John J. Ray III: What’s left of FTX? The case for a lawyer that helped bankman-fried

What’s left of FTX is now being led by John J. Ray III — you may remember him as the guy who cleaned up Enron and who also said FTX is worse than Enron. The FTX lawyers filed a lawsuit against Bankman-Fried’s parents, saying they should give back the millions of dollars they received from their child. Ray referred to Bankman-Fried’s conduct as “really just old fashioned”

“We had him going out directly to the internet,” LaVigne says. If he says stuff in interviews that aren’t true, it becomes fodder for the government’s case. “They can point to that and say, ‘This is what he said, this is what actually happened.’”

To further establish intent, the government can use Bankman-Fried’s own words. The indictment criticizes Bankman- Fried for his November 22, 2022, ” false and misleading” message.

What was he telling his family and advisers about this? LaVigne says. What conversations took place between him and his co-conspirators that are now cooperating against him?

The second part is where the drama will be, says Christopher LaVigne, a litigation partner at the law firm Withers. Bankman-Fried needs to be proved that he lied about what he was doing even though he knew what he was doing was wrong.

It is easy to prove the government’s case and boring, when prosecutors have to show that certain transactions took place. The records of the Southern District of New York will be shown.

Because he was so successful at this kind of public relations, his fall from grace was another mark against an industry that was already roiled by bankruptcies and scandals. Some additional trouble for the crypto industry is likely to come from one crucial element of the fraud trial — the part where the government must prove intent.

Bankman-Fried’s behavior after the fall of FTX suggests he’s something of a wild card. He may suggest he was acting on the advice of his lawyers. But he may also introduce other evidence that could be troublesome — implying, for instance, that he was engaged in standard industry behavior or that everything that happened was Binance’s fault. That may be risky, but Bankman-Fried is fond of risk.

A law professor asks how much damage this trial will do to the reputation of the industry. “This trial is going to be an excruciating moment for the industry because no one knows what kind of evidence might come out.”

Already, Bankman-Fried’s lawyers are marking arguments that his constitutional rights are being violated by his pretrial incarceration because, among other things, his internet connection wasn’t good enough for him to plan his defense, notes LaVigne. That could lead to an appeal.

The CEO of Binance, the world’s largest trading exchange, had a tense relationship with Bankman-Fried, the CEO of FTX. Bankman-Fried blamed tweets Zhao made for having precipitated the run on deposits that caused FTX to crumble. The prosecution may refer to these tweets as it frames events for the jury. Zhao is dealing with his own legal issues: US regulators charged Binance earlier this year with a litany of violations, and the DOJ is reportedly investigating too.

Messages from group chats may be brought into evidence during the trial. It could possibly be embarrassing for the whole industry.

“You can imagine some of these founders, CEOs, people of that echelon talk to each other somewhat informally about what’s going on,” she says. If it seems like his peer group supported him, or worse, fawned over him, that’s a real problem for the industry’s reputation.”

There’s no question the Bankman-Fried trial is going to be embarrassing for the crypto industry. The salacious details of his past relationships with his girlfriends, as well as possible drug use and complicated love lives, mean the public will be interested in the trial. Bankman- Fried has a appetite for risk and so the sky may well be the limit.

The CEO of Alameda Research and on-and-off romantic partner of Bankman-Fried. The pair met at Jane Street, where they both worked. She has pleaded guilty to seven crimes, including wire fraud.

The co-CEO of Alameda Research alongside Ellison, Trabucco left the post three months before the collapse of FTX. The DOJ did not accuse Trabucco of any wrongdoing and it is not clear if he is cooperating with prosecutors. His whereabouts are unknown.

The person is the director of engineering. Singh worked as an engineer at Meta. He has pleaded guilty to six criminal charges, including wire fraud, securities and commodities fraud, and money laundering.

The attorney now tasked with steering FTX and its subsidiaries through bankruptcy. Ray established himself as a restructuring savant after overseeing the insolvency of Enron, a company that engaged in accounting and corporate fraud. The prosecution may cite materials Ray compiled as part of the FTX bankruptcy investigation to support its case against Bankman-Fried.

Bankman- Fried didn’t plead guilty to all seven charges. He has spent most of the intervening period under house arrest but was taken into custody in August after the prosecution alleged he was tampering with witnesses. If the accused is found guilty at the end of the trial, he will likely be sentenced to decades in prison.