Legal representatives for former FTX CEO Sam "SBF" Bankman-Fried are striving to introduce specific details from the crypto exchange's terms of service as part of witness testimonies.
In a filing made on October 12 in the United States District Court for the Southern District of New York, SBF's legal team asserted that this motion aimed to address "certain evidentiary issues" in the ongoing criminal trial. These issues revolve around conflicting interpretations between the prosecution and the defense concerning the alleged misuse of FTX funds.
According to Bankman-Fried's attorneys, the prosecutors intended to call witnesses to establish their "understanding and expectation" regarding how their deposits on FTX would be utilized. The defense argued that adherence to FTX's terms of service serves as a defense against the charges, regardless of users' understanding of those terms.
The filing stated, "The defense's position is that the rights and obligations of parties in a commercial relationship are not determined by their expectations and understandings, particularly for the misappropriation theory of federal fraud statutes."
In their petition, the defense requested the court's permission to question prosecution witnesses based on FTX's terms of service and to exclude testimony from "lay fact witnesses." They cited Paradigm co-founder Matt Huang's testimony as an example, claiming that it was more of an "expert opinion" rather than a reflection of "common everyday experience" regarding FTX's services.
The filing highlighted that the government's attempt to establish misappropriation through customer and other testimonies about their beliefs and expectations is a strategy to evade the burden of proving an essential element of its embezzlement theory beyond a reasonable doubt. It argued that such evidence about customer beliefs regarding their legal relationship with FTX would only serve to confuse jurors when considering the facts alongside the meaning of the Terms of Service.
October 13 marked the eighth day of Bankman-Fried's criminal trial, where he pleaded not guilty to all charges. During this week, Caroline Ellison, the former CEO of Alameda Research and SBF's ex-girlfriend, testified, admitting to engaging in fraudulent activities under the direction of Bankman-Fried, which included providing false documents and making misleading statements about Alameda using FTX funds.
BlockFi's founder and CEO, Zac Prince, also testified on October 12 and into October 13. He provided insights into a $400-million credit line offered by BlockFi to FTX US in July 2022, along with the consequences resulting from the Terraform Labs and Three Arrows Capital collapse. The trial has been adjourned until October 16.
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