Today: 16-04-2024

Prosecutors in the case against FTX co-founder Sam Bankman-Fried

Prosecutors in the case against FTX co-founder Sam Bankman-Fried have likened one of the defense's arguments to a scene from the 1994 movie "Dumb and Dumber," in which actor Jim Carrey says promissory notes are "just as good as money."

In a written letter to Judge Lewis Kaplan overseeing the Manhattan trial, U.S. Assistant Attorneys for the Southern District of New York expressed disagreement with some of the instructions provided by the defense team.

One specific instruction reminded prosecutors of the 29-year-old comedy about two not-so-bright friends, played by Carrey and Jeff Daniels, who go on a cross-country journey to return a briefcase full of money to its owner, only to discover that the money was left as ransom.

"If you find that FTX customers received credit to engage in transactions on the FTX exchange after depositing funds into FTX and, as a result, had the right to withdraw an equivalent amount of funds at a later time upon request, this is not enough to establish that they were deprived of property," reads the defense's jury instruction.

Much of the government's case relies on billions of dollars that FTX, Bankman-Fried's cryptocurrency exchange, pumped from customer accounts and used largely to cover losses at the affiliated Alameda Research hedge fund following cryptocurrency price crashes. The funds were also purportedly used to pay for items like a $35 million Bahamas mansion and political donations.

The defense, prosecutors say, is attempting to convince jurors that customers still had a credit for their deposited funds, even if the money wasn't there because it was used for other purposes. Prosecutors argue this argument is "not tethered to the facts of the case" and that "credit to obtain funds at a later date, if such funds ultimately become available, is plainly not the same and not as valuable as money or property itself."

In a footnote, the prosecution writes, "A popular 1990s film illustrates this point: a briefcase once filled with cash is not the same as a briefcase later filled with promissory notes." In "Dumb and Dumber," when the briefcase reaches its owner, it's found to be filled with papers.

"It's as good as money, sir," Carrey's character, Lloyd Christmas, says.

Mark Cohen, an attorney for Bankman-Fried, did not immediately respond to CNBC's request for comment.

The 31-year-old Bankman-Fried is facing seven counts of fraud related to the collapse of his crypto empire late last year. Bankman-Fried, who has pleaded not guilty, could face life in prison if convicted.

The trial's first three weeks featured testimony from former close friends of Bankman-Fried who were also top executives at FTX and Alameda and have since turned against him, some having cut plea deals with the government. The trial is scheduled to resume late next week and extend into November.

Judge Kaplan has called additional meetings with lead government prosecutors and Bankman-Fried's lawyers repeatedly to discuss their behavior in the courtroom. Most recently, on Thursday, Kaplan took both sides to task, specifically saying their last expert witnesses knew nothing specific about crucial details yet still opined on Bankman-Fried's behavior. Both sides were warned to perform better and communicate more with each other.