Sep 5, 2023

FTX ads featuring comedian Larry David and football star Tom Brady show a blurring between bankrupt crypto exchange FTX's U.S. and international businesses, the U.S Department of Justice said Friday.

Video transcript

We're going to turn now to F TX where founder Sam Beman Fried and the Department of Justice are sparring about what evidence can be brought to his upcoming fraud trial in October. Joining us. Now to discuss is Coindesk regulatory reporter Jack Schickler. Welcome to the show. Jack. Hi, great to be here as you say. Yeah, these court filings are kind of the battle before the battle. Uh The actual fraud trial for Samba MRI will begin. We expect on the second of October in New York. Uh He has pleaded not guilty to a bunch of charges uh um including wire fraud. And we're just about to see this, this famous uh ad from the Super Bowl of 2022 February of 2022. That's now taken center stage in some of these court filings. Uh an almost ironic ad, Jack, I believe in the ad. They say that FTX is probably the safest way to get into crypto. Then we have Larry David said, saying, then this is not a quote that he doesn't know if he believes it. Of course, we know what happened to FDX after this ad aired. Talk to me about the significance. What are prosecutors saying? Well, actually, they're using this ad to make a very specific point. Um Sam Bank Fried is trying to argue that the charges against him relate to FDX dot com, the international business and that that is a completely separate business from FDX dot us, uh which, which serve us customers for regulatory reasons. And uh and prosecutors at the Department of Justice aren't standing for this are saying, look at this ad it right through. Um it never once mentions FTX US. This is very clearly uh sorry, it never once mentions FTX US. This is very clearly an ad talking to the US viewers. It was shown during the Super Bowl which is a US sports event on U STV. And there you can see the logo says FTX. So for them, you know, the market and they've also got some internal documents from FDX saying the marketing of FTX and FTX US were basically the same thing and they're not quite saying it's exactly the same business, but we've definitely seen accusations of that kind in the, in the crypto world in areas like finance uh which has been accused of not really having a proper separation between uh US and international business in the charges imposed against them by the SEC a few months ago. How are Sam Bakeman Fried's lawyers responding to this? What's, what's their argument here? Well, as I say, they're arguing that you should strike out a whole bunch of evidence. We don't, it's, it's, it's for the judge now to decide how to make these, how to, to, to value these competing claims. He hasn't given a huge amount of ground to Samba MRI so far. Um He ordered him to return to jail because he deemed that he had broken his bail conditions um just a few weeks ago. Uh So, you know, the judge seems a bit skeptical about a lot of SPS arguments, but we Sam by Pete has also made his own kind of counter proposals. He said witnesses, the government wants to call shouldn't be allowed to testify. They've also said a bunch of a bunch of arguments the uh the government wants to make shouldn't be allowed to be put in front of a jury because they are confusing. This is kind of the more um battle before the battle before the trial begins about exactly what will the jury be allowed to see what evidence, what testimony, what witnesses um before, before the actual trial begins? And this is all happening pretty soon. I mean, in the coming days, we are expecting jury selection to begin. Um So we're sort of reaching the beginning at the end of this uh this beginning to the trial, Jack, you say that this is normal and there's been a lot of back and forth between the Doj and Sam Bank Fried's lawyers. We cover it every time it happens on coin desk. How normal is it for these arguments to be happening? Um, right before the trial, is this something that happens in every trial or is there something extraordinary or, or different about Sam Bank Fried's case? Well, this is a very serious trial. There are very serious charges have been levied against him. There's an unusual number of complex issues partly because we're dealing with crypto. We're also dealing with national politics because he had to be, he had to be removed from the Bahamas in order to face the charges, an extra kind of international dimension there. Um So it is an unusually complex case. He is also contesting the charges. He has pleaded not guilty. Um So he, you know, there's no, not an immediate prospect of them doing a deal or a plea bargain has been reached with some other senior FTX executives. Um So it does take time to prosecute this kind of thing. And in fact, that's another of, of, of the defendant's arguments. He says, in order to be able to defend himself against these charges, read through all the volumes and millions of pages of, of discovery evidence that's been unearthed, he needs access to the internet, he needs access to a laptop and he argues he cannot get that from prison and, and, and he's that he's currently struggling with, with being able to read and evaluate and build up his, his defense. All right. And quickly before we go could this have any impact on FTX 2.0 or the potential of an FTX 2.0 of course, that's the potential plan for FTX to reboot under new leadership. Yeah, that's a really good question. Um Obviously the wind up of FDX itself that's now under new management, that's proceeding in a different court in a Delaware bankruptcy court, um which is a separate legal proceeding. We know that FDX, the company is cooperating with the Department of Justice on the criminal case. Um And you know, hopefully the outcome of that bankruptcy case will be that um, investors, customers in ETX start to see some share of their money back once a bankruptcy plan is agreed, but this is proving complicated. Um One of the things Sam Bank Mare has argued, um you know, it doesn't, it doesn't really matter because, uh, you know, FDX should have never filed for bankruptcy and customers could still be made whole is one of the arguments he has made in the past. And actually, uh the government's is a bit skeptical about that in, in terms of its own case. It said it doesn't even if customers are made whole, which is Brazil something they will be hoping for that doesn't actually have a bearing on the fraud allegations made against him because there was still an immediate attempt to defraud. So even if you know the really lucky outcome, uh that the bankruptcy case leads to customers getting all their money back. Um, the fraud cup trial will continue. The government argues. All right, Jack, thanks for joining the show this morning and giving us an update. Thank you. That was coin desk regulatory reporter, Jack Schickler.

Learn more about Consensus 2024, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to to register and buy your pass now.