dismiss Counts 9-10 and 12-13 based on violation of the rule of specialty. Mr. Bankman-Fried agreed to simplified extradition, reserving his rights under the rule of specialty. The rule of specialty has been violated because Count 12 was not included in the Warrant of Surrender and Counts 9-10 and 13 were impermissibly added post-extradition

TLDR: On December 10, 2022, the US Government requested the provisional arrest of SBF in the Bahamas for extradition to the United States based on the original indictment charging wire fraud, securities fraud, money laundering, and conspiracy to violate federal campaign finance laws. SBFG was arrested on December 12, 2022. SBF then finally consented to extradition on December 20, 2022, and was extradited based on the first seven counts in the indictment.

The defense argues that the rule of specialty in the Extradition Treaty ensures that a person can only be detained, tried, or punished for the offenses for which extradition was granted. But SBF now faces additional charges not included in the original extradition, which the defense argues may violate the rule of specialty because the Bahamas did not consent to extradition on the additional new criminal charges.

Pretrial Motion No. 2: Motion to dismiss Counts 7-9 and 1-2 based on invalidity of the “right to control” theory of property fraud and because the S5 Indictment does not identify a valid property interest that Mr. Bankman-Fried obtained from Alameda’s lenders or from FTX’s customers in violation of the wire fraud statute;

TLDR: The Government filed its Fifth Superseding Indictment on March 28, 2023. S “S5 Indictment”). The defense moves to dismiss Counts 7 through 9 and 1 through 2 of the S5 Indictment for failure to state an offense. The motion is based on the argument that the bank fraud and wire fraud charges are premised on an invalid property right or do not allege a valid property interest, particularly in light of a recent confession of error by the Solicitor General in the Ciminelli v. United States case. 

As Petitioner in Ciminelli explained, the “right to control” theory erroneously disposes of a common law element of fraud—the proof of intended harm to a recognized property interest—because the withholding of information alone does not constitute a deprivation of property. See generally Pet’r Br. at 9-49; Br. for Resps. Aiello & Gerardi in Supp. of Pet’r at 30-40, Ciminelli v. United States, No. 21-1170 (U.S. Aug. 29, 2022), available at 2022 WL 3999795 (“Aiello Br.”). The right to control theory is further undermined by the structure of the mail, wire, and bank fraud statutes and multiple canons of statutory construction, which require narrow construction of the term “property” to avoid criminalizing ordinary transactional conduct that Congress did not intend to criminalize through a property fraud statute. See id. Similarly, a defendant does not “obtain” property from a victim—as required by the text of the bank fraud and other property fraud statutes—when the defendant deprives another of “potentially valuable economic information” because the defendant does not acquire a transferable property interest. See generally Aiello Br. at 14–30. 

Conceding the invalidity of the “right to control” theory as currently formulated by the Second Circuit, the government instead argued that a subset of “right to control” cases involving actual or intended “tangible economic harm” to the victim are salvageable on an alternate theory—one in which the defendant obtains property by fraudulently inducing the victim to enter into a contract or transaction. See Resp. Br. at 23-24, 26-31; Tr. at 31 (“right to control” theory should survive in fraudulent inducement cases “where the victim is tricked into paying for something fundamentally different from what he bargained for”). In such circumstances, the case may still “satisfy the traditional elements of property fraud.” See id. at 12-13. But even the government conceded that preserving the “right to control” theory with the “tangible economic harm” requirement “might still go too far,” Tr. at 37, while the Justices expressed at argument that they “took the case to resolve the right-to-control issue and not this other theory that you’re attempting to develop about fraudulent inducement.” Id. at 38 (Gorsuch, J.). Motion to Dismiss No. 2

The S5 Indictment charges Bankman-Fried with conspiring to defraud banks and lenders by providing false information, but the defense argues that the indictment does not allege a valid property interest under the bank fraud and wire fraud statutes. Instead, it relies on a "right to control" theory of property fraud, which the Solicitor General has admitted is invalid in the Ciminelli case.

The defense contends that if the Supreme Court invalidates the Second Circuit's "right to control" theory in Ciminelli, Count 9 must be dismissed. Even if the Supreme Court endorses a narrower formulation of the "right to control" theory, the author argues that the S5 Indictment still does not allege a violation of this version, as it does not allege tangible economic harm.

Similarly, the S5 Indictment does not allege a valid property right for the wire fraud offenses in Counts 7, 8, 1, and 2. The defense concludes that these counts must also be dismissed due to the lack of a valid property interest under the wire fraud statute.

Pretrial Motion No. 3: Motion to dismiss Counts 3-4 and 10 for failure to state an offense. The commodities fraud charges allege facts occurring almost entirely outside the United States and fail to allege the required “connection with” regulated sales or transactions. The unlicensed money transmitting charge fails because FTX was not required to register as a money services business solely for using a U.S. bank account.

TLDR: SBF’s defense team seeks the dismissal of commodities fraud charges (Counts 3-4) and a conspiracy to operate an unlicensed money transmitting business charge (Count 10) for failure to state an offense. The dismissal of Counts 3 and 4 is based essentially two grounds: (1) the government has not established that the alleged fraud was conducted "in connection with" a commodities transaction, and (2) the extraterritorial application of the Commodities Exchange Act (CEA) is impermissible. The defense also argues that the alleged fraud is “incidental” rather than integral to any commodities transaction, and the alleged conduct occurred predominantly outside the United States.

The defense argues that Count 10 should also be dismissed because the government failed to allege that SBF operated an unlicensed money transmitting business within the meaning of 18 U.S.C. § 1960. The registration requirements of the Bank Secrecy Act do not apply to FTX, as its only relevant domestic activity was the use of a U.S. bank account. Therefore, Count 10 fails to allege an offense and should be dismissed.

Pretrial Motion No. 4: Motion to dismiss, or in the alternative sever, Counts 12 and 13. The S5 Indictment does not properly allege illegal campaign contributions or payments to Chinese officials to “obtain[ ] or retain[ ] business,” and fails to establish venue for Count 13

TLDR: The SBF defense team argues that Counts 12 and 13 of the S5 Indictment should be dismissed or tried separately from Counts 1 through 11. The defense essentially argues that Count 12 (alleging SBF’s participation in a conspiracy to make unlawful political contributions and defraud the FEC) is not supported by the facts. The defense contends that the S5 Indictment fails to allege any contributions that would violate federal campaign finance laws.

Count 13 charges SBF with conspiracy to violate the FCPA's anti-bribery provisions. The defense argues that the government failed to properly allege that payments were made to assist in obtaining or retaining business—an essential element of an anti-bribery violation. Additionally, the defense claims that venue in the Southern District of New York is improper for the alleged conspiracy to violate the FCPA.

In the alternative, the defense moves for severance of Counts 12 or 13 from the S5 Indictment because as the alleged, the conspiracies lack the necessary similarities or connection for proper joinder under Federal Rule of Criminal Procedure 8(a).

Pretrial Motion No. 5: Motion to compel additional discovery, including Rule 16, BradyGiglio and Jencks Act materials, from the FTX Debtors on the basis that they are part of the “prosecution team”

TLDR: The defense argues that the FTX Debtors have been working closely with the Government to investigate and prosecute SBF. The defense claims that the FTX Debtors and their counsel have essentially acted as federal agents, assisting the Government in gathering evidence, interviewing witnesses, and developing strategy. Due to their extensive involvement, the defense asserts that the FTX Debtors should be considered part of the "prosecution team" for purposes of the Government's discovery obligations under Federal Rule of Criminal Procedure 16, Brady v. MarylandGiglio v. United States, and 18 U.S.C. § 3500 (the "Jencks Act"). The defense raises concerns about undisclosed Brady material and asks the Court to order the Government to review the documents in the possession of the FTX Debtors and produce any discoverable material.

Pretrial Motion No. 6: Motion for a bill of particulars and early disclosure of Brady, Giglio, and Jencks Act materials, a list of Government witnesses, and accelerated disclosure of FRE 404(b) evidence

TLDR: The defense is seeking a bill of particulars with respect to specific counts charged in the superseding indictment, as well as disclosure of Brady and Gigliomaterial, witness statements, a list of government witnesses, and accelerated disclosure of Rule 404(b) material. The defense argues that the indictment lacks essential information about several crimes alleged against him, hindering his ability to prepare a defense.

The motion highlights the extensive and complex nature of the businesses involved and the sprawling allegations made against SBF. The defense contends that without further particulars and pre-trial disclosures, SBF will be left guessing about the nature of the charges and could face surprise at trial. The motion seeks further specificity to enable him to understand the charges against him and prepare his defense.

Additionally, the motion requests accelerated disclosure of witness statements, a list of government witnesses, and the disclosure of any evidence the government intends to introduce under Rule 404(b) of the Federal Rules of Evidence or as background of the conspiracies charged in the superseding indictment.

Pretrial Motion No. 7: Motion to dismiss multiplicitous counts. Counts 1 and 9, and Counts 3 and 1, are the same in fact and law. 

TLDR: The defense team argues that Counts 9 and 10 of the S5 Indictment are “multiplicitous” of Counts 1 and 3, respectively, as they charge the same offenses and would violate the Double Jeopardy Clause unless one count in each pair is dismissed. The motion claims that the facts of the conspiracies charged in Counts 1 and 9, as well as Counts 3 and 10, substantially or entirely overlap, rendering them multiplicitous under the Second Circuit's standard for conspiracies charged under the same statute.

SBF seeks either the dismissal of the multiplicitous counts in the S5 Indictment before trial or the requirement that the Government elect between them to avoid undue prejudice. The defense notes in the motion that Second Circuit precedent permits the charging and trial of multiplicitous counts, but prohibits conviction and punishment for the same crime twice. Thus, if found guilty, SBF may only be convicted once under Counts 1 and 9, and once under Counts 3 and 10. 

We now await the government’s response to the above motions and whether the court will schedule live hearings to address the substances of these motions. 

This blog post was prepared with the assistance of ChatGPT-4 AI. Nothing in this post should be considered legal advice or the creation of an attorney-client relationship. This blog is strictly for informational purposes only.