- SBF’s defense counsel tried to argue that the brand endorsements were not all bad for the exchange
- The exchange’s former chief engineer had earlier remarked that Sam’s spending was “excessive”
The criminal trial against Sam Bankman-Fried (SBF) continues in all its glory. 17 October started with the cross-examination of FTX’s former Chief Engineer — Nishad Singh. The hearing continues to spill details about SBF’s celebrity fascination, with Singh speaking about an investment in a “tequila brand owned by a famous celebrity.”
SBF’s counsel argues endorsements were good for FTX
The celebrity in question happens to be Kendall Jenner — a popular supermodel and Keeping Up with the Kardashians reality star. According to Reuters, Bankman-Fried had poured in a whopping $216 million in FTX’s customer funds to buy a stake in Jenner’s 818 tequila brand. The former CEO made the investment through a shell company when 818 was valued at $2.94 million.
Notably, over $1 billion of FTX’s funds was spent on celebrity endorsements and marketing, with Singh remarking that SBF’s spending behavior was “excessive”. Furthermore, today, 17 October, the defense counsel pushed back on this remark by claiming that these investments were not “reckless and frivolous”.
Defense lawyer – Mark Cohen – even asked Singh if he thought these endorsements could have been useful for FTX’s brand. To which, Singh stated that he “understood it had business costs and benefits”.
Furthermore, Singh also agreed that he initially believed that Alameda Research’s right to backstop some trades was to protect customer funds. According to Financial Times, he said, “My view at the time [was that] it would be helpful for customers.”
FTX’s bankruptcy proceedings make headway
While the criminal case against SBF continues to take the spotlight, the bankruptcy proceedings are making headway, subsequently. According to an announcement made on 16 October, the amended ‘Alameda Plan’ could see customers getting “90% of distributable value worldwide”. This was if it gets approved by the bankruptcy court. Moreover, the funds would be distributed to customers by the end of the second quarter of 2024.
The proposal also suggested the division of assets into three pools: FTX.US customers, FTX.com Customers, and a general pool of other assets. Customers of the US branch and the main branch can make claims from their respective exchange pools.
They would also be eligible for a “shortfall claim” from the general pool. This would “correspond to the estimated value of assets missing at their exchange,” with the shortfall for FTX being $8.9 billion and FTX.US being $166 million.
Moreover, the FTX debtors stated that customers from both exchanges may not get a full payment. Additionally, FTX.com users may take a bigger hit. It also said,
“Future recoveries for customers and non-customers will depend on many variables, including the resolution of tax and governmental claims, the FTX team’s on-going asset recovery efforts, the results of avoidance action and other litigation, the claims allowance process, the extent to which compliance with Know-Your-Customer procedures reduces the number of filed or accepted claims (…)”
