Attorneys for Sam Bankman-Fried Seek to Probe Caroline Ellison's Portfolio

The defense's focus on Ellison's reliance on legal counsel and the valuation of FTX's stake in Anthropic AI reflects their efforts to build a strong case for their client.

Creator: Yuki Iwamura Credit: Bloomberg/Getty Images

NEW YORK, NY – In the ongoing criminal fraud case against crypto tycoon Sam Bankman-Fried, a series of legal maneuvers and courtroom drama have been playing out, providing intriguing insights into the defense strategy. Bankman-Fried, the founder of Alameda Research and the now-bankrupt FTX crypto exchange, is on trial for alleged misappropriation of customer funds for personal use. Central to the defense's strategy is the questioning of Caroline Ellison, former CEO of Alameda Research and a star witness in the case. In a pair of filings, Bankman-Fried's legal team has sought authorization to delve into Ellison's reliance on legal counsel during her tenure and the valuation of FTX's stake in Anthropic AI.

Caroline Ellison and "Advice-of-Counsel" Argument

Ellison's role as CEO of Alameda Research and her connection to Bankman-Fried's FTX exchange make her a pivotal figure in the case. The defense team, in their filings [1][2], expressed a desire to question Ellison about the extent to which she depended on legal counsel when making decisions during her tenure as CEO. They are keen on understanding how the advice of lawyers may have influenced company policies and actions, such as the activation of auto-deletion tools on the messaging app Signal.

This "advice-of-counsel" argument is of interest, given the potential implications it could have on Bankman-Fried's case. It highlights the importance of understanding the legal context in which key decisions were made within Alameda Research and FTX, raising questions about the legality and ethicality of actions that have been called into question.

The Valuation of FTX's Stake in Anthropic AI

Another aspect of Bankman-Fried's defense strategy revolves around the valuation of FTX's stake in Anthropic AI, an artificial intelligence firm. The Department of Justice (DOJ) has vigorously opposed the defense's attempts to raise this topic, arguing that it is immaterial to the core question of whether Bankman-Fried misappropriated customer funds for personal use. However, Bankman-Fried's legal team contends that the Anthropic news holds essential context for understanding FTX's expected value analysis and should be a subject of inquiry.

The possibility of FTX creditors receiving a larger payout if the bankrupt exchange sells its stake in Anthropic AI adds complexity to the case. Exploring the valuation of this investment may shed light on the financial situation of FTX and its potential implications for the ongoing trial.

The Question of Admissibility

A significant issue arising from these filings is the question of whether Judge Lewis Kaplan will allow the defense to address these issues during the trial. The judge's stance on the admissibility of these topics remains to be seen, and the decision could have a substantial impact on the course of the trial.

Ellison's Personal Investment in Anthropic

One additional intriguing element that emerged is Ellison's personal investment in Anthropic AI, which was highlighted by an assistant U.S. attorney. This revelation adds a layer of complexity to the case, potentially affecting her credibility as a witness. Whether or not the court deems this information admissible, it may become a topic of questioning as the trial unfolds.

Other Ongoing Issues

The court also grapples with other outstanding matters, including whether the DOJ should be allowed to call a witness from Ukraine to testify remotely. Judge Kaplan's reluctance to permit cumulative testimony raises questions about the necessity and relevance of each witness's testimony.