Sam Bankman-Fried's lawyer says FTX investments were not 'reckless'
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[October 18, 2023]
By Luc Cohen
NEW YORK (Reuters) -FTX founder Sam Bankman-Fried's lawyer on Tuesday
said the now-bankrupt cryptocurrency exchange's investments were not
"reckless and frivolous," pushing back against testimony by former
executive Nishad Singh portraying its spending on marketing and
celebrity endorsements as excessive.
Singh, FTX's former engineering chief, testified for a second straight
day at Bankman-Fried's fraud trial in Manhattan federal court. Under
cross-examination, Singh told the jury that he thought FTX would be able
to stay in business upon learning in September 2022 of a $13 billion
shortfall in customer funds, potentially bolstering Bankman-Fried's
argument that he believed the exchange's troubles were manageable.
FTX declared bankruptcy on Nov. 11, 2022.
Singh testified on Monday that the company's venture investments and
$1.1 billion in planned marketing deals, including naming rights to the
arena where the NBA's Miami Heat play and featuring NFL quarterback Tom
Brady in commercials, "reeked of excess and flashiness."
Defense lawyer Mark Cohen on Tuesday asked Singh, one of three former
members of Bankman-Fried's inner circle who have pleaded guilty to fraud
and agreed to cooperate with prosecutors, whether promoting FTX's brand
could be useful.
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"I understood it had business benefits and costs," Singh said in
testimony that defense lawyers could use to argue that Bankman-Fried was
making what he believed to be good-faith business decisions in shelling
out funds for marketing and investments even if others disagreed.
Bankman-Fried is in the third week of his trial on charges involving the
looting billions of dollars in FTX customer funds to make investments,
donate to U.S. political campaigns and prop up his hedge fund, Alameda
Research. He has pleaded not guilty.
Singh testified on Monday that he worried a deal the company had with an
investment firm called K5, which Bankman-Fried described as a "one-stop
shop" for brokering relationships with celebrities, would prove "toxic"
for FTX's culture.
On Tuesday, Singh said K5 also helped Bankman-Fried invest in a tequila
brand run by a "famous celebrity," when asked by Cohen whether the firm
was anything more than a relationship broker.
"Yesterday (Monday) we were told these were all reckless and frivolous
investments, and I'm entitled to show that there was way more to it than
we were told yesterday," Cohen said, after a prosecutor objected to his
questioning about K5.
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![](../images/101823PIX/news_h17.jpg)
Sam Bankman-Fried, the founder of bankrupt cryptocurrency exchange
FTX, arrives at court as lawyers push to persuade the judge
overseeing his fraud case not to jail him ahead of trial, at a
courthouse in New York, U.S., August 11, 2023. REUTERS/Eduardo
Munoz//File Photo
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In a lawsuit filed against K5 in June seeking to claw back $700
million, FTX's current management said a Bankman-Fried-controlled
shell company used $214 million in FTX funds to buy a stake in
celebrity Kendall Jenner's 818 Tequila brand at a time when the
tequila company's assets were valued at just $2.94 million. K5 said
the lawsuit was without merit.
Bankman-Fried has argued that while he made mistakes running FTX, he
never intended to steal funds. His lawyers have said he is
considering taking the witness stand in his own defense.
Jurors have already heard from Gary Wang, FTX's former chief
technology officer, and Caroline Ellison, Alameda's onetime chief
executive officer and Bankman-Fried's former girlfriend.
Cohen questioned Singh on Tuesday about a confrontation he had with
Bankman-Fried in September 2022 after learning Alameda owed billions
of dollars to FTX customers. He confronted Bankman-Fried on the
balcony of the $35 million Bahamas penthouse they shared with many
FTX and Alameda employees.
Singh acknowledged that he was anxious at the time, and said he was
suicidal then and for several more months. He testified on Monday
that Bankman-Fried was angry during the conversation.
After telling Cohen he thought FTX could stay in business "for some
amount of time" despite the shortfall, Singh said he had previously
told U.S. authorities he thought the company could survive for
years.
Cohen also pressed Singh about a $3.7 million home he purchased
using FTX customer funds in Washington state in the fall of 2022.
Singh acknowledged buying the Orcas Island home, but said he was
"ashamed" and had agreed to forfeit it as part of his plea
agreement.
"I was putting myself ahead of customers," Singh said.
(Reporting by Luc Cohen in New York; Editing by Will Dunham)
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