Convicted former cryptocurrency mogul Sam Bankman-Fried on Tuesday requested a new federal trial based on what he claims is newly discovered evidence concerning his company's solvency and its ability to repay all FTX customers. The motion challenges prosecutors' core allegation that Bankman-Fried looted $8 billion of customer money.
Bankman-Fried was convicted in 2023 on charges he fraudulently directed his Alameda Research hedge fund to secretly commingle billions of dollars of customers' deposit funds from his FTX exchange platform. Prosecutors alleged he used these funds as loans for risky cryptocurrency futures trading on the digital currency exchange he co-founded and controlled.
The motion was filed by Bankman-Fried's mother, Stanford Law School professor Barbara Fried, on behalf of her son in Manhattan federal court. The filing represents a self-represented bid for a new trial, marking a notable development in the high-profile cryptocurrency fraud case.
According to the motion, Bankman-Fried argues that evidence disclosed since his trial disproves prosecutors' case regarding Alameda Research's alleged multi-billion dollar deficit of FTX customer funds. Instead, he claims the evidence shows FTX always had sufficient assets to repay the cryptocurrency platform's customer deposits in full.
"What it faced was a short-term liquidity crisis caused by a run on the exchange, not insolvency," Bankman-Fried wrote in the petition. This assertion directly contradicts the prosecution's theory that the company was fundamentally insolvent due to fraudulent misappropriation of customer funds.
The motion also challenges testimony presented during the original trial. "The false or misleading testimony the government elicited from its witnesses concerning the balance in Alameda's user account went to the heart of the prosecution's case and featured prominently in its closing argument," Bankman-Fried wrote.
A central element of the new trial request involves allegations against the Department of Justice regarding cooperating witness Nishad Singh. Bankman-Fried accuses federal prosecutors of coercing a guilty plea and cooperation deal from Singh, who was described as a close friend of Bankman-Fried's younger brother.
Singh testified as a cooperating witness at Bankman-Fried's trial, providing testimony about the company's operations and spending practices. According to Singh's trial testimony, Bankman-Fried directed FTX to spend large sums of money in 2021 and 2022 pursuing cultural and political influence as part of an effort to legitimize cryptocurrency and establish FTX as the premier exchange for cryptocurrency trading.
However, Bankman-Fried's motion reveals that Singh's initial cooperation with investigators told a different story. According to the filing, Singh's initial proffer to investigators "contradicted key parts of the government's version of events." The motion alleges that Singh only changed his account after facing threats from the government.
"But following threats from the government, Mr. Singh changed his proffer," the motion states, suggesting prosecutorial misconduct in securing Singh's cooperation and testimony.
The distinction between liquidity crisis and insolvency represents a crucial legal and factual argument in Bankman-Fried's bid for a new trial. A liquidity crisis suggests a temporary inability to meet immediate obligations despite having sufficient underlying assets, while insolvency indicates insufficient assets to cover liabilities. This distinction could significantly impact the fraud charges if accepted by the court.
FTX collapsed into bankruptcy in November 2022, leading to Bankman-Fried's arrest and subsequent prosecution. The case attracted widespread attention as one of the largest financial fraud cases in recent history, involving billions of dollars in alleged customer losses and marking a major scandal in the cryptocurrency industry.
The timing of this motion comes as the cryptocurrency industry continues to grapple with regulatory uncertainty and public trust issues stemming from FTX's collapse. Bankman-Fried's conviction was seen as a significant victory for federal prosecutors pursuing accountability in the digital asset space.
For a new trial to be granted, Bankman-Fried must demonstrate that the newly discovered evidence could not have been obtained through reasonable diligence before or during the original trial, and that the evidence would likely change the outcome if presented to a jury.
The motion represents Bankman-Fried's latest legal challenge following his conviction. Federal courts generally set a high bar for granting new trials based on newly discovered evidence, requiring clear proof that the evidence is material and would probably produce a different result.
The Manhattan federal court will now consider whether the alleged newly discovered evidence meets the legal standards for ordering a new trial in this high-profile cryptocurrency fraud case.