Judge allows Sam Bankman-Fried to keep his new lawyers after prosecutors warn of conflict of interest

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FTX founder Sam Bankman-Fried is questioned by defense lawyer Mark Cohen during his fraud trial.

REUTERS/Jane Rosenberg

US District Judge allows Sam Bankman-Fried to retain new attorneys despite conflict of interest.Marc Mukasey and Torrey Young also represent the former CEO of Celsius Network, which lent to Alameda Research.Bankman-Fried was found guilty of seven counts of fraud and conspiracy and is expected to appeal.

US District Judge Lewis Kaplan ruled that Sam Bankman-Fried could retain his new lawyers despite a noted conflict of interest.

In Manhattan federal court on Wednesday, Bankman-Fried assured Kaplan he was of sound mind as he sat flanked by the attorneys in question, Marc Mukasey and Torrey Young.

Questioned thoroughly by Kaplan, Bankman-Fried affirmed that he wanted to keep his new attorneys, waiving his right to “conflict-free representation,” as Kaplan put it.

True to form, Bankman-Fried answered Kaplan’s various questions with “yep,” “yeah,” and “nope” as he sat in a brown inmate’s uniform with his distinct curly hair.

Mukasey and Young joined Bankman-Fried’s defense team on January 9, according to the court docket.

They’re expected to help Bankman-Fried with his sentencing hearing, scheduled for late March. His legal team must also submit a sentencing memo — where they are expected to argue for a far lower sentence than the potential century he could face in prison — by February 26.

Justice Department Prosecutors flagged a potential conflict of interest in early February, noting that Mukasey and Young also represent Alex Mashinsky, the former CEO of the now-defunct cryptocurrency lender Celsius Network.

In November, a jury found Bankman-Fried guilty of seven counts of fraud and conspiracy after a monthlong trial.

Some of those counts involved defrauding lenders, including Celsius, which lent money to his cryptocurrency fund Alameda Research. Bankman-Fried and his co-conspirator Caroline Ellison prepared false and misleading documents making it appear that Alameda Research was financially healthy enough to repay the loans, even though it was in reality propped up by funds from customers of FTX, the cryptocurrency exchange Bankman-Fried also controlled. Bankman-Fried is expected to appeal the verdict.

Prosecutors brought a separate set of charges against Mashinsky in July, similarly accusing him of misrepresenting Celsius’s finances to investors and customers and artificially inflating the company’s value by rigging the price of its proprietary cryptocurrency token. Mashinsky pleaded not guilty to the charges against him, and a trial is scheduled for September.

In their February letter, prosecutors said Kaplan should hold a Curcio hearing, where the judge could ask Bankman-Fried and his lawyers questions to determine whether a legitimate conflict of interest exists and whether they would waive it for the sentencing hearing. Prosecutors said Celsius was a victim of Bankman-Fried’s fraud and was entitled to restitution as part of the sentencing.

“At sentencing, the Government will argue that Alameda Research’s lenders, including Celsius, were victims of the fraud, and that lenders are entitled to restitution. This has the potential to create a conflict in the representation of Bankman-Fried and Mashinsky,” prosecutors wrote in the letter. “Bankman-Fried may wish to argue at sentencing or in the event of an appeal that Celsius and similar lenders were not defrauded and are not entitled to restitution. Celsius, and potentially Mashinsky, may take a contrary position.”

Mukasey brought a heftier pedigree to Bankman-Fried’s defense team. He is the son of Michael Mukasey, a former Manhattan federal judge and US attorney general during the George W. Bush administration. Marc Mukasey also previously represented ex-Navy SEAL Eddie Gallagher during his murder trial, Eric Trump in the New York attorney general investigation into the Trump Organization’s finances, and Matt Gaetz during his sex trafficking investigation.

Prior to leaving the courtroom on Wednesday, Bankman-Fried turned to face the pews of reporters and observers behind him, including another attorney of his, Alexandra Shapiro. After he left, Shapiro briefly chatted with Mukasey, Young, and Assistant US Attorney Nicolas Roos.

The hearing lasted all of 20 minutes. As Bankman-Fried left the courtroom, the rattle of his ankle cuffs followed him.

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