By
Tolu Ajiboye
May 14th, 2024
The heart of the DOJ’s argument lies in the assertion that evidence regarding the current value of Bankman-Fried’s investments, particularly his stake in Anthropic, is irrelevant to the charges against him.
The legal saga surrounding Sam Bankman-Fried (SBF), the founder of the crypto exchange FTX, continues to unfold as the US Department of Justice (DOJ) seeks to exclude specific evidence from his defense.
The request aims to preclude the defendant from introducing evidence or argument related to the current value of certain investments made by Bankman-Fried, particularly his investment in Anthropic, an Artificial Intelligence startup.
Background of the DOJ Request on Anthropic
Sam Bankman-Fried is facing charges related to wire fraud, specifically the misappropriation of funds from FTX customers to finance various investments, including the aforementioned investment in Anthropic. The DOJ alleges that these funds were stolen from FTX customers, forming the basis of their case against the defendant.
Anthropic, the AI startup in question, gained public attention by announcing plans to raise additional capital from investors like Amazon.com Inc (NASDAQ: AMZN) and Google. Reports suggest that this new investment could potentially value the company between $20 billion and $30 billion, which may significantly impact the value of Bankman-Fried’s initial investment.
Meanwhile, FTX took a stake in Anthropic that was worth $500 million when it filed for bankruptcy nearly a year ago. However, the bankruptcy trustee for FTX has not yet sold FTX’s stake in Anthropic.
This delay in selling the stake has now become a matter of interest and speculation, especially among FTX creditors who are eagerly anticipating any potential recovery from the bankruptcy proceedings.
The DOJ’s Argument
The heart of the DOJ’s argument lies in the assertion that evidence regarding the current value of Bankman-Fried’s investments, particularly his stake in Anthropic, is irrelevant to the charges against him. The government claims that even if the value of these investments has increased significantly, it does not mitigate the alleged fraudulent activities undertaken by Bankman-Fried during the course of his tenure at FTX.
The government cites legal precedents, such as United States v. Sindona and United States v. Males, to emphasize that the immediate intent to misapply and defraud is the primary focus in such cases. The prosecutors, therefore, highlighted that belief in future profitability or intent to repay misappropriated funds is irrelevant.
Furthermore, the DOJ contends that evidence of the current value of Anthropic shares, or any other investments, could mislead the jury and create undue confusion. Valuations in venture capital investments are often speculative and subject to change, as evidenced by the example of FTX itself.
This could potentially lead to a lengthy and unnecessary mini-trial regarding the value of assets available through bankruptcy proceedings, which is unrelated to the central issues the jury needs to decide.
Lastly, the DOJ argues that introducing such evidence could encourage a verdict based on an improper basis. While the government acknowledges that Bankman-Fried’s misappropriation led to FTX’s bankruptcy, it has not offered evidence of how much money victims will ultimately lose.
Therefore, introducing evidence of the current value of investments would serve no purpose other than to prejudice the proceedings.