A Document Implicating Powerful People Is Blocked from Public Viewing in Sam Bankman-Fried Criminal Case
https://wallstreetonparade.com/2023/02/a-document-implicating-powerful-peopl... By Pam Martens and Russ Martens: February 1, 2023 ~ Sam Bankman-Fried Sam Bankman-Fried Five pages of a deeply sensitive document that is both embarrassing and potentially a legal threat to people in positions of power vanished yesterday from public viewing in the criminal case against former crypto-kingpin Sam Bankman-Fried. The document is a letter written by five federal prosecutors in the U.S. Attorney’s Office for the Southern District of New York. The courthouse where the five pages vanished from view is where the case is being heard: the U.S. District Court for the Southern District of New York. According to personnel in the Press Office and Records Management Office of that District Court that we spoke to yesterday, all six pages of the document had been filed electronically on Monday, January 30, and all six pages of the document were able to be viewed in the court’s ECF system (Electronic Case Files) according to those personnel. ECF is the federal judiciary’s system that allows case documents, such as pleadings and motions, to be filed electronically. What’s available for viewing on the ECF system should also be available for attorneys, the press and the general public to view through the Public Access to Court Electronic Records (PACER) system at a cost of ten cents per page. We’ve been using PACER for many years and our experience yesterday was a first. We learned of the situation as follows: On Monday evening, CNN reporter Kara Scannell quoted a portion of one paragraph from this document. We didn’t come across that CNN story until Tuesday morning. When we went to PACER to view and download the full document, only the first page of the six-page document appeared with text. The other five pages were completely blank except for the case number and page number at the top of page six. That is, the five blank pages were not redacted using thick black lines which is the customary technique for redacting court documents; they were simply blank with no text other than the header on page six. We checked the Court Docket to see if a redaction or sealing request had been made for this document. We could find none. After learning from the Press Office and Records Management Office that all six pages had been filed by the federal prosecutors, we were referred to the Courtroom Deputy for the Presiding Judge in the case, Lewis A. Kaplan. We left a voice mail explaining the problem, along with our email address and a request to receive the full document via email. We promptly received via email from the Courtroom Deputy a complete copy of the document and its two exhibits. You can view the six-page document and exhibits here. In a return email, we thanked the Courtroom Deputy for the document and asked that the problem be corrected so that all six pages could be accessed and viewed via PACER. As of this morning, the five pages are still blank on PACER. It was immediately obvious to us that multiple powerful persons might have had an interest in suppressing further press coverage of the material on those five pages. We’ve broken down the most sensitive areas into two parts below, along with essential background information. Information Embarrassing to, and/or a Legal Threat to, Big Law Firm Sullivan & Cromwell, Which Has Already Been Under a Barrage of Negative Publicity for Aggressively Pushing to Become Lead Counsel in the FTX Bankruptcy Case, Despite a Mountain of Conflicts of Interest: Page Six of the document carries this information: “…the defendant [Sam Bankman-Fried] moved to take control of approximately $500 million of Robinhood shares that were purchased using misappropriated FTX customer funds by a special purpose entity owned primarily by the defendant. The Government has since seized the shares after demonstrating probable cause to believe that they are the proceeds of wire fraud and are property involved in money laundering. Since the Government’s seizure, the defendant has claimed that he would direct the majority of these funds toward making customers whole, but the original circumstances of the purchase of these shares, through a foreign special purpose vehicle with no public connection to FTX or Alameda, further indicate the steps the defendant has taken to obscure his criminal misuse of FTX customer property.” (Italics added.) On January 17, Sullivan & Cromwell law partner, Andrew Dietderich, filed a document with the bankruptcy court acknowledging that the law firm had not only done extensive legal work for FTX but personally represented its CEO, Sam Bankman-Fried, from April 14, 2022 through August 5, 2022. The disclosure noted that “This matter was arranged, and paid for, by Alameda.” That’s Bankman-Fried’s hedge fund which prosecutors have charged he used to loot FTX customer funds. The specific nature of the work Sullivan & Cromwell did for Bankman-Fried involved “a position that had been established in the stock of Robinhood Markets, Inc.” according to the Dietderich declaration. So the paragraph above, that has vanished from public viewing, adds the smoking gun that federal prosecutors believe that some lawyer or law firm created “a foreign special purpose vehicle” to hide more than half a billion dollars of looted funds. It also means that it is highly likely that federal prosecutors know who that lawyer or law firm is. This information comes at a delicate time for Sullivan & Cromwell. Next Monday, February 6, the U.S. Trustee in the FTX bankruptcy case, who represents the U.S. Department of Justice, is scheduled to present its case at a hearing as to why an independent examiner should be appointed so that Sullivan & Cromwell is not afforded the ability to investigate its own conduct in its previous legal dealings with FTX and Sam Bankman-Fried. Sullivan & Cromwell has aggressively opposed that intervention. The government’s newly disclosed position that the half billion dollars of Robinhood shares – on which Sullivan & Cromwell provided legal guidance to Sam Bankman-Fried – came from “the proceeds of wire fraud” and “money laundering” isn’t a good look for Sullivan & Cromwell. The Document Is Deeply Embarrassing and a Potential Legal Threat to the Government of the Bahamas: The third paragraph on page three of the document carries this revelation, backed by an explosive email from Bankman-Fried: “Moreover, although the Government has not identified the source of the hack that occurred shortly before the initial conference, the defendant’s misuse of FTX and Alameda assets during November 2022 independently justifies the bail condition. As FTX struggled to meet customer withdrawal requests in early November, Bankman-Fried approved halting customer withdrawals from the exchange. Shortly thereafter, however, he reopened withdrawals only for customers in the Bahamas. In an email to Ryan Pinder, Attorney General of the Bahamas on November 10, 2022, Bankman-Fried wrote in part, ‘We are deeply grateful for what The Bahamas has done for us, and deeply committed to it. We are also deeply sorry about this mess. As part of this: we have segregated funds for all Bahamian customers on FTX. And we would be more than happy to open up withdrawals for all Bahamian customers on FTX, so that they can, tomorrow, fully withdraw all of their assets, making them fully whole. It’s your call whether you want us to do this–but we are more than happy to and would consider it the very least of our duty to the country, and could open it up immediately if you reply saying you want us to. If we don’t hear back from you, we are going to go ahead and do it tomorrow.’ Opening withdrawals exclusively for Bahamians resulted in millions of dollars being withdrawn from the exchange, while other customers of FTX had no ability to access withdrawals.” This is not the first time that something less than transparent has occurred in FTX cases. In fact, a dark curtain has been drawn around much of what is going on in both the FTX bankruptcy case in Delaware and the criminal case in lower Manhattan. For starters, the media has been unable to obtain a list of customer names in the FTX bankruptcy case and had to hire a lawyer to get creditors’ names released. After the creditors names were finally released, and mega banks on Wall Street were included on the list of creditors, a clarifying statement was issued saying that not all of the names on the creditors’ list might actually be creditors. So, almost three months after the FTX bankruptcy petition was filed, the public has no clarity on who the creditors or customers are. In the criminal case against Sam Bankman-Fried, media outlets had to intervene to ask the court to reveal the names of two unnamed persons who guaranteed bonds of $500,000 and $200,000 to secure Bankman-Fried’s release on bail, in addition to his parents who put up their California home as collateral. Judge Kaplan ruled in favor of the media but has put his decision on hold pending an appeal. The criminal court case also suffered an embarrassment when the first judge assigned to the case, Judge Ronnie Abrams, had to later recuse herself because her husband, Greg Andres, is a law partner at Davis Polk & Wardwell LLP, which handled a deal involving crypto exchanges FTX and BlockFi, both of which are now in bankruptcy. See our report: Sam Bankman-Fried’s Criminal Trial Judge Is Married to Law Partner of Firm that Arranged the FTX-BlockFi Deal. The polling organization, Gallup, reported last September that American adults’ trust in the federal judicial branch had fallen from a high of 80 percent in 1999 to a new low of just 47 percent last year. If American democracy is to survive, our federal institutions must do a far better job at providing transparency to the public and policing conflicts of interest.
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Gunnar Larson