DoJ seeks to block discussions around FTX’s AI arm
- This development is seen as a positive turn of events for FTX creditors, as it could potentially impact the outcome of the case.
- The DoJ’s stance on this matter is rooted in the wire fraud charges against Bankman-Fried.
FTX [FTT] founder Sam Bankman-Fried faces a potential roadblock in his defense against charges brought by the U.S. Department of Justice (DoJ). Notably, prosecutors are looking to prevent him from raising issues related to the recent fundraising efforts of Anthropic, an artificial intelligence company linked to FTX.
The DoJ alleged that a $500 million investment in Anthropic in 2022 was raised using customer funds.
They further argued that discussions about the current value of Bankman-Fried’s investments could only be used to support arguments that FTX customers and other victims will ultimately recover their losses, which the court has deemed impermissible.
The DoJ’s stance on this matter is rooted in the wire fraud charges against Bankman-Fried, accusing him of misappropriating FTX customer deposits for investments and other expenditures.
They emphasized that the profitability of these investments is immaterial to the case, and it would not constitute a defense if Bankman-Fried believed the investments would eventually yield significant returns.
Anthropic has recently made headlines with an agreement worth up to $4 billion with Amazon and discussions about raising an additional $2 billion in funding.
FTX holds a stake in Anthropic valued at $500 million, which has not been sold by the company’s bankruptcy trustee since FTX filed for bankruptcy nearly a year ago.
DoJ challenges FTX founder’s defense strategy
This development is seen as a positive turn of events for FTX creditors, as it could potentially impact the outcome of the case.
The DoJ and Bankman-Fried’s defense team have reached agreements on various issues related to the trial, but the admissibility of evidence concerning the Anthropic fundraise remains a point of contention.
The DoJ argues that such evidence serves no legitimate purpose in the defense’s case and should be excluded from proceedings.
As the trial unfolds, the focus remains on the wire fraud charges and the alleged misappropriation of FTX customer deposits.
This legal dispute comes at a time when Anthropic is attracting significant attention in the tech and investment sectors due to its substantial agreements with Amazon and ongoing fundraising efforts.
The outcome of this legal battle could have implications not only for Bankman-Fried but also for the broader cryptocurrency and investment communities.
FTX’s former chief technology officer, Gary Wang, has testified that the crypto exchange used hidden Python code to fake the value of its insurance fund, which was designed to protect users from losses during significant liquidation events.
According to Wang, the $100 million insurance fund claimed by FTX in 2021 was fabricated and did not actually contain any of the exchange’s FTX tokens (FTT).
Instead, the displayed figure was calculated by multiplying the daily trading volume of the FTX Token by a random number. Wang also revealed that the fund was often insufficient to cover significant losses, and when depleted, losses were shifted to Alameda Research to hide them.