Sam Bankman-Fried’s Lawyer Asserts FTX Investments Were Not ‘Reckless’ – Reuters

By Luc Cohen

NEW YORK – The attorney for FTX founder Sam Bankman-Fried argued on Tuesday that the investments made by the now-bankrupt cryptocurrency exchange were not careless or extravagant, countering former executive Nishad Singh’s claims that its expenditures on marketing and celebrity endorsements were excessive.

Singh, who served as FTX’s former engineering chief, continued his testimony for a second day at Bankman-Fried’s fraud trial in federal court in Manhattan. During cross-examination, Singh mentioned that he believed FTX could continue operating after learning about a $13 billion shortfall in customer funds in September 2022, potentially supporting Bankman-Fried’s defense that he thought the exchange’s issues were manageable.

FTX declared bankruptcy on November 11, 2022.

On Monday, Singh noted that the company’s venture investments, along with $1.1 billion earmarked for marketing agreements—which included naming rights for the arena of the NBA’s Miami Heat and featuring NFL quarterback Tom Brady in ads—”reeked of excess and flashiness.”

Defense attorney Mark Cohen asked Singh, one of three former associates of Bankman-Fried’s inner circle who have pleaded guilty to fraud and agreed to cooperate with prosecutors, whether promoting the FTX brand could be beneficial. Singh acknowledged that he recognized the business advantages and costs involved.

The argument presented by Cohen could be used to assert that Bankman-Fried was making decisions he believed to be in good faith regarding marketing and investment expenditures, even if others disagreed.

Bankman-Fried is currently in his third week of trial, facing charges of misappropriating billions of dollars in FTX customer funds for investments, political donations, and to support his hedge fund, Alameda Research. He has pleaded not guilty.

During his testimony on Monday, Singh expressed concerns that a deal with an investment firm named K5, which Bankman-Fried referred to as a “one-stop shop” for celebrity relationships, might be detrimental to FTX’s corporate culture.

On Tuesday, Singh elaborated that K5 also facilitated Bankman-Fried’s investment in a tequila brand owned by a “famous celebrity,” when questioned by Cohen about K5’s role.

Cohen expressed the need to highlight that there was more to these decisions than the claim that they were all reckless and frivolous. In a lawsuit filed against K5 in June aimed at recovering $700 million, FTX’s current management accused a Bankman-Fried-controlled shell company of using $214 million in FTX funds to acquire a stake in celebrity Kendall Jenner’s tequila brand at a time when its assets were valued at just $2.94 million. K5 has stated that the lawsuit lacks merit.

Bankman-Fried contends that, despite making mistakes while managing FTX, he never intended to steal funds. His legal team has indicated that he is considering testifying in his defense.

Jurors have previously heard from Gary Wang, FTX’s former chief technology officer, and Caroline Ellison, the former CEO of Alameda and Bankman-Fried’s ex-girlfriend.

Cohen questioned Singh regarding a confrontation he had with Bankman-Fried in September 2022, after discovering that Alameda owed billions to FTX customers. Singh confronted Bankman-Fried on the balcony of their shared $35 million Bahamas penthouse.

Singh admitted feeling anxious during that time and revealed he had suicidal thoughts for several months afterward. He testified that Bankman-Fried reacted with anger during their discussion.

After stating that he thought FTX could remain operational “for some amount of time” despite the fund shortfall, Singh acknowledged having previously told U.S. authorities that he believed the company could survive for years.

Cohen also inquired about a $3.7 million home Singh purchased using customer funds in Washington state in late 2022. Singh confirmed buying the Orcas Island property but expressed shame over the purchase and mentioned that he had agreed to forfeit the home as part of his plea deal, admitting he had prioritized his own interests over those of the customers.