Sam Bankman-Fried plans to keep new lawyers despite potential conflict of interest: reports

Former FTX CEO Sam Bankman-Fried plans to continue with his new legal team, which is also representing another former crypto executive, Alex Mashinsky, according to multiple news reports. 

Wearing a tan jail shirt and chains around his ankles, Bankman-Fried told the court on Wednesday that "at a high level," he recognized that his counsel also represents Mashinsky, according to Reuters. 

Earlier this month, U.S. prosecutors wrote a letter to U.S. District Judge Lewis Kaplan asking for a hearing about the potential conflicts of interest that could arise since Mukasey and Young represent both Bankman-Fried and former Celsius CEO Mashinsky. Mukasey and Young were brought in to represent SBF as counsel in January, according to court filings. 

Celsius loaned money to Alameda Research, the hedge fund linked to FTX, and these loans were repaid by the fund to Celsius using FTX customer funds, according to evidence presented at Bankman-Fried's trial. Bankman-Fried could argue that Celsius was not defrauded and not entitled to restitution in a future appeal, while Mashinsky could argue the opposite, the prosecutors explained. Both FTX and Celsius have since filed for bankruptcy. 

"The relationship between Alameda Research and Celsius creates the potential for conflicts in several respects," the U.S. prosecutors said in their letter. 

Bankman-Fried said he had discussed the potential conflict with appellate counsel Alexandra Shapiro who will be a part of his eventual appeal, according to Reuters. 

Par for the course

Ira Lee Sorkin, who represented the infamous Ponzi scheme mastermind Bernie Madoff, said new lawyers often come in after a trial who have appellate experience. 

"To the extent that the court and the lawyers want to make sure that any communications that Mr. Bankman-Fried had with the Cohen firm, he's going to waive the attorney-client privilege so that the Cohen firm can communicate with the Mukasey firm with respect to the appeal. That's all there is, it's not uncommon at all," Sorkin said in an interview with The Block. 

Bankman-Fried appears to plan to work with Mukasey and Young on his appeal, said Braden Perry, partner at Kennyhertz Perry and a former federal enforcement attorney, said in an email to The Block. 

"Attorneys, especially specialized white collar and appellate attorneys, run into many potential conflicts and ethical issues in representing clients within the same industry, and in this case, set of facts," Perry said. 

Bankman-Fried is behind bars after being found guilty by a New York jury last year on all counts for defrauding investors. Mashinsky meanwhile is awaiting a trial set to begin in January 2025 after he was charged last year with fraud and misleading customers about core aspects of the business. 

Mashinsky was in court on Tuesday where he also waived his right to object to having a lawyer without conflicts of interest, according to Inner City Press.