Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Sam Bankman-Fried’s spending at the collapsed FTX cryptocurrency exchange was not “frivolous”, his defence lawyer argued in a courtroom cross-examination of former executive Nishad Singh.
Bankman-Fried is on trial in New York on criminal charges of defrauding investors, lenders and customers at his exchange and funnelling billions of dollars to his affiliated crypto trading firm. Singh, FTX’s former head of engineering, is the last of three central witnesses co-operating with federal prosecutors in the trial.
FTX had promoted itself widely before failing last November. Mark Cohen, Bankman-Fried’s lead defence lawyer, said in court on Tuesday that the prosecution had used Singh’s testimony the day before to depict billions of dollars that FTX committed to celebrity sponsorship and other expenses as “all reckless and frivolous”.
“I am entitled to show that there was way more to it,” Cohen said, justifying a line of questioning probing the value of these deals to FTX’s business.
Cohen pointed out that large headline figures, such as the more than $130mn FTX paid for the naming rights to the home arena for the NBA’s Miami Heat, were often long-term deals. The Miami deal was to last 19 years and cost only $14mn in 2021.
Singh, who has pleaded guilty to fraud and campaign finance violations, said he had disagreed with some of Bankman-Fried’s spending decisions but that others had been valuable for building up the FTX business.
Cohen delivered a more forceful cross-examination that he had with the other witnesses who were members of the former billionaire’s inner circle, Caroline Ellison and Gary Wang. He tried to rebut the prosecution’s efforts to portray Bankman-Fried as someone who used customer money to enjoy celebrity connections and a high-flying lifestyle.
Questioned on a dispute with Bankman-Fried about whether the more than $30mn Bahamas penthouse they occupied was too expensive, Singh acknowledged that he ultimately moved into the master bedroom.
“I considered moving out many times,” Singh said. Cohen countered: “But you didn’t.”
The jury heard how Singh bought a $3.7mn home in Washington state in October 2022 with a loan from FTX, even as he said on the witness stand that he “knew it was drawing on customer funds”.
“My spending on it was egregious, unnecessary and selfish,” Singh said. The property has since been forfeited.
Singh also acknowledged that he originally thought some of the special treatment Bankman-Fried’s trading firm Alameda Research received on FTX was meant to protect customers by allowing it to more effectively “backstop” some trades.
“My view at the time [was that] it would be helpful for customers,” Singh said.
Cohen also quizzed Singh on his statement that he only became fully aware that Alameda had tapped billions in FTX customer assets in September 2022, despite participating in an accounting exercise the previous June that showed Alameda had a large negative position on the exchange.
Singh said that in June he “suspected there was wrongdoing . . . [but] took cues from people around me and didn’t pursue it further”.
The cross examination of Singh has focused attention on whether Bankman-Fried will take the stand when the defence begins its case as early as next week. In a letter to the judge, Bankman-Fried’s lawyers hinted that their client might testify, but raised concern that he was not receiving doses of Adderall, a drug used to treat attention-deficit hyperactivity disorder, while he is in court.
“As we approach the defence case and the critical decision of whether Mr Bankman-Fried will testify, the defence has a growing concern that . . . he has not been able to concentrate at the level he ordinarily would,” Cohen wrote.
Judge Lewis Kaplan rejected the defence’s request to delay court proceedings this week to resolve the issue. Cohen told the court the defence was “still working through” whether they would “put on a case and if so of what nature”, for example by calling their own witnesses.
Credit: Source link
