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 a former executive who called its spending on marketing and celebrity endorsements excessive.
Nishad Singh, FTX’s former engineering chief, testified at Bankman-Fried’s fraud trial 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 kicked off his cross-examination of Singh – one of three former members of Bankman-Fried’s inner circle who have pleaded guilty to fraud and agreed to cooperate with prosecutors – by asking Singh whether promoting FTX’s brand could be useful.
“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.
Singh testified on Monday that he worried that a deal that 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.
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.
This is the third week of Bankman-Fried’s trial in Manhattan federal court on charges related to the looting billions of dollars in customer funds to make investments, donate to U.S. political campaigns and prop up his hedge fund, Alameda Research.
Bankman-Fried, who has pleaded not guilty, 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.
(Reporting by Luc Cohen in New York; Editing by Will Dunham)
