In a setback for Sam Bankman-Fried, the founder of the FTX cryptocurrency exchange, a US judge has limited his ability to present expert witnesses at his criminal fraud trial.

Bankman-Fried had sought to call seven experts on topics related to cryptocurrency markets and English contracts in an effort to convince the jury to acquit him of charges of stealing billions of dollars in FTX customer funds to cover losses at his Alameda Research hedge fund.

US District Judge Lewis Kaplan issued a written order that excluded three of the proposed expert witnesses, deeming their testimony either irrelevant or potentially confusing for the jury.

Late in August, attorneys for the US Department of Justice filed a motion to exclude every witness that Bankman-Fried had suggested.

Among these witnesses was Peter Vinella, a consultant who intended to discuss “FTX’s use of widely-accepted practices in the financial services industry.” Judge Kaplan found this testimony to be irrelevant to the case.

Additionally, Bankman-Fried was barred from calling English barrister Lawrence Akka to testify about FTX’s terms of service, which were governed by English law. Kaplan reasoned that only a judge could instruct jurors on matters of law.

According to the court, Akka’s testimony does not serve the purpose of aiding the jury in comprehending FTX’s terms of service. Instead, it is deemed as an expression of “legal opinions” regarding the interpretation of the contractual terms in question.

The defence also requested testimony on FTX’s financials, software, and document metadata from consultants Thomas Bishop and Joseph Pimbley as well as data analytics specialist Brian Kim.

On the basis of Rule 16, which requires the government to reveal specific evidence it intends to use throughout the trial, the court rejected all of their possible testimony.

Sam Bankman-Fried may file a request to enable certain witnesses to testify if his lawyers feel that the witnesses will be able to refute testimony from government witnesses. The government might, however, oppose the filing.

The court documents suggest that Bankman-Fried may argue that the terms of service did not explicitly prohibit the use of customer funds for investments, drawing a comparison to how traditional banks use deposits to fund loans. This practice, he may contend, was common in the cryptocurrency industry.

It is customary in US criminal trials for both prosecutors and defendants to call upon expert witnesses to help clarify complex issues. In this case, the prosecution plans to present three former FTX and Alameda executives, all of whom have pleaded guilty to their roles in the alleged fraud, as witnesses in Sam Bankman-Fried’s trial.

The trial is expected to extend over a period of 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 he has acknowledged deficiencies in risk management at FTX prior to its collapse in November 2022, he vehemently denies any wrongdoing in the misappropriation of funds.

Featured image from Shutterstock

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