FTX Trial: What is the “buried facts doctrine”?

By now, it is common knowledge Samuel Bankman-Fried was convicted on November 2, 2023 following trial in his criminal case in New York. In his defense, he blamed his close friends and former executives and the failure to have risk management systems in place. He denied intending to defraud investors.

During the trial, Judge Lewis Kaplan suggested the lawyers research the “buried facts doctrine”. Ordinarily, one is presumed to understand the terms of any agreement to which a person obligates themselves. Under the “buried facts doctrine”, it is insufficient to bury facts or disclosures in a lengthy document filled with legalize or to use opaque language in providing disclosures about investment risk.

The doctrine’s application is generally limited to proxy disclosures made in connection with investments,

Bankman-Fried will be tried a second time on five additional charges, including bank fraud and bribery, in early March 2024. His sentencing following his first trial is scheduled for March 28, 2024.