1.Advice-of-Counsel Ruling and Morning Matters

JUDGE KAPLAN: Good morning, everyone.

The record will reflect the defendant is present.

I understand counsel have something for me?

JUDGE KAPLAN: All right. Everyone is so reminded. And if there are infractions, people will be removed.

Yes?

JUDGE KAPLAN: Okay. First of all, to the extent any objections were made yesterday——and they were quite limited——with respect to the cross, and certainly not categorical, I ruled on them. The rulings stand.

I will not prohibit use of anything that the defendant said yesterday on the grounds articulated by Mr. Cohen.

And to back up a little further, we've been having this conversation about what I'll refer to——even acknowledging that it's a misnomer——as the "quasi-advice of counsel defense" that Mr. Cohen seeks to assert for a long time. There has been extensive briefing; there has been a prior written opinion on the subject. And the essence of the problem is that on the one hand, there is a risk that the defendant, by introducing alleged communications with counsel in the past on matters that fall short of what traditionally is referred to——again, improperly in my view, but referred to——as an "advice of counsel defense," can have the effect of a suggestion from the defense that because lawyers were involved in some degree or another in pieces of what happened, the defendant was entitled to take comfort from the involvement of the lawyers in assuming or believing that he was acting within the bounds of the law. That's an understanding of the defendant's position. The problem, of course, is that it can be a very misleading impression, depending on the facts. It is one thing for a defendant to come in and to say: I had a proposed course of action, I went to a lawyer, I put all of the relevant facts in front of the lawyer, and the lawyer advised me that it was lawful, and therefore when I engaged in that course of action, I had no criminal intent. That's not what's happening here. It's an impression that may be created. In order for me to assess the balance between the potential harm to the public interest in creating a misleading impression and the defendant's right to present a defense, I have to know——I had to know—-exactly what happened.

Now when the government first moved to preclude any testimony of this sort by the defendant, I declined to rule because what the defendant had put before me was at such a high level of generalization that the relevant facts were just not articulated. So I didn't grant the government's motion. I denied it subject to consideration once we had the facts. We had the hearing yesterday for the purpose of my hearing straight from Mr. Bankman-Fried's mouth what it is he proposed to say. In order to get a full picture, it of course was necessary for the government to question him also. I have a slightly better sense of what's going on. All of this has been done to ensure that the defendant had a full opportunity, despite the shortcomings of detail in everything that had been said before yesterday in the defense presentations, to make his case for the proposition that what he was endeavoring to do would not be unfairly prejudicial and would be appropriate. He's had his shot.

Now there are a number of specific points on which counsel has sought to elicit testimony about the involvement of lawyers.

First, I heard testimony yesterday that Mr. Friedberg and other counsel for FTX implemented data retention policies for the company. That's no surprise to anybody. There is no suggestion in this case that having a data retention policy in and of itself is fraudulent, or criminal, or improper. Companies do that. It's a common business practice. Everybody knows it. And they're certainly not drafted by chief executive officers, in my experience. I don't see sufficient harm to the public interest in allowing the defendant, to the extent he did it yesterday, to adduce evidence that counsel were involved in preparing the data retention policy, whatever it may have been, and for the government to cross-examine about what it was, how the defendant knows what it was, and all sorts of related questions. So to that extent, I'm granting the defense application.

JUDGE KAPLAN: The other four items all involve circumstances in which lawyers drafted plain vanilla legal documents and in which the alleged problem was not the transaction in the document per se, it was what was done and with what intent collateral to the document. In the event there's a conviction, I will write on this subject, no doubt, more extensively than most people will care to read, but we're not going to allow that here. That evidence would, in my judgment, be confusing and highly prejudicial by falsely implying, given the testimony yesterday, that the lawyers, with full knowledge of the facts, all of the facts, blessed what the defendant is alleged to have done. And I didn't hear that at all yesterday.

First of all, the relevance of all of that material is exceptionally tenuous, if it has any at all, and my best judgment is it has none at all. In any case, any probative value of that evidence on the points at issue in this case would be outweighed substantially by the risk of unfair prejudice, confusion, and so forth.

Now just to illustrate, the fact that a lawyer was involved in drafting a promissory note for a loan that Mr. Bankman-Fried took out from Alameda has no relevance to this case. None. What's relevant is something quite different.

Okay. Now we had an open issue at the end of the day about omnibus wallets. And I asked counsel to see if they couldn't work their way through that issue. Have you succeeded?

JUDGE KAPLAN: Okay. And just let me clarify that on reading the transcript, I think there's a real lack of clarity all around. I understood the testimony about omnibus wallets on the blockchain with respect to crypto. I don't understand whether this has anything to do with fiat deposits or holdings. And I didn't take the testimony as really addressing that at all.

Okay. Anything else before we get started?