Sam Bankman-Fried faces hearing over lawyer's conflict in cryptocurrency fraud case

Sam Bankman-Fried, the incarcerated founder of the defunct cryptocurrency exchange FTX, is set to appear in court on Wednesday for a crucial hearing regarding his recent legal representation and a potential conflict of interest.

Bankman-Fried, 31, was convicted of fraud in November following allegations of siphoning off billions of dollars from FTX customers. Since then, he has retained defence attorney Marc Mukasey to aid in his sentencing and potential appeal process.

However, Mukasey's representation of Alex Mashinsky, founder of bankrupt cryptocurrency lender Celsius Networks, on unrelated charges has raised concerns about a possible conflict of interest. Mashinsky faces allegations of artificially inflating the value of his company's in-house crypto token, and Mukasey's involvement in both cases has prompted scrutiny.

Prosecutors have flagged the issue, pointing out that Bankman-Fried's Alameda Research hedge fund reportedly utilised stolen FTX customer funds to repay debts owed to Celsius. The potential overlap in legal representation could complicate matters, particularly regarding restitution claims.

Despite the conflict, prosecutors have suggested that Bankman-Fried may proceed with Mukasey's representation as long as he is fully aware of the situation. The decision ultimately rests on Bankman-Fried's understanding and willingness to proceed under these circumstances.

Bankman-Fried, who has been held at Brooklyn's Metropolitan Detention Centre since August 2023, faces the prospect of a lengthy prison sentence. His sentencing is scheduled for March 28, with the possibility of facing decades behind bars.

Marc Mukasey, a seasoned legal professional and former federal prosecutor, has a notable background, including past involvement in high-profile cases such as representing Trevor Milton, the founder of electric truck maker Nikola, in a fraud case. Milton's sentencing last year resulted in a four-year prison term, significantly less than what prosecutors had sought.

At the hearing, US District Judge Lewis Kaplan is expected to address Bankman-Fried directly, seeking his input on waiving objections to the potential conflict of interest. Mukasey and his legal team have assured the court of their ability to fairly represent both Bankman-Fried and Mashinsky, who also appeared in court on Tuesday.

Bankman-Fried's trial attorneys, Mark Cohen and Christian Everdell, continue to be involved in his legal defence alongside Mukasey and his team.

(With Reuters inputs)