What United States v. Bankman-Fried Means for Health Care Fraud Defense

On the surface, United States v. Bankman-Fried is a case about the collapse of a cryptocurrency exchange. But the U.S. Court of Appeals for the Second Circuit’s recent opinion — affirming Samuel Bankman-Fried’s conviction on seven counts of fraud and conspiracy — carries important lessons that extend well beyond the world of digital assets.

For providers, pharmaceutical manufacturers, device makers, specialty pharmacies, and other health care companies that face (or may face) federal criminal prosecution or civil Racketeer Influenced and Corrupt Organizations (RICO) litigation premised on undisclosed kickbacks, Bankman-Fried addresses two issues of immediate practical significance: (1) whether a defendant who provides real value to a payor can nonetheless be found to have committed fraud by failing to disclose a kickback arrangement; and (2) whether a defendant can use evidence of attorney involvement in business operations to establish good faith and lack of fraudulent intent — even without satisfying the strict requirements for a formal advice-of-counsel defense. The answers the Second Circuit provides are sobering.

The “No Intent to Cause Loss” Defense Is No Longer Available

In health care civil RICO litigation, payors frequently allege that providers and other entities that obtain referrals through kickbacks — and submit claims without disclosing them — commit mail or wire fraud. In criminal cases involving kickbacks outside federal programs (and thus where the Anti-Kickback Statute is generally inapplicable), the U.S. Department of Justice (DOJ) has sometimes used the same theory. In such cases, defendants have argued that even if a kickback arrangement existed, the services rendered were medically necessary, were correctly priced, and would have been provided (and billed) by some other provider even absent the kickback. Under this argument, no net harm was intended, and the payor received exactly what it bargained for. That argument had gained traction in some courts.

But the U.S. Supreme Court’s 2025 decision in Kousisis v. United States foreclosed this defense. As the Court explained, “a defendant commits federal fraud whenever he uses a material misstatement to trick a victim into a contract that requires handing over her money or property — regardless of whether the fraudster, who often provides something in return, seeks to cause the victim net pecuniary loss.” Ultimately, it held that “a fraud is complete when the defendant has induced the deprivation of money or property under materially false pretenses.”

In Bankman-Fried, the defendant had given investors’ funds to an affiliated entity that he controlled (Alameda Research), while telling them their funds would remain secure. While he argued that he had expected the funds to be repaid in full, the Second Circuit applied Kousisis, ruling that it was “immaterial as a matter of law” whether Bankman-Fried thought his customers and lenders would ultimately suffer loss, and confirming that “FTX customers were defrauded as soon as Bankman-Fried transferred their money to Alameda, regardless of how strongly he believed he might later return the money.” The court further held that deceptive conduct intended to obtain another’s property — even temporarily — undermined any assertion that the defendant acted in good faith.

Implications for Health Care Kickback Cases

These decisions carry direct force in health care-related criminal wire fraud and civil RICO cases in which a payor alleges that undisclosed kickbacks rendered claim submissions fraudulent, even when the underlying services were real, medically appropriate, and correctly priced. The argument that “we never intended the payor to lose a dollar” is no longer tenable as a defense to the mail or wire fraud predicate. Notably, Bankman-Fried disposed of this issue entirely by citing Kousisis, without discussing other relevant decisions (e.g., United States v. Regent Office Supply Co., United States v. Starr, United States v. Milheiser), signaling that Kousisis has superseded the prior cross-circuit consensus to become the controlling framework.

Of course, federal prosecutors and civil RICO plaintiffs basing their cases on mail or wire fraud must still show that the misrepresentations or omissions were “material,” in that they were important enough that they could have influenced the victim to part with property. Moreover, civil RICO claims must still satisfy independent requirements of injury to business or property and proximate causation under 18 U.S.C. § 1964(c), while also pleading mail or wire fraud predicates with the particularity required by Federal Rule of Civil Procedure 9(b). Courts have dismissed kickback-based RICO claims where plaintiffs could not identify a specific misleading representation or duty to disclose that rendered a claim submission a fraudulent half-truth (e.g., Humana Inc. v. Biogen, Inc.) But the “no intent to cause loss” defense — long a potential tool at the predicate-act level — is no longer available.

Limits of Attorney Involvement as a Good-Faith Defense

Health care companies routinely engage outside counsel to review regulatory compliance, structure transactions, and opine on the legality of arrangements that may later become the subject of government scrutiny or civil litigation. When charged with fraud, defendants often wish to rely — either formally or informally — on that attorney’s involvement and advice to show they lacked fraudulent intent. A formal advice-of-counsel defense, if properly invoked, can result in the court instructing the jury that it may be a full defense to fraud liability. However, it has strict prerequisites: to assert such a defense, defendants must “show that [they] [(1)] made complete disclosure to counsel, [(2)] sought advice as to the legality of [their] conduct, [(3)] received advice that [their] conduct was legal, and [(4)] relied on that advice in good faith.” (Markowski v. SEC).

Bankman-Fried is particularly instructive because Bankman-Fried did not seek a formal advice-of-counsel defense. Instead, his counsel informed the court that he “did not intend to present a formal advice of counsel defense” but planned to present evidence to the jury that attorneys were involved in reviewing and approving decisions related to several matters at issue, contending that discussions with attorneys regarding various matters led Bankman-Fried to believe that he was acting in good faith.

The district court, and later the Second Circuit, rejected this approach. The latter emphasized that a formal advice-of-counsel defense requires, among other things, “complete disclosure” to counsel about the matter at issue, and reasoned that Bankman-Fried’s approach risked unfairly prejudicing the government because it would likely confuse the jury if he were permitted to focus on the “presence or involvement of lawyers” without providing “any degree of specificity about what they were present for or involved in, what their tasks were, what exactly they knew, and what the defendant knew about what the lawyers knew and were doing.” The Second Circuit also approved the district court’s instruction that a lawyer’s involvement “doesn’t itself constitute a defense to any charge in this case.”

Implications for Health Care Defendants

This aspect of Bankman-Fried has significant implications for health care fraud defendants who have engaged outside counsel in connection with the arrangements under scrutiny. In health care, counsel are frequently involved in structuring speaker programs, reviewing marketing arrangements, opining on fair market value analyses, or advising on patient assistance programs. Bankman-Fried indicates that unless the strict formal prerequisites for advice-of-counsel are satisfied, the mere fact of attorney involvement may not be admissible to suggest an “air of legality” with the jury.

Insights for Providers, Manufacturers, and Other Potential Defendants

1. 1. The “no intent to cause loss” defense is foreclosed at the predicate level. The argument that medically necessary services at correct prices negate fraudulent intent may not be viable. Civil RICO payor claims and criminal prosecutions based on undisclosed kickbacks are better defended on other grounds.
   2. Scrutinize all financial relationships with referral sources. Under Kousisis and Bankman-Fried, if an illegal and undisclosed remuneration agreement equates to fraud, then courts may consider the fraud complete upon each claim submission, regardless of clinical appropriateness, regulatory compliance on other dimensions, or the absence of any price inflation.
   3. Attorney involvement is not a substitute for a properly established advice-of-counsel defense. Retaining counsel to review an arrangement, or having lawyers draft related documents, will not necessarily protect a defendant who did not make complete disclosure of all material facts to those lawyers, did not seek advice about the legality of the specific conduct at issue, and did not receive and rely on a genuine legal opinion that the conduct was lawful.
   4. Document advice-of-counsel relationships with care. If your organization relies on outside counsel opinions to support the legality of a financial arrangement, ensure that engagement letters, memoranda, and communications reflect complete disclosure of all material facts, such as including the intended use of any structures, and that counsel has addressed the specific conduct at issue, not merely related or general compliance matters.
   5. Evaluate civil RICO exposure alongside regulatory exposure. Kousisis affects the mail and wire fraud predicate. The Anti-Kickback Statute, the False Claims Act, and applicable state law each present independent frameworks with their own requirements and risks. A comprehensive assessment of exposure should address all of these in parallel.

For further insight into how this decision — or other case law developments — may influence your organization’s defensive litigation strategies, please contact the author of this alert or your preferred Crowell & Moring lawyer.