FTX founder Sam Bankman-Fried’s attorney stated on Tuesday that the bankrupt cryptocurrency exchange’s investments were not “reckless and frivolous.” This response comes in opposition to former executive Nishad Singh’s testimony, which characterized the exchange’s spending on marketing and celebrity endorsements as excessive.
Singh, who previously served as FTX’s engineering chief, testified for the second consecutive day at Bankman-Fried’s fraud trial in a federal court in Manhattan. During cross-examination, Singh informed the jury that upon learning of a $13 billion deficiency in customer funds in September 2022, he believed FTX could continue operating, potentially strengthening Bankman-Fried’s argument that he thought the exchange’s problems were manageable.
FTX went bankrupt on November 11, 2022.
On Monday, Singh testified that the company’s venture investments and $1.1 billion in planned marketing deals, such as securing naming rights to the NBA’s Miami Heat arena and featuring NFL quarterback Tom Brady in commercials, were excessive and flashy.
Defense attorney Mark Cohen questioned Singh on Tuesday about the potential utility of promoting FTX’s brand.
Singh’s response to Cohen’s question could be used by defense lawyers to argue that Bankman-Fried made what he believed to be good-faith business decisions by allocating funds for marketing and investments, even if others disagreed.
Bankman-Fried is currently in the third week of his trial, facing charges related to the embezzlement of billions of dollars in FTX customer funds for investments, political campaign donations, and the support of his hedge fund, Alameda Research. He has pleaded not guilty.
Singh stated on Monday that he was concerned the agreement FTX had with investment firm K5, described by Bankman-Fried as a “one-stop shop” for celebrity relationships, would have a detrimental impact on FTX’s culture.
When asked whether K5 solely acted as a relationship broker, Singh mentioned that K5 facilitated Bankman-Fried’s investment in a tequila brand owned by a “famous celebrity.”
“Yesterday (Monday), we were informed that all these investments were reckless and frivolous, and I have the right to demonstrate that there was more to it than what we were told,” Cohen stated, following a prosecutor’s objection to his inquiries about K5.
In a lawsuit filed against K5 in June, seeking to recover $700 million, FTX’s current management alleged that a shell company controlled by Bankman-Fried used $214 million from FTX funds to acquire a stake in Kendall Jenner’s 818 Tequila brand, even though the tequila company was valued at just $2.94 million. K5 dismissed the lawsuit as baseless.
Bankman-Fried has maintained that while he made mistakes while running FTX, he had no intention of stealing funds. His legal team has indicated that he may take the stand in his own defense.
The jury has already heard testimony from Gary Wang, FTX’s former chief technology officer, and Caroline Ellison, Alameda’s former CEO and Bankman-Fried’s ex-girlfriend.
Cohen questioned Singh on Tuesday about a confrontation he had with Bankman-Fried in September 2022 after discovering that Alameda owed billions of dollars to FTX customers. The confrontation took place on the balcony of their $35 million penthouse in the Bahamas, where many FTX and Alameda employees resided.
Singh acknowledged feeling anxious at the time and stated that he felt suicidal during that period and for several months afterward. He also mentioned that Bankman-Fried was angry during their conversation.
After stating that he believed FTX could continue operating “for some amount of time” despite the shortfall, Singh acknowledged during his testimony on Tuesday that he had previously told US authorities that he believed the company could survive for years.
Cohen also questioned Singh about a $3.7 million house he purchased in Washington state in the fall of 2022 using FTX customer funds. Singh admitted to buying the Orcas Island property but expressed remorse, stating that he was “ashamed” and had agreed to forfeit it as part of his plea agreement.
“I put my own interests ahead of customers,” Singh admitted.
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