Sam Bankman-Fried (SBF) is fighting to defend the legitimacy of FTX's investments. His lawyer has argued that these investments were not "reckless and frivolous," countering Nishad Singh's portrayal of excessive spending on marketing and celebrity endorsements, Reuters reported.

Singh, FTX's former Chief Technology Engineer, testified for a second consecutive day in SBF's fraud trial at the Manhattan federal court today (Wednesday). Under cross-examination, Singh stated that he thought FTX could handle the challenges after discovering a shortfall of $13 billion in customer funds in September 2022.

Challenging FTX’s Former Top Executive's Testimony

FTX declared bankruptcy on November 11, 2022, and Singh had previously testified that the company's venture investments and substantial marketing deals "reeked of excess and flashiness." However, SBF's defense lawyer, Mark Cohen, raised the question of whether promoting FTX's brand had business benefits, to which Singh acknowledged that it had both benefits and costs.

In his previous testimony, Singh expressed concerns about a deal with an investment firm called K5, which SBF had described as a "one-stop shop" for celebrity relationships. However, Singh later acknowledged that K5 facilitated SBF's investment in a tequila brand run by a "famous celebrity."

The trial's latest developments hint at a complex legal battle. FTX's current management had previously filed a lawsuit against K5, seeking to recover $700 million. They claimed that a shell company controlled by SBF had used $214 million in FTX's funds to buy a stake in Kendall Jenner's 818 Tequila brand when its assets were valued at just $2.94 million.

FTX's New Plan to Refund Customers’ Funds

Meanwhile, FTX has revealed an amended proposal aimed at returning a significant portion of creditors' holdings, potentially as high as 90% of the funds that were held at the exchange before its collapse.

FTX's debtors, currently overseeing the bankruptcy process, intend to formally file this plan by December 16, 2023, with the expectation that it will be reviewed by the US Bankruptcy Court.

The proposal, which was disclosed in the company's official statement, is aimed at dividing the missing customer assets into three pools. These categories are assets allocated to FTX.com's customers, the assets intended for FTX.US customers, and a "General Pool" that encompasses other assets.

The proposal specifies that customers with a preference settlement amount under $250,000 can accept the settlement without any reduction in their claim or payment. The preference settlement amount is calculated as 15% of the customer withdrawals made on the exchange nine days before its collapse.

Additionally, creditors will receive a shortfall claim against the general pool, which corresponds to the estimated value of assets that were missing from their respective exchanges. This shortfall claim is estimated to be approximately $9 billion for FTX.com and $166 million for FTX.US, the US arm of the exchange.