The downfall of Sam Bankman-Fried, founder of the FTX cryptocurrency exchange, came fast and furious. The now bankrupt exchange is facing mounting legal woes including investigations from the U.S. Justice Department, Securities and Exchange Commission, and Commodity Futures Trading Commission, plus bankruptcy proceedings and an investor class-action lawsuit.
That’s… a lot.
But, as reported by Reuters, his efforts to secure counsel may be hampered by his penchant to say… entirely too much in interviews and on Twitter. (He told Vox that FTX’s downfall was based in part on “messy accounting.” He later said he did not intend the conversation to be public. And his Tweets were cited by FTX’s bankruptcy lawyer as “incessant and disruptive” in court filings.) That may mean lawyers are hesitant to represent Bankman-Fried:
“There’s this old saying that a lawyer who represents himself has a fool for a client. The reverse is also true. An individual who is the subject of an investigation and tries to defend themselves in the court of public opinion has a fool for a lawyer,” said Justin Danilewitz, a white-collar defense lawyer at law firm Saul Ewing Arnstein & Lehr.
Because a lawyer will want to vet the public narrative before it goes live:
“The basic question is who controls the story,” said Stephen Gillers, a law professor at New York University and an expert on legal ethics. “From the lawyer’s point of view, once he or she is hired, it’s the lawyer who controls the story as far as public consumption goes.”
At least one major law firm previously linked to Bankman-Fried has exited the representation.
Paul, Weiss partner Martin Flumenbaum informed Bankman-Fried that, due to an undisclosed conflict, the firm would no longer represent him, “We informed Mr. Bankman-Fried several days ago after the filing of the FTX bankruptcy that conflicts have arisen that precluded us from representing him.”
Flumenbaum declined to describe the conflicts. A onetime lawyer for convicted financier Michael Milken, Flumenbaum is currently defending Christian Larsen, the founder and chair of crypto payment and exchange company Ripple Labs Inc, in a high-profile lawsuit filed by the SEC. His law firm represents many other financial industry clients.
So far Bankman-Fried has hired Gregory Joseph of boutique firm Joseph Hage Aaronson, and a colleague of his parents. Stanford Law professor David Mills was also added to Bankman-Fried’s legal team — both of his parents are professors at SLS.
Kathryn Rubino is a Senior Editor at Above the Law, host of The Jabot podcast, and co-host of Thinking Like A Lawyer. AtL tipsters are the best, so please connect with her. Feel free to email her with any tips, questions, or comments and follow her on Twitter (@Kathryn1).