CRIMINAL CRYPTO CAPITALI$M
Sam Bankman-Fried trial jury sees
his profane messages about regulators
Luc Cohen
Wed, October 18, 2023
NEW YORK (Reuters) -The prosecution in Sam Bankman-Fried's fraud trial on Wednesday showed jurors a slew of profane messages he sent journalists complaining about regulators, challenging the image the FTX founder cultivated as a proponent of cryptocurrency oversight.
U.S. District Judge Lewis Kaplan overruled objections by Bankman-Fried's lawyers and allowed the jurors in Manhattan federal court to see a profane message he sent to a reporter for the news website Vox days after FTX collapsed in November 2022 complaining that regulators "make everything worse."
Jurors also saw a profanity-laced message Bankman-Fried sent a journalist for crypto news site The Block on Twitter, the social media platform now called X, that made reference to U.S. Securities and Exchange Commission Chair Gary Gensler.
In the message, Bankman-Fried suggested that U.S. lawmakers were "dumb" and "about to hand the industry to Gensler on a silver platter." The SEC is viewed in cryptocurrency circles as more hostile to the industry than another federal agency, the Commodity Futures Trading Commission.
In the trial, which began on Oct. 3, Bankman-Fried stands accused of looting billions of dollars in FTX customer funds to make investments, donate to U.S. political campaigns and prop up his hedge fund, Alameda Research. Prosecutors have said his political donations were meant to promote legislation favorable to cryptocurrency.
The former billionaire has pleaded not guilty to two counts of fraud and five counts of conspiracy. Bankman-Fried, 31, could face decades in prison if convicted.
Bankman-Fried's lawyers had sought to bar prosecutors from introducing the messages with the Vox reporter as evidence, arguing that the defendant sent the "off-the-cuff musings" after the time period at issue in the trial and that the language would bias the jury against him.
In arguing for allowing the jury to see the messages, prosecutor Danielle Sassoon said that they were "highly probative" of his true state of mind at the time, noting that Bankman-Fried later told the reporter he thought the conversation had been off the record.
Vox ultimately published the messages.
Bankman-Fried wrote that his prior statements in favor of regulating cryptocurrency were "just PR," meaning public relations.
"It doesn't reflect his honest intent at the time when he was engaging with regulators," defense lawyer Christian Everdell said outside the jury's presence, arguing against allowing the messages as evidence.
Prosecutors have said they could rest their case as soon as Oct. 26. Bankman-Fried's lawyers have said he is considering testifying in his own defense.
(Reporting by Luc Cohen in New York; Editing by Will Dunham)
“Crackdown on Binance”: Bankman Fried trial highlights crypto rivalry
Testimony and evidence presented last week in the New York fraud trial of Sam Bankman-Fried has shed new light on the sudden, chaotic decline of FTX, his crypto exchange.
Also revealed: New details of his fateful rivalry with Changpeng Zhao, CEO of FTX competitor Binance.
FTX and Binance were the pillars of the crypto sector a year ago and together held around 46 percent of the market share in spot trading. Bankman-Fried and Zhao were among the industry’s most prominent figures, with the former particularly successful in laying out his vision for digital assets through X, formerly known as Twitter, sponsorships and lobbying.
Then last November, FTX collapsed, sending shockwaves across crypto markets. Bankman-Fried is now facing fraud charges for allegedly stealing billions of dollars in his customers’ funds. He pleaded not guilty and maintains his innocence.
At trial, prosecutors showed private notes from Caroline Ellison, Bankman-Fried’s sometime girlfriend and CEO of his trading firm Alameda Research. Under the heading “Things Sam is freaking out about,” she wrote in the fall of 2022 that one of Bankman-Fried’s priorities was “getting regulators to take action against Binance.”
The jury heard how in November 2022 a leaked financial statement revealed Alameda’s dangerous reliance on FTT – a crypto token issued by FTX – as an asset and how a Twitter message from Zhao that he would liquidate millions in FTT triggered a spiral that this led to the destruction of the Bankman Fried empire.
In private documents prepared as part of a final fundraising effort to save FTX, Bankman-Fried penned messages accusing Zhao of carrying out a stunning corporate raid to take out a rival exchange.
“Over the past few months, Binance has been conducting a PR campaign against us. . . They leaked a balance sheet; blogged about it; forwarded it to Coindesk,” Bankman-Fried wrote, according to evidence presented in court. Coindesk is the crypto news portal that published Alameda’s balance sheet.
The source of the leak has been one of the most frequently asked questions in the crypto space. Bankman-Fried has previously suggested that Binance was targeting its companies, but refrained from making an explicit public accusation.
Evidence presented since the trial began this month traces the twists and turns of the relationship between the two high-profile executives in the $1.2 trillion cryptocurrency market, portraying Zhao first as an ally and investor, then a rival and finally an arch-enemy of Bankman. Fried.
As one of the first FTX investors, Zhao’s Binance was initially willing to work with the Bankman Fried exchange. Zhao’s view was: “Sam is a genius, let’s fund him, he can cover markets we can’t and take risks we don’t want to take,” according to a person familiar with Binance’s plans at the time.
But the relationship soured as Bankman-Fried began becoming the most politically influential crypto executive in the US, testifying before congressional committees, publicly supporting crypto legislation and donating to candidates.
Zhao has battled for years with regulators around the world targeting his sprawling, headquarterless exchange dealing with compliance and consumer protection concerns. Bankman-Fried’s emergence as a mainstream crypto leader brought with it suspicions that he was championing his company’s interests over those across the sector, including Binance.
“It was only when Sam started lobbying against Binance and gained significant traction that he was seen biting the hands that fed him,” the person familiar with Binance added. “He was no longer willing to kiss Lord Zhao’s ring.”
Ellison’s statement last week showed the extent to which FTX’s relationship with Binance was deteriorating.
“[Bankman-Fried] said that in the event of a regulatory action against Binance, many Binance customers could switch to FTX and that he had been hoping that this would happen for some time and that various regulators had promised him that this would happen for some time. but it never happened,” she told the court.
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Former FTX executives suspect that this campaign provoked Zhao. The Binance boss alluded to this, without mentioning Bankman-Fried by name, in a Twitter message last November: “We will not support people who lobby against other industry players behind their backs.”
On the same day, November 6, 2022, Zhao tweeted that Binance would sell hundreds of millions of dollars worth of FTT, which Binance had accepted as payment when it sold its stake in FTX back to Bankman-Fried the year before.
Ellison said during her testimony that Bankman-Fried described the decision to buy out Binance’s $2 billion stake in FTX as “really important because if we didn’t buy it out…”. . Binance would do things to mess up FTX.”
Zhao’s November tweet capitalized on crypto market concerns sparked by the leaked balance sheet, which led to an inexorable price decline on FTT and a rush of customer withdrawals on FTX. The panic revealed a shortage of FTX customer funds.
After Bankman-Fried failed to raise capital to save the exchange, Zhao agreed to purchase FTX. But a day later he withdrew from the deal, saying due diligence revealed that customer funds had been mishandled. FTX had no choice but to file for bankruptcy.
Binance did not respond to a request for comment.
In her statement, Ellison said Zhao’s “true target…” . It wasn’t about selling his FTT, it was about hurting FTX and Alameda.”
Zhao has denied attacking FTX. Last December he wrote: “No healthy business can be destroyed by a tweet.”
Video: FTX: The Legend of Sam Bankman-Fried | FT film
SBF Trial: a Witness Contrasts Sam Bankman-Fried's House Testimony With FTX's Dangerous Secrets
2023-10-18
CoinDesk
Former FTX lobbyist Eliora Katz testified Wednesday in Sam Bankman-Fried's criminal trial, illuminating a contrast between the crypto mogul's public comments about the exchange's safeguards and the secret reality that led to its demise a year ago.
Bankman-Fried’s testimony before the House Financial Services Committee came up early in the Department of Justice questioning of the witness, alongside the FTX founder’s tweets about investor protection.
"We have a transparent system," Bankman-Fried said in a clip played for the jury of his comments before Congress. Bankman-Fried, in the video, also discussed the company's risk-monitoring system, contrasting it with the opaque Wall Street mess that fueled the 2008 financial crisis.
The truth, according to prosecutors and FTX insiders who have testified after pleading guilty, was very different: poor financial recordkeeping and improper siphoning of customer money to Bankman-Fried's nominally separate trading firm, Alameda Research. And once that started coming to light, the company fell apart in a rapid, 2008-style collapse.
Katz actually said relatively little on the stand. The prosecutor just kept showing her tweets and transcripts and asked her read them out loud, and she often kept her answers short: "yes" or the like. She seemed to be mainly on the stand to contrast FTX’s public statements on crypto investor protection and how it actually handled customer funds, and to introduce statements about cryptocurrencies being commodities instead of securities – an important regulatory distinction in the U.S.
Some of the Department of Justice's exhibits focused on statements by Bankman-Fried that much of the crypto market is commodities. The former CEO of FTX is charged with conspiracy to commit commodities fraud.
Katz also emphasized repeatedly that Bankman-Fried’s testimony both before the House committees occurred prior to her joining FTX. She appeared visibly uncomfortable on the stand. The witness denied putting together various materials published by FTX and said she believed that everything Bankman-Fried told the public about investor protection was true.
Judge Lewis Kaplan, who is overseeing the case, also seemed to be losing patience with the assistant U.S. attorney questioning Katz, asking how many documents he planned to show the jury near the end of the half-hour direct examination.
2023-10-18
CoinDesk
Former FTX lobbyist Eliora Katz testified Wednesday in Sam Bankman-Fried's criminal trial, illuminating a contrast between the crypto mogul's public comments about the exchange's safeguards and the secret reality that led to its demise a year ago.
Bankman-Fried’s testimony before the House Financial Services Committee came up early in the Department of Justice questioning of the witness, alongside the FTX founder’s tweets about investor protection.
"We have a transparent system," Bankman-Fried said in a clip played for the jury of his comments before Congress. Bankman-Fried, in the video, also discussed the company's risk-monitoring system, contrasting it with the opaque Wall Street mess that fueled the 2008 financial crisis.
The truth, according to prosecutors and FTX insiders who have testified after pleading guilty, was very different: poor financial recordkeeping and improper siphoning of customer money to Bankman-Fried's nominally separate trading firm, Alameda Research. And once that started coming to light, the company fell apart in a rapid, 2008-style collapse.
Katz actually said relatively little on the stand. The prosecutor just kept showing her tweets and transcripts and asked her read them out loud, and she often kept her answers short: "yes" or the like. She seemed to be mainly on the stand to contrast FTX’s public statements on crypto investor protection and how it actually handled customer funds, and to introduce statements about cryptocurrencies being commodities instead of securities – an important regulatory distinction in the U.S.
Some of the Department of Justice's exhibits focused on statements by Bankman-Fried that much of the crypto market is commodities. The former CEO of FTX is charged with conspiracy to commit commodities fraud.
Katz also emphasized repeatedly that Bankman-Fried’s testimony both before the House committees occurred prior to her joining FTX. She appeared visibly uncomfortable on the stand. The witness denied putting together various materials published by FTX and said she believed that everything Bankman-Fried told the public about investor protection was true.
Judge Lewis Kaplan, who is overseeing the case, also seemed to be losing patience with the assistant U.S. attorney questioning Katz, asking how many documents he planned to show the jury near the end of the half-hour direct examination.
FTX misused customer funds, accounting expert who assisted in Enron prosecution testifies
Jacquelyn Melinek
Wed, 18 October 2023
Image Credits: TIMOTHY A. CLARY/AFP / Getty Images
The Sam Bankman-Fried trial is 11 days in and witnesses continue to take the stand on behalf of the prosecution’s case. The defamed former co-founder of FTX and Alameda is on trial for seven criminal charges related to fraud and money laundering.
On Wednesday, Peter Easton, an accounting professor at University of Notre Dame, testified regarding whether or not the FTX collapse was predicated on fraud. Easton also assisted government officials’ prosecution of prior scandals like Enron and WorldCom.
Easton was hired by the U.S. Department of Justice to trace the billions of dollars that flowed between Alameda and FTX, many of which were customer funds. He provided analysis by tracking and compiling thousands of pages of bank statements and internal documents from FTX. When prosecutors asked Easton if FTX ever spent user funds, he said, “oh, yes.”
The deposits from FTX users were used by the exchange and its sister company Alameda Research for investments, real estate, political contributions and charity, Easton added.
Earlier this week, former senior FTX executive Nishad Singh testified along similar lines. Singh said Bankman-Fried and other FTX executives spent $8 billion worth of customer funds on real estate, venture capital investments, campaign donations, endorsement deals and even branding a sports stadium.
Singh, who has already pleaded guilty to fraud, money laundering and violation of campaign finance laws, said Monday that he learned of the massive hole in Alameda’s books as a result of a coding error that “prevented the correct accounting” of user deposits by around $8 billion. He also testified that Bankman-Fried was “in general the one making the final decision on investments and investment team decisions as a whole.”
Former Alameda CEO Caroline Ellison explains how FTX hid losses, sandbagged lenders
Easton testified that in June 2022, FTX only had $2 billion available for withdrawals even though about $11.3 billion had been deposited by users.
At the time, FTX spent $228 million on real estate and about $195 million on “insiders,” or executives at FTX and Alameda, Easton testified. Prosecutors pulled up charts tracking FTX customer funds’ inflows and outflows through various avenues. The government also showed evidence from company Slack messages between Bankman-Fried and other employees indicating that they knew where funds were coming from and being allocated to.
The Bahamas-based hedge fund Modulo Capital, co-founded by one of Bankman-Fried’s exes -- Xiaoyun “Lily” Zhang -- received over $400 million in capital from Alameda that was sourced from FTX customer funds, Easton testified. During cross-examination, he stated that he traced Modulo’s investment through the FTX database.
While the Modulo investment was a whopping amount, it wasn’t the only such transaction that used customer funds -- Easton testified that his investigation into FTX and Alameda found that customer funds were used for a majority of FTX’s investment into companies like Celsius, Anchorage, Anthony Scaramucci’s SkyBridge Capital as well as bitcoin mining company Genesis Digital Assets.
While some capital deployments were fully funded by customer funds, other investments only had “some” customer funds, Easton said. The distinction does little to shake the picture of fraud that the government is crafting.
Jacquelyn Melinek
Wed, 18 October 2023
Image Credits: TIMOTHY A. CLARY/AFP / Getty Images
The Sam Bankman-Fried trial is 11 days in and witnesses continue to take the stand on behalf of the prosecution’s case. The defamed former co-founder of FTX and Alameda is on trial for seven criminal charges related to fraud and money laundering.
On Wednesday, Peter Easton, an accounting professor at University of Notre Dame, testified regarding whether or not the FTX collapse was predicated on fraud. Easton also assisted government officials’ prosecution of prior scandals like Enron and WorldCom.
Easton was hired by the U.S. Department of Justice to trace the billions of dollars that flowed between Alameda and FTX, many of which were customer funds. He provided analysis by tracking and compiling thousands of pages of bank statements and internal documents from FTX. When prosecutors asked Easton if FTX ever spent user funds, he said, “oh, yes.”
The deposits from FTX users were used by the exchange and its sister company Alameda Research for investments, real estate, political contributions and charity, Easton added.
Earlier this week, former senior FTX executive Nishad Singh testified along similar lines. Singh said Bankman-Fried and other FTX executives spent $8 billion worth of customer funds on real estate, venture capital investments, campaign donations, endorsement deals and even branding a sports stadium.
Singh, who has already pleaded guilty to fraud, money laundering and violation of campaign finance laws, said Monday that he learned of the massive hole in Alameda’s books as a result of a coding error that “prevented the correct accounting” of user deposits by around $8 billion. He also testified that Bankman-Fried was “in general the one making the final decision on investments and investment team decisions as a whole.”
Former Alameda CEO Caroline Ellison explains how FTX hid losses, sandbagged lenders
Easton testified that in June 2022, FTX only had $2 billion available for withdrawals even though about $11.3 billion had been deposited by users.
At the time, FTX spent $228 million on real estate and about $195 million on “insiders,” or executives at FTX and Alameda, Easton testified. Prosecutors pulled up charts tracking FTX customer funds’ inflows and outflows through various avenues. The government also showed evidence from company Slack messages between Bankman-Fried and other employees indicating that they knew where funds were coming from and being allocated to.
The Bahamas-based hedge fund Modulo Capital, co-founded by one of Bankman-Fried’s exes -- Xiaoyun “Lily” Zhang -- received over $400 million in capital from Alameda that was sourced from FTX customer funds, Easton testified. During cross-examination, he stated that he traced Modulo’s investment through the FTX database.
While the Modulo investment was a whopping amount, it wasn’t the only such transaction that used customer funds -- Easton testified that his investigation into FTX and Alameda found that customer funds were used for a majority of FTX’s investment into companies like Celsius, Anchorage, Anthony Scaramucci’s SkyBridge Capital as well as bitcoin mining company Genesis Digital Assets.
While some capital deployments were fully funded by customer funds, other investments only had “some” customer funds, Easton said. The distinction does little to shake the picture of fraud that the government is crafting.
Bankman-Fried Knifed Again During His Own Lawyer’s Questioning
Noah Kirsch
Tue, October 17, 2023
Reuters/Jane Rosenberg
It was another bad day in court for Sam Bankman-Fried on Tuesday, as a turncoat prosecution witness took the stand and testified about “heinously criminal” activity at the crypto exchange FTX.
The damage was done as Bankman-Fried’s own lawyer cross-examined Nishad Singh, a former FTX executive who was once close friends with Bankman-Fried’s little brother.
Singh told jurors he had considered resigning from the company over FTX’s alleged decision to let Bankman-Fried’s trading firm, Alameda Research, pilfer customer deposits in order to fund risky investments and pay off loans.
“The scale of wrongdoing was enormous,” Singh testified.
Singh’s hands weren’t clean either. Around October 2022, Singh paid $3.7 million for a home on Orcas Island in Washington State using funds from FTX—even though he knew its customers were at risk of losing their money. He conceded in court that the purchase was “egregious, unnecessary, and selfish” and said he agreed to forfeit the property as a small gesture of restitution.
Singh pleaded guilty to six counts in February, including conspiracy to commit money laundering and conspiracy to commit securities fraud. He said he is hoping for a lenient sentence in light of his cooperation with prosecutors.
Bankman-Fried, meanwhile, faces seven counts in this trial; five others were severed before the proceedings due to complications related to his extradition from the Bahamas, but he could be tried on those charges next year.
Singh also discussed his discomfort with Bankman-Fried’s lavish spending, saying he contemplated moving out of their shared Bahamas penthouse multiple times. (He didn’t.) He said he consulted with lawyers—Bankman-Fried’s dad, Joseph, among them—about massive loans he received from the company. And he recalled strategizing with Bankman-Fried’s mother, Barbara, about political spending. (Singh pleaded guilty to campaign finance violations for allegedly participating in a straw-donor scheme alongside Bankman-Fried and Ryan Salame, another former FTX exec; Bankman-Fried’s mother has not been charged with any crimes.)
Prior to becoming head of engineering at FTX, Singh spent two years at Alameda Research. At one point during the business’ ascent, he was a billionaire, he testified, and he distributed millions of dollars to his friends and family, bringing them along for the luxury ride.
After FTX collapsed in November 2022, Singh said he contemplated suicide for months. He appeared poised in court this week, if verbose and nerdy. As he scuttled out of the courtroom on Tuesday afternoon, he made eye contact with no one, least of all his former boss.
Sam Bankman-Fried's lawyer says FTX investments were not 'reckless'
Noah Kirsch
Tue, October 17, 2023
Reuters/Jane Rosenberg
It was another bad day in court for Sam Bankman-Fried on Tuesday, as a turncoat prosecution witness took the stand and testified about “heinously criminal” activity at the crypto exchange FTX.
The damage was done as Bankman-Fried’s own lawyer cross-examined Nishad Singh, a former FTX executive who was once close friends with Bankman-Fried’s little brother.
Singh told jurors he had considered resigning from the company over FTX’s alleged decision to let Bankman-Fried’s trading firm, Alameda Research, pilfer customer deposits in order to fund risky investments and pay off loans.
“The scale of wrongdoing was enormous,” Singh testified.
Singh’s hands weren’t clean either. Around October 2022, Singh paid $3.7 million for a home on Orcas Island in Washington State using funds from FTX—even though he knew its customers were at risk of losing their money. He conceded in court that the purchase was “egregious, unnecessary, and selfish” and said he agreed to forfeit the property as a small gesture of restitution.
Singh pleaded guilty to six counts in February, including conspiracy to commit money laundering and conspiracy to commit securities fraud. He said he is hoping for a lenient sentence in light of his cooperation with prosecutors.
Bankman-Fried, meanwhile, faces seven counts in this trial; five others were severed before the proceedings due to complications related to his extradition from the Bahamas, but he could be tried on those charges next year.
Singh also discussed his discomfort with Bankman-Fried’s lavish spending, saying he contemplated moving out of their shared Bahamas penthouse multiple times. (He didn’t.) He said he consulted with lawyers—Bankman-Fried’s dad, Joseph, among them—about massive loans he received from the company. And he recalled strategizing with Bankman-Fried’s mother, Barbara, about political spending. (Singh pleaded guilty to campaign finance violations for allegedly participating in a straw-donor scheme alongside Bankman-Fried and Ryan Salame, another former FTX exec; Bankman-Fried’s mother has not been charged with any crimes.)
Prior to becoming head of engineering at FTX, Singh spent two years at Alameda Research. At one point during the business’ ascent, he was a billionaire, he testified, and he distributed millions of dollars to his friends and family, bringing them along for the luxury ride.
After FTX collapsed in November 2022, Singh said he contemplated suicide for months. He appeared poised in court this week, if verbose and nerdy. As he scuttled out of the courtroom on Tuesday afternoon, he made eye contact with no one, least of all his former boss.
Sam Bankman-Fried's lawyer says FTX investments were not 'reckless'
Luc Cohen
Updated Tue, October 17, 2023
FILE PHOTO: Former FTX Chief Executive Bankman-Fried at a courthouse in New York
NEW YORK (Reuters) -FTX founder Sam Bankman-Fried's lawyer on Tuesday said the now-bankrupt cryptocurrency exchange's investments were not "reckless and frivolous," pushing back against testimony by former executive Nishad Singh portraying its spending on marketing and celebrity endorsements as excessive.
Singh, FTX's former engineering chief, testified for a second straight day at Bankman-Fried's fraud trial in Manhattan federal court. Under cross-examination, Singh told the jury that he thought FTX would be able to stay in business upon learning in September 2022 of a $13 billion shortfall in customer funds, potentially bolstering Bankman-Fried's argument that he believed the exchange's troubles were manageable.
FTX declared bankruptcy on Nov. 11, 2022.
Singh testified on Monday that the company's venture investments and $1.1 billion in planned marketing deals, including naming rights to the arena where the NBA's Miami Heat play and featuring NFL quarterback Tom Brady in commercials, "reeked of excess and flashiness."
Defense lawyer Mark Cohen on Tuesday asked Singh, one of three former members of Bankman-Fried's inner circle who have pleaded guilty to fraud and agreed to cooperate with prosecutors, whether promoting FTX's brand could be useful.
"I understood it had business benefits and costs," Singh said in testimony that defense lawyers could use to argue that Bankman-Fried was making what he believed to be good-faith business decisions in shelling out funds for marketing and investments even if others disagreed.
Bankman-Fried is in the third week of his trial on charges involving the looting billions of dollars in FTX customer funds to make investments, donate to U.S. political campaigns and prop up his hedge fund, Alameda Research. He has pleaded not guilty.
Singh testified on Monday that he worried a deal the company had with an investment firm called K5, which Bankman-Fried described as a "one-stop shop" for brokering relationships with celebrities, would prove "toxic" for FTX's culture.
On Tuesday, Singh said K5 also helped Bankman-Fried invest in a tequila brand run by a "famous celebrity," when asked by Cohen whether the firm was anything more than a relationship broker.
"Yesterday (Monday) we were told these were all reckless and frivolous investments, and I'm entitled to show that there was way more to it than we were told yesterday," Cohen said, after a prosecutor objected to his questioning about K5.
In a lawsuit filed against K5 in June seeking to claw back $700 million, FTX's current management said a Bankman-Fried-controlled shell company used $214 million in FTX funds to buy a stake in celebrity Kendall Jenner's 818 Tequila brand at a time when the tequila company's assets were valued at just $2.94 million. K5 said the lawsuit was without merit.
Bankman-Fried has argued that while he made mistakes running FTX, he never intended to steal funds. His lawyers have said he is considering taking the witness stand in his own defense.
Jurors have already heard from Gary Wang, FTX's former chief technology officer, and Caroline Ellison, Alameda's onetime chief executive officer and Bankman-Fried's former girlfriend.
Cohen questioned Singh on Tuesday about a confrontation he had with Bankman-Fried in September 2022 after learning Alameda owed billions of dollars to FTX customers. He confronted Bankman-Fried on the balcony of the $35 million Bahamas penthouse they shared with many FTX and Alameda employees.
Singh acknowledged that he was anxious at the time, and said he was suicidal then and for several more months. He testified on Monday that Bankman-Fried was angry during the conversation.
After telling Cohen he thought FTX could stay in business "for some amount of time" despite the shortfall, Singh said he had previously told U.S. authorities he thought the company could survive for years.
Cohen also pressed Singh about a $3.7 million home he purchased using FTX customer funds in Washington state in the fall of 2022. Singh acknowledged buying the Orcas Island home, but said he was "ashamed" and had agreed to forfeit it as part of his plea agreement.
"I was putting myself ahead of customers," Singh said.
(Reporting by Luc Cohen in New York; Editing by Will Dunham)
One last gamble beckons for Sam Bankman-Fried
Natalie Sherman & Erin Delmore - BBC News, New York
Tue, October 17, 2023
Caroline Ellison is one of the former friends testifying against Sam Bankman-Fried
Lawyers for former crypto billionaire Sam Bankman-Fried have asked for him to get increased medication to address his ADHD (attention deficit hyperactivity disorder) so he can better focus on his ongoing trial and possibly testify. As he faces a long prison sentence for defrauding investors, could he take the stand?
To many watching the proceedings, the signs increasingly point to yes.
The 31-year-old is being tried on seven federal charges including wire fraud, securities fraud and money laundering after the collapse of his cryptocurrency exchange left thousands of FTX customers short by billions of dollars. He denies all charges.
It's widely accepted that the first two weeks of trial have been close to disastrous for him.
A parade of former friends, staff and business colleagues have testified that Mr Bankman-Fried took money from FTX for his own purposes, while his team has struggled to undermine their story.
"It clearly appears because of how poorly this case is going for him... that he views taking the stand as necessary if he hopes to win an acquittal," said Jacob Frenkel, a former federal prosecutor and partner at Dickinson Wright who has been following the trial.
On Monday, it was the turn of Nishad Singh, a childhood friend of Mr Bankman-Fried's brother, who said he had complained repeatedly about Mr Bankman-Fried's lavish spending on investments, marketing and sports sponsorships and felt the company, intended to be a force for good, ultimately became "evil".
Mr Bankman-Fried's lawyers have drawn admissions from customers that they did not read the terms of service and established that his friends often failed to voice objections at the time. They've said Twitter posts were taken out of context.
But the team is wrestling with some of the decisions made by Judge Lewis Kaplan in the lead-up to the trial, which limited their avenues of defence.
Those rulings included restrictions on what witnesses could appear and to what extent Mr Bankman-Fried's lawyers could introduce evidence that investors and customers were negligent.
Gary Wang is one of the friends of Sam Bankman-Fried testifying in court
Allowing Mr Bankman-Fried - whose powers of persuasion once moved billions of dollars to his side - to speak for himself may be among the best options left.
Typically attorneys advise against their clients taking the stand, worried about potential damage inflicted by prosecutors' questions or whatever impression jurors might take away independently.
But there are instances when defendants do take the stand, notably Elizabeth Holmes, a once celebrated tech tycoon now serving time in prison for fraud and conspiracy.
Government prosecutors have said they are on track to wrap up their portion of the trial by 27 October, when Mr Bankman-Fried's team presents its side of the case.
David I Miller, a partner at Greenberg Traurig and a former assistant US attorney in the Southern District of New York, said putting Mr Bankman-Fried on the stand was a "very risky proposition" - especially given his own comments on the case and the testimony of the co-operating witnesses.
"There's a real opportunity for the government to attack the defendant's credibility and to undermine any intent-related defence that's being argued on his behalf," he said.
The defence only needs to plant doubt in the minds of the jury, a 12-person cast, with six back-up alternates. The group includes a high school librarian, a commuter rail conductor, a paediatric nurse and a retired investment banker.
Courtroom sketch of Sam Bankman-Fried
Given Mr Bankman-Fried's repeated willingness to speak to the press - even after he was charged - and his stomach for gambling when the payoff is big, many expect him to take his chances.
That speculation increased after his lawyers raised the possibility in a letter on Sunday requesting that he receive increased access to Adderall for his attention deficit disorder.
"As we approach the defense (sic) case and the critical decision of whether Mr. Bankman-Fried will testify, the defense has a growing concern that because of Mr. Bankman-Fried's lack of access to Adderall he has not been able to concentrate at the level he ordinarily would and that he will not be able to meaningfully participate in the presentation of the defense case," lawyers Mark Cohen and Christian Everdell wrote.
Judge Kaplan on Monday showed little sympathy, refusing to delay trial to address the issue.
What Mr Bankman-Fried makes of it all remains hard to know. He has spent most of his hours in court shielded by a laptop, which was granted to him, without internet access, for note-taking.
While his lawyers can advise him about what to do, the decision will ultimately rest with him.
With decades in prison a possibility, this may be his biggest personal bet yet.
FTX execs blew through $8B — testimony reveals how
Rebecca Bellan
Updated Tue, October 17, 2023
Sam Bankman-Fried and other FTX executives spent $8 billion worth of customer funds on real estate, venture capital investments, campaign donations, endorsement deals and even a sports stadium, according to testimony from former senior FTX executive Nishad Singh.
Singh's testimony, which kicked off the third week of Bankman-Fried’s trial, provides fresh details of exactly where that money went.
Singh, who has already pled guilty to fraud, money laundering and violation of campaign finance laws, said Monday that he learned of the massive hole in Alameda's books as a result of a coding error that "prevented the correct accounting" of user deposits by around $8 billion.
Singh's testimony helps corroborate the statements given by three previous prosecution witnesses, all of whom were in Bankman-Fried's inner circle: FTX CTO Gary Wang, Alameda CEO Caroline Ellison and FTX engineer Adam Yedidia. While Wang and Ellison have pled guilty, each witness has pointed to Bankman-Fried as the orchestrator of fraud and money laundering.
Singh said that even after learning about the hole, "implicitly and explicitly, I green-lit transactions that I knew must have been digging the hole deeper and therefore coming from customer funds."
Singh went on to describe Bankman-Fried's spending as "excessive." He said that he often learned about large spends after the fact and that his expressions of concern weren't taken seriously.
"I also would express that I felt kind of embarrassed or ashamed of how much it all reeked of excess and flashiness," said Singh. "It didn't align with what I thought we were building a company for."
Where the money went
Prosecutor Nicolas Roos and Singh went through spreadsheets detailing different ways Alameda spent the $8 billion in customer funds. Singh testified that Bankman-Fried was "in general the one making the final decision on investments and investment team decisions as a whole."
In addition to going over a $1 billion on Genesis Digital Assets, a crypto mining firm in Kazakhstan, and $500 million on Anthropic, an AI company focused on safety, the prosecution focused on Alameda's $200 million investment into K5 Global, a venture firm led by investor Michael Kives who is known for his extensive network.
That network seemed to deeply impress Bankman-Fried. After attending a Super Bowl party hosted by K5 in Los Angeles, the former crypto mogul told Singh that he had met "the most impressive collection of people he ever had in one location." Faces at the party included Hillary Clinton, Katy Perry, Orlando Bloom, Leonardo DiCaprio, Jeff Bezos, Kendall and Kris Jenner and Kate Hudson.
Bankman-Fried had proposed a term sheet to Singh and Wang one night that laid out hundreds of millions of dollars of onuses to Kives and Bryan Baum, co-founder and managing partner of K5. The sheet also proposed up to $1 billion long-term capital to give to the VC firm, according to Singh.
"We can get from them essentially infinite connections," wrote Bankman-Fried in a letter to FTX leadership that was shared at Monday's trial. "I think that if we asked them to arrange a dinner with us, Elon, Obama, Rihanna and Zuckerberg in a month, they would probably succeed."
Singh said he expressed concern about partnering with K5 and giving them such substantial funds, which would be "really toxic to FTX and Alameda culture." He said that "politicking and social climbing was not going to be rewarded, and here we were rewarding people in exorbitant amounts."
The former FTX executive suggested that Bankman-Fried use his own money, not FTX's, to make some of these investments. Those protestations didn't yield results, according to the spreadsheet, which showed the K5 deal went through Alameda's venture arm.
Bankman-Fried also believed that endorsement deals and even "unpaid partnerships with celebrities" would help increase FTX's influence to propel its success, said Singh.
To that end, about $205 million of that $8 billion chunk was spent renaming the Miami Heat stadium to FTX Arena. Another $150 million was spent to endorse the MLB. Other items on a spreadsheet shown to the jury show FTX paid out $1.13 billion in exchange for endorsements from basketball player Steph Curry; video game developer Riot; Seinfeld writer Larry David, who endorsed FTX in a Super Bowl ad; football star Tom Brady; and model Gisele Bündchen, with whom FTX was coordinating on some philanthropic efforts, according to Singh.
Singh's testimony also revealed a range of properties that had been purchased with the funds, including a $30 million penthouse in the Bahamas that Singh said was "too ostentatious."
Bankman-Fried has also donated tens of millions to election campaigns.
The former FTX executive, who also went to high school with Bankman-Fried and was a close friend of his brother, testified that he expressed concern about the company's spending, but was usually blown off.
Singh recalled one instance where Bankman-Fried got visibly angry with him and said that people like him were "sowing seeds of doubt in the company decisions" and were "the real insidious problem here."
"It was pretty humiliating," said Singh.
Where did this $8 billion hole come from?
Singh's testimony aligned with Yedidia's that states in June 2022, the executives learned that Alameda owed $8 billion worth of FTX customer money after Ellison shared a Google Doc displaying the "extremely negative" balance.
Singh told the court this hole was due to a bug that Yedidia accidentally introduced into the system in 2021. The bug "prevented correct accounting for fiat@FTX.com's balances on specific types of withdrawals," said Singh. Fiat@FTX.com was an internal accounting system that recorded user deposits.
On top of this, Singh testified that he built out systems on FTX that gave Alameda "special privileges" not afforded to other users. A feature called "allow negative" let Alameda trade, borrow and withdraw FTX funds in excess of its balance and collateral amounts, according to Singh. He testified that he coded an initial version of the feature in 2019 at Bankman-Fried and Wang's advisement.
A later version of this code allowed Alameda to borrow from FTX without having its collateral liquidated. In effect, it could "withdraw money that it didn't have," meaning it could "lose money" that "belonged to customers," Singh said.
By June 2022, Alameda had built up its own $2.7 billion deficit on the FTX platform.
"This seemed like a real abuse of a feature that until this point I believe was serving FTX, not hurting it," said Singh.
Alameda at this point also owed $8 billion in user funds to FTX that it no longer had on hand. In total, the negative account balance and accounting bug contributed to a $11 billion hole on FTX's balance sheet, Singh testified.
SBF Trial: FTX Exec Felt ‘Suicidal’ in Crypto Exchange’s Final Days
Sam Kessler, Nikhilesh De
Updated Tue, October 17, 2023 at 7:00 AM MDT·7 min read
“I was blindsided and horrified.”
That’s how Nishad Singh recalled feeling after a fateful September 2022 meeting with FTX founder Sam Bankman-Fried where his boss laid bare the full scope of the exchange’s financial problems. Singh was the head of engineering at FTX before it imploded in November 2022 and lost billions of dollars worth of its users’ funds.
Singh told a jury on Monday that his September meeting with Bankman-Fried was the first time he realized that Alameda, FTX’s sister trading firm, had spent billions of dollars of FTX user deposits, and had left a gaping hole in both companies’ balance sheets.
“I felt betrayed,” said Singh.
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Singh is a key witness in the government’s case against Sam Bankman-Fried, and – like other star witnesses – he’s pleaded guilty to a slate of fraud and conspiracy charges that he says he committed hand-in-hand with the FTX founder. Singh told the jury he was driven by purpose in building FTX, but he realized after his meeting with Bankman-Fried that “five years of blood, sweat, and tears turned out to be for something evil.”
Monday’s testimony from Singh was perhaps the strongest evidence yet from prosecutors that Bankman-Fried was the key decision maker at FTX, and the main culprit behind the firm’s alleged crimes.
Singh was, by his own admission, culpable for much of what went wrong at FTX. He admitted to making key changes to FTX’s code that gave Alameda special privileges. Once he eventually became privy to the firms’ theft of FTX user funds in September 2022, he stayed on with the company even as it made more big expenditures and courted investors to plug the hole in its balance sheet.
In presenting Singh’s testimony – and to portray Bankman-Fried as the key wrongdoer who helmed FTX – prosecutors leaned into Singh’s apparent knack for storytelling. In addition to an admitted co-conspirator, Singh – according to his and the government’s telling – was himself a sort of tragic victim of the Bankman-Fried saga.
When Singh recounted the time he confronted Bankman-Fried on the balcony of their Bahamas apartment, prosecutors splashed an image on the screen of the FTX team’s Caribbean rooftop balcony and its sparkling swimming pool at dusk – when Singh said the conversation took place.
Singh and other top FTX/Alameda executives noticed a shortfall in FTX’s balance sheet two months earlier, and they’d grown more worried in the time since. “Caroline is really freaked out,” Singh recalled telling Bankman-Fried, “and so am I.” According to Singh, his boss eventually revealed that FTX had borrowed around $13 billion but only had $5 billion on-hand to pay back depositors.
Afterwards, when Singh asked exactly “how much are we short?” Bankman-Fried apparently retorted that this was “the wrong question.” The right question? “How can we deliver?”
“Jesus f’ing Christ,” Singh recalled saying in response.
“This has cost 5-10% of my productivity… for the last year,” Bankman-Fried said, referring to the shortfall, according to Singh. Singh recalled feeling more concerned, responding “this is going to be doing a lot more damage to me.”
Singh said he agreed to stay on at FTX despite his misgivings about its use of customer deposits – swayed by Bankman-Fried’s insistence that his friend and deputy was instrumental to FTX’s operations and uniquely positioned to aid in its survival. “How could I live with myself if my departure precipitated a fall that could’ve been avoidable?” Singh reflected.
Singh recounted several more confrontations with Bankman-Fried – these centering around the firm’s continued use of FTX user funds on expenditures which were, in Singh’s view, unnecessary.
Like Ellison, who sobbed as she recounted FTX’s final days, Singh’s testimony veered darker as he played through the events of November 2022 – when FTX ultimately collapsed.
As his testimony closed, Singh remarked on the heavy toll that the FTX saga took on his mental health: “I had been suicidal for some days.”
Campaign finance
While Bankman-Fried isn’t charged with campaign finance violations or defrauding the Federal Election Commission in this trial, prosecutors have spent quite a bit of time demonstrating the evidence they have toward that charge – first with former Alameda Research CEO Caroline Ellison, and again Monday with Singh.
Monday’s testimony, however, is the first to really demonstrate the extent to which Bankman-Fried (allegedly) had a sophisticated operation for funneling money to political candidates and causes. Singh testified that there was a group chat, where hired political consultants made recommendations on where to move funds. Ryan Salame, the former FTX Digital Markets CEO who pleaded guilty to campaign finance charges last month, executed wire transfers from Singh’s account at Prime Trust (which he repeatedly referred to as a bank account, even though Prime Trust wasn’t a bank) to move the funds to recipients.
Singh also testified that he signed literal “blank checks” from his Wells Fargo account, which he sent to Gabriel Bankman-Fried (Sam’s brother) through an assistant. These checks would be signed in bulk by Singh, and distributed by Gabriel Bankman-Fried to choice political causes.
Sam Bankman-Fried also funded Guarding Against Pandemics, the political action committee his brother ran, Singh said.
Prosecutors said in August they folded campaign finance allegations into a wire fraud charge that Bankman-Fried already faces, after having to drop an explicit campaign finance-related charge due to extradition treaty obligations with the Bahamas.
— Sam Kessler, Nikhilesh De
Courtroom scenes
Bankman-Fried continued tapping away at his laptop Monday. During one section of Singh’s testimony, the former head of product described a conversation he had with Bankman-Fried, where the then-FTX CEO was angry with Singh, saying there were certain physical tics that indicated Bankman-Fried’s anger: Bankman-Fried “puffed out his chest, had his hands back, he was … closing his eyes, grinding his teeth and when he opened them to respond he would sort of glare at me.” The defendant did not look up during this part.
Sam Bankman-Fried’s parents looked anxious when Singh testified about the campaign finance scheme, a reporter for another outlet who was in the courtroom told CoinDesk. (Our reporters were all in the courthouse overflow room at the time.)
Judge Lewis Kaplan rejected the defense’s motion to either adjourn court temporarily or administer Sam Bankman-Fried his prescription Adderall for ADHD, saying he had not received any recent reports from physicians on Bankman-Fried’s needs. “I can’t have lawyers coming in and giving drugs to people on trial because somebody says they need it,” the judge said.
This CoinDesk reporter was seen frantically digging through his backpack for a pen after the one he was using ran dry, the second in as many weeks to die in service of covering this trial.
— Nikhilesh De
What we're expecting
The prosecution wrapped up its questioning of Singh at the end of the trial day on Monday, meaning the defense team will open up Tuesday with its cross-examination of the former product lead. We also heard from Tareq Morad, an FTX customer, on Monday, meaning several others named last Friday have yet to testify.
We otherwise still seem to be on track for the DOJ resting its case by Oct. 26 (next Thursday). The defense continues to estimate that its case will take about a week and a half, suggesting that we may move to closing statements by Nov. 7 or 8.
Bankman-Fried also can’t bring up the success of his investment in the company Anthropic during the trial, Judge Kaplan said in a written ruling published after Monday’s court session. Last week, the judge likened the plan to boasting about spending stolen funds on a winning Powerball lottery ticket.
— Nikhilesh De
'I'd been suicidal for days': Sam Bankman-Fried lieutenant testifies about immense pressure to keep FTX crypto scam going — before it all crashed
Jacob Shamsian
Singh pleaded guilty in the plot to take money from FTX customers
Singh is set to continue answering questions under oath Tuesday under cross-examination from Bankman-Fried's legal team.
In his testimony so far, Singh has described his time working for Bankman-Fried, first as a software engineer for Alameda and later for FTX.
Singh was close with Bankman-Fried's family, befriending his brother Gabe Bankman-Fried, in high school. Unlike most other FTX employees, Singh had a stake in the company, accepting shares instead of bonuses on top of his $200,000 annual salary starting in 2020.
He ultimately accrued a 6 to 7% ownership share in FTX, he said, making him an on-paper billionaire. Starting in December 2021, he moved to the Bahamas to live in the penthouse, which was shared with his girlfriend, Bankman-Fried, and other members of Bankman-Fried's inner circle, including Wang, Ellison, and developer Adam Yedidia.
According to prosecutors, Bankman-Fried defrauded FTX's customers and investors, and Alameda's lenders, through the scheme where he siphoned money from FTX customers into Alameda Research, which he owned.
Singh — along with Ellison, Wang, and another FTX executive, Ryan Salame — all pleaded guilty to the conspiracy. Singh's guilty plea includes six criminal counts, and he said he was testifying as part of a cooperation agreement in hopes of getting a lighter sentence than the 75-year maximum for the charges.
"I've always been intimidated by Sam," Singh testified Monday. "Sam's a formidable character. Brilliant. And so I had a lot of respect for him."
"Over time, that eroded, and I became distrustful," he continued.
Before the September 2022 realization that Alameda was taking FTX customer money, Singh had participated in fraudulent activity in other ways.
At the end of 2021, FTX had made around $950 million in revenue, Singh said. He testified Monday that, at the end of December in 2021, Bankman-Fried asked him to juice FTX's revenues by about $50 million by making new transactions and then backdating them in the company's transaction history. Those falsified figures were given to investors to make it seem like the company had $1 billion in revenue that year, Singh said.
In another instance, also in 2021, a flaw in FTX's margin trading system had led to a $1 billion loss. At Bankman-Fried's direction, Singh transferred the losses to Alameda to hide it from FTX's investors, Singh testified.
Earlier in 2022, Singh had some inkling that things weren't all right with how Alameda's funds were accounted for on FTX's platform. That June, he was roped into a project to figure out the true value of Alameda's balances on FTX after a bug misrepresented the number by about $8 billion. Alameda was billions of dollars in the red, but Singh testified that he believed the company had assets elsewhere and that the company was still solvent and customer funds were untouched.
But when Singh saw that Alameda had taken customer funds, he believed that crossed a line, he said.
"I was blindsided and horrified," he said on the witness stand Monday. "I felt really betrayed, that five years of blood, sweat, and tears from me and so many employees, driving towards something that I thought was a beautiful force for good, had turned out to be so evil."
FTX founder Sam Bankman-Fried leaves Federal court, Wednesday, July 26, 2023, in New York.AP Photo/Mary Altaffer
'Sam has some physical twitches for when he gets angry'
Singh considered leaving the company "every day," he said in court. But he stuck around, believing the best approach would be to make FTX as successful as possible, hoping that its profits could fill the hole created by Alameda's borrowing. He believed FTX would have to fake it 'til it made it.
"How could I live with myself if my departure precipitated a fall that might have been avoidable?" he said.
Singh pressed Bankman-Fried to wind down what he saw as precipitous spending, cut back on investments, and find new sources of funds.
A month after the September meeting, Bankman-Fried went on a trip to several Gulf states in the Middle East with Anthony Scaramucci, who had invested in FTX, to try to raise more funds. When he returned, the FTX CEO told Singh that he believed he could get $5 billion more in investments, Singh testified.
But the hole at that point was $13 billion deep. Meeting in Bankman-Fried's room in their Bahamas apartment, Singh asked what else they could do to get more money quickly.
"Sam was on edge, and I felt he was very mad at me for talking about this," Singh said. "It was tense. There were long periods of silence."
He was visibly upset, according to Singh.
"Sam has some physical twitches for when he gets angry," he said.
Sam Bankman-Fried before his detainment ahead of trial.AP Photo/Seth Wenig
The "physical tells for when he is thinking hard or is upset" were "on display," Singh said.
"Puffed out his chest, had his hands back, he was grinding his finger, closing his eyes, grinding his teeth or tongue in his mouth," Singh said. "When he opened them to respond, he would sort of glare at me with some intensity."
"This didn't happen for the whole conversation, but it did happen at specific points," Singh continued. "Like when I asked, 'Dear god, what else is there? Give me some updates.'"
Singh said Bankman-Fried handled the meeting poorly.
"I ended up apologizing to him at the end for asking for the meeting because I could tell it was so unwelcome," he said.
In her own testimony earlier in the trial, Ellison said that Bankman-Fried didn't raise any money from the trip.
Singh got sucked into Bankman-Fried's efforts to burnish FTX's reputation in other ways. In October and November, he participated in a straw donor scheme to give money to Democratic candidates and political action committees.
In reality, Singh testified, Salame — who himself later pleaded guilty to breaking campaign finance laws by funneling FTX funds to Republican candidates — had access to one of his bank accounts and made the donations with political consultants. All Singh did was press buttons to approve wire transfers and write blank checks for donations, he testified. (Prosecutors have charged Bankman-Fried with campaign finance violations; a separate trial on those charges is scheduled for next year.)
I'd been suicidal'
By November, Singh's fears were coming through. The crypto news publication Coindesk published an article about a leaked copy of Alameda's balance sheet, which illustrated some of the unusually close ties between it and FTX — although Ellison testified earlier this month that the companies were even more closely integrated than it appeared.
FTX customers began to withdraw their funds from the platform en masse, and FTX didn't have their money.
Singh suggested freezing withdrawals until they could figure out another step, like persuading Binance, a bigger cryptocurrency exchange that Bankman-Fried considered a rival, to purchase FTX.
Sam Bankman-Fried, the founder of bankrupt cryptocurrency exchange FTX, is seen during a hearing as a U.S judge revoked his bail, at a courthouse in New York.REUTERS/Jane Rosenberg
Bankman-Fried and Ellison dismissed the idea "in a kind of annoyed way and proceeded" to draft tweets falsely claiming that FTX and Alameda were solvent.
In the chaos, Singh said, he asked Bankman-Fried to forgive all of the loans he had taken from FTX.
Bankman-Fried appeared inclined to grant the request, according to text messages shown as evidence in the trial. But Singh decided not to go through with it.
"It felt wrong. I mean, I was fine giving up my personal assets. I'd taken on debts and given up my assets for the company countless times," Singh said. "But I understood the purpose of this exercise to be, you know, to fool a US regulator and to fool employees of the company, and I wasn't comfortable with that."
As the chaos continued to roil FTX, Bankman-Fried, Ellison, and other executives pointed fingers at each other while employees and customers demanded answers, Singh said. Singh urged them to come clean, even if it meant disclosing his own role in the cover-up. He had little to lose.
"I'd been suicidal for some days," Singh said.
Besides, he wanted them to focus on the problem at hand.
"People weren't being productive," Singh said. "Now more than ever, to salvage whatever we could, FTX employees needed to be productive, and resolving the blame game quickly and definitively seemed like it would be a path towards that."
On November 11, Singh resigned from FTX and its caretaker CEO immediately declared bankruptcy. Around a week later, he met with prosecutors for the first time. He was on his way to a cooperation agreement
Yueqi Yang, Bob Van Voris and Allyson Versprille
Tue, October 17, 2023
(Bloomberg) -- Nishad Singh, the former director of engineering at FTX, faces cross-examination at the Sam Bankman-Fried trial Tuesday.
Under questioning by prosecutors on Monday, Singh, 28, said he was intimidated by Bankman-Fried, and at times humiliated by him. He also detailed the FTX co-founder’s spending on a Bahamian penthouse and political donations.
Like previous witnesses, Caroline Ellison and Gary Wang, Singh has pleaded guilty to fraud and conspiracy counts and has agreed to cooperate with prosecutors.
Here are a few stories to catch up on Singh’s testimony and the trial:
FTX Insider Says Work With SBF Left Him in ‘Severe’ Distress
SBF’s Friends Force Him Into ‘Hail Mary’ Choice on Testimony
Group Chats, Tweets and Audio Tape: The Evidence Against SBF
The Key Players at Sam Bankman-Fried’s Historic Fraud Trial
Here’s the latest from court (all times are NY):
SBF Calendar Showed Meetings With Clinton, Hochul (4:30 p.m.)
Bankman-Fried had scheduled meetings in Manhattan with several influential people — from former President Bill Clinton to New York Governor Kathy Hochul — in the months prior to FTX’s collapse, according to evidence presented by the government Tuesday.
According to a calendar invite, he had a meeting scheduled with Clinton at the New York Hilton Midtown in September 2022. A meeting with Hochul was scheduled to take place a month earlier. Emails and calendar invites also showed the former crypto billionaire had dinner scheduled in September 2022 with Yasir Al Rumayyan, the head of Saudi Arabia’s Public Investment Fund, at The Pierre hotel in New York. Another pointed to a March 2022 dinner with New York City Mayor Eric Adams.
The meetings were revealed while the government was questioning FBI agent Richard Busick about an analysis he did on an AT&T phone allegedly used by Bankman-Fried. He testified that the various dinners and meetings from emails and calendar entries corresponded with the phone’s location at those times.
During cross-examination, Bankman-Fried’s lawyers cast doubt on the accuracy of the location data.
Singh Forfeited House He Bought One Month Before FTX Collapse (3:15 p.m.)
Singh said he forfeited the Orcas Island property that he bought in October 2022 using money borrowed from FTX even after learning the company was misusing customer funds.
“My spending on it was egregious, unnecessary and selfish,” Singh said. “I was embarrassed and ashamed, and forfeiting seems to be one of the ways to right the wrong, at least a little.”
Singh finished his testimony and left the courtroom.
Singh Said He Thought FTX Would ‘Last for Years’ (2:30 p.m.)
Singh said under questioning by Bankman-Fried’s lawyer that he took a loan from the company to purchase a vacation home on Orcas Island for the use of himself and his friends even after he learned about the financial issues.
He said the funds were wired to purchase the apartment in mid- to late October of 2022. He has testified that he pushed Bankman-Fried to cut expenses.
Read more: FTX’s Singh Bought Dream House in October. It’s Uncle Sam’s Now.
Mark Cohen asked if Singh remembered telling prosecutors that he thought FTX would last “for years” even after learning about Alameda’s growing deficit in September 2022.
“I did tell prosecutors that I thought FTX would last for years,” Singh said.
Singh Wasn’t ‘Required’ to Be Face of FTX Political Donations (1:15 p.m.)
Singh acknowledged that he wasn’t “required” to be the face of FTX’s political donations and performed the role despite personal reservations.
In a Signal chat group, Singh told Michael Sadowsky, a political consultant, that he was averse to supporting “explicitly woke stuff.”
Still, Singh said that he became “really excited” in 2018 about California Proposition 12, a ballot proposition titled the “Prevention of Cruelty to Farm Animals Act,” which imposed minimum space requirements for egg-laying hens, pigs and veal calves.
Singh said he had money deducted from his floating balance at Alameda to fund political donations on the proposition.
Later, he worked with people including his “dear” friend, Sam Bankman-Fried’s brother Gabe, to make political donations.
Singh has pleaded guilty to conspiring to violate campaign finance laws by acting as an illegal straw donor to funnel donations to political campaigns - mostly to Democrats.
The court is on lunch break until 2:00 p.m.
Singh Says Alameda Special Privilege Initially Intended to Help Customers (12:20 p.m.)
Singh said under questioning that one of Alameda Research’s special privileges — which eventually resulted in a nearly unlimited line of credit — was initially designed to help customers.
Singh recalled an instance in mid-2020 in which an auto-deleveraging event happened on the FTX exchange because no backstop liquidity providers were eligible to step in, resulting in random FTX customers being forced to take on risky positions.
It was “undesirable” for customers to take on these positions without opting in, Singh said.
After the event, Gary Wang concluded that Alameda failed to step in and absorb the trades because the trading firm didn’t have enough free collaterals, due to them being tied up by a large amount of pending trades.
“Ultimately Sam asked me why should it depend at all on free collaterals,” since the pending positions exhausted collaterals, not actual trades, Singh recalls.
Singh testified he later wrote in a code proposal to make auto-deleveraging events less likely, including being “careful not to liquidate” Alameda.
Singh Describes ‘Sense of Relief’ About Alameda Balance Size (11:30 a.m.)
Cohen cross-examined Singh closely on the discovery of a software bug that, by mid-June 2022, had introduced an error in Alameda’s balance in its main account on the FTX exchange totaling about $8 billion.
Singh told jurors that Caroline Ellison produced data showing that the bug explained many discrepancies between the balance of the account and Alameda transactions records.
He testified about a long discussion over Google Meet, lasting possibly an hour, involving Bankman-Fried, Ellison, Wang and himself. Adam Yedidia, who testified against Bankman-Fried earlier in the trial, had inadvertently introduced the bug in 2021.
“The next thing I do recall was sensing from others a palpable sense of relief, even elation,” at discovering the balance was negative $11 billion and not negative 19 billion, Singh testified.
Defense Lawyer’s Questioning Meets Difficulties (10:45 a.m.)
Bankman-Fried’s defense lawyer, Mark Cohen, ran into some early difficulties in his questioning of Singh.
Singh said Cohen misunderstood his comments to prosecutors in January about whether it “felt wrong” to borrow from anywhere as long as you have the assets.
Singh explained that his language was specific to the discussion of bank accounts, not borrowing in general.
At one point, Judge Lewis Kaplan intervened Cohen’s requests for Singh to read out multiple items on a spreadsheet. “We are not performing eye examinations here.”
The spreadsheet “says what it says,” Kaplan said to Cohen.
After that, Cohen changed his approach and read out excerpts of Singh’s testimony directly before asking questions.
Singh Lived in the ‘Nicest Room’ in the Penthouse (10:15 a.m.)
Despite complaining about the cost of the penthouse, Singh volunteered Tuesday that he and his girlfriend, Claire Watanabe, moved into the “nicest room in the house.”
Asked by Cohen if it was excessive for billionaires to live in a $30 million home, Singh replied that the cost is the same no matter the “wealth of the people living in it.”
“I really don’t know what’s reasonable for billionaires to do,” Singh said. “I don’t know other billionaires.”
Watanabe, another former FTX executive, was in court Monday to watch his testimony.
Singh Said There Could Be Benefits to Celebrity Deals (10:00 a.m.)
After testifying Monday about what he believed was FTX’s lavish spending on celebrity endorsements, Singh said under cross Tuesday that it was Bankman-Fried’s job to make those determinations.
“I believe it could be valuable to the business...depending on the circumstances,” Singh said under questioning by Bankman-Fried lawyer Mark Cohen. “I understood it had business benefits and costs.”
After questions about the sponsorship of a Miami arena and other deals, Cohen said that on Monday the court was told that many of these things were “reckless spending” and that his job today is to show “there was way more to it than we were told.”
Singh still pointed to an investment in a tequila brand run by a celebrity as an example of excessive spending.
A previous version of the story was corrected to reflect the location of the property on Orcas Island.
Allyson Versprille, Bob Van Voris and Yueqi Yang
Mon, October 16, 2023
(Bloomberg) -- The Sam Bankman-Fried trial resumed Monday with more prosecution witnesses, including Nishad Singh, the former director of engineering at FTX.
Like previous witnesses, Caroline Ellison and Gary Wang, Singh has pleaded guilty to fraud and conspiracy counts and has agreed to cooperate with prosecutors.
Singh is another witness with close ties to Bankman-Fried. He was a childhood friend of Bankman-Fried’s younger brother, Gabriel, and lived with Bankman-Fried in the Bahamas.
Here are a few stories to catch up on the trial last week:
SBF’s Friends Force Him Into ‘Hail Mary’ Choice on Testimony
Group Chats, Tweets and Audio Tape: The Evidence Against SBF
Caroline Ellison Says ‘Sam Was the One’ Who Caused FTX Collapse
The Key Players at Sam Bankman-Fried’s Historic Fraud Trial
Here’s the latest from court (all times are NY):
SBF Lawyers Revisit Access to Adderall (5:30 p.m.)
After the jury was sent home, Mark Cohen, one of Bankman-Fried’s lawyers, again raised the issue of his client’s access to Adderall, the drug prescribed to treat his ADHD and depression.
Bankman-Fried’s team said in a letter late last night that he may not be able to “meaningfully participate” in his own defense because he hadn’t been receiving his full dose of Adderall.
Bankman-Fried has continually raised this issue since Kaplan revoked his bail in August.
“As we approach the defense case and the critical decision of whether Mr. Bankman-Fried will testify,” Cohen said in the letter, “the defense has a growing concern that because of Mr. Bankman-Fried’s lack of access to Adderall he has not been able to concentrate at the level he ordinarily would and that he will not be able to meaningfully participate in the presentation of the defense case.”
Read More: SBF Lawyers Say FTX Co-Founder May Need Adderall to Testify (2)
Kaplan rejected two solutions proposed by Cohen, a half-day delay to work out the issue and the possibility that Bankman-Fried’s legal team could bring his medication to court for him.
The judge said he hadn’t been given information from a doctor on the issue since August and that he’s “not professionally competent” to make medication decisions or allow lawyers to administer drugs.
“I can’t write the prescription,” he said.
The judge also said he hadn’t observed a problem with Bankman-Fried and is “inclined to push ahead” with the trial.
Bankman-Fried was paying close attention to the discussion, but appeared dejected when the judge denied the request.
His lawyers will begin cross-examination of Singh in the morning.
Singh Describes ‘Crazy, Blame Game’ in Final Days (5:15 p.m.)
Singh said that in the days leading up to FTX’s demise “there was a crazy, blame game going on and people were not being productive.”
Singh says he spoke to Daniel Friedberg, FTX’s former chief regulatory officer, and that he was mad about Alameda’s borrowing.
The attorney, who he described as FTX’s “chief legal decision maker,” blamed Singh, Bankman-Fried and Wang for the company’s problems.
Singh testifies that the accusations left him in “severe emotional distress” and that he “had been suicidal for some days.”
Because of this, Singh testified that he asked Bankman-Fried to clarify everyone’s role in the fraud scheme, saying he wanted it made clear that he’d only been aware of the misuse of customer funds since September 2022. Singh said he wanted Bankman-Fried to take the blame for orchestrating everything.
FTX Bahamas, US Arms More Intertwined Than Suggested (4:45 p.m.)
At times, Bankman-Fried, Wang and Singh would receive loans from Alameda that would be used to fund investments and acquisitions for FTX’s US unit. Singh testified that they would work with company lawyers to set the transactions up.
The testimony suggests that the Bahamas-based company and US arm were more intertwined than what was suggested publicly and that money for the latter’s investments may have come from customer funds.
Political Donations Made for ‘Advantageous Optics’ (4:00 p.m.)
Singh said that a lot of the money for FTX-related political donations went through his accounts.
He said that funds were often taken from Alameda’s account, and then would be wired to Singh’s Prime Trust account. From there, Ryan Salame, the former CEO of FTX’s Bahamian unit, had access to the account to make donations and the contributions would be made in Singh’s name.
Salame has pleaded guilty to one campaign finance violation and one charge of operating an illegal money-transmitting business.
Similarly, Singh would sign blank checks for Gabriel Bankman-Fried, Sam Bankman-Fried’s younger brother, who was head of a political action committee called Guarding Against Pandemics, which also made political donations.
Singh said he wasn’t comfortable with his name being used for political donations and tried to find someone who could replace him in that capacity.
But he said donations were made in his name for “advantageous optics.”
Singh was friends with Gabriel Bankman-Fried before joining FTX. The younger Bankman-Fried hasn’t been charged with a crime.
‘We Came, We Saw, We Researched’ Memo on Alameda (3:30 p.m.)
Singh said, like other witnesses, that there were serious discussions about shutting down Alameda in September 2022.
There was a memo called “We Came, We Saw, We Researched” that looked at the issue.
Singh suggested keeping Alameda open, but shut down Alameda’s account on FTX.
That was first proposed inside a chat with himself, Gary Wang, Caroline Ellison and Bankman-Fried.
But Ellison said, “that’s impossible,” Singh recalled.
Wang said there’s $13 billion that couldn’t be paid back.
Bankman-Fried said that FTX was “short on deliverables” in 24 hours if pressed, $5 billion, “substantially more.”
I said something like “Jesus f’ing Christ.”
“I think this is going to be doing a lot more damage to me,” Singh said. “I understand it’s not productive for me to react emotionally.”
Singh Tried to Stop ‘Crazy’ Spending on Endorsements (3:10 p.m.)
As late as September 2022 as Alameda’s debts piled up, Singh said he was fighting to stop spending on endorsements and other expenses.
Singh said he complained about spending about $1 billion on endorsement deals. “This is crazy, we need to cut this,” Singh said.
But Bankman-Fried “didn’t think these were bad spends,” Singh recalled.
After September, spending was necessarily “digging the customer deficit hole deeper,” Singh said.
Singh Thought About Quitting Company Every Day (2:55 p.m.)
Singh said that he considered leaving the company “every day.”
“I was blindsided and horrified,” he said about FTX and Alameda’s worsening financial condition. “I felt really betrayed.”
He thought he was working five years for something good, but it turned out “so evil.” The only reason he didn’t quit was because he didn’t want to trigger a collapse.
FTX Latest: Judge Seeks Explanation of Blockchain, Crypto Mining (12:40 p.m.)
Judge Lewis Kaplan was unusually active during Singh’s testimony, asking him to simplify technical matters and asking his own questions to amplify the testimony. The judge asked Singh to explain terms including “venture investing,” “blockchain” and “algorithmic failure.”
When the topic turned to crypto mining, the judge again intervened, noting that in his day, mining meant “digging things out of the ground.”
At one point, he asked questions to clarify what Singh knew about the ability of Alameda to borrow FTX customer funds early on.
Kaplan, who was a litigator before being appointed to the bench, nudged the prosecutor, Nicolas Roos, several times for failing to elicit background testimony - or “lay a foundation” - for some of his questions.
The court is taking a lunch break until 2 p.m.
Singh Knew About FTX Customers’ Transfers to Alameda at an Early Stage (12:05 p.m.)
Singh said he knew that FTX was accessing customer funds very early. He described an FTX OTC system that supported transferring FTX customer funds into Alameda’s bank account.
Singh said he was told by Bankman-Fried that the reason was the difficulty for FTX to open a bank account.
The setup allowing FTX customers to deposit funds into Alameda’s bank account in order to trade on FTX was “from FTX’s inception,” Singh said.
Bankman-Fried Attended Star-Studded Dinner in LA (11:40 a.m.)
Singh recalled a star-studded dinner that Bankman-Fried attended in LA at the home of Michael Kives, co-founder of K5 Global investment firm and a former Hillary Clinton aide.
After the dinner, Bankman-Fried was impressed by Kives’s connections and decided to invest in K5.
Singh said he told Bankman-Fried that he was “worried that partnering with K5 and giving them this amount of money would be really toxic to FTX and Alameda culture.” He explained the investment would go against their corporate culture, in which politicking and social climbing shouldn’t be rewarded.
Bankman-Fried went ahead with the K5 investment and subsequently made his way into the celebrities and politicians circle, allowing FTX to gain major endorsement deals.
The prosecutor showed Bankman-Fried’s notes from after the dinner:
“In LA met with Michael Kives and his firm K5. He is, probably, the most connected person I’ve ever met. In attendance at the dinner at his house were:
Hillary Clinton, Doug Emhoff, Katy Perry, Orlando Bloom, Kate Hudson, Leonardo DiCaprio, Jeff Bezos, Ted Sarandos, Kendall Jenner, Kris Jenner, Corey Gamble, etc.”
Asked to identify each person on the list, Singh quickly pointed out Clinton as a presidential candidate, and Bezos as the chief executive officer of Amazon.
When asked about Kendall Jenner and Kris Jenner, Singh said, “I honestly could not tell you what they do,” prompting laughter.
FTX Seeks $700 Million From Bankman-Fried’s Celebrity Connector
SBF Lashed Out When Confronted About Spending (10:40 a.m.)
Singh described Bankman-Fried’s approach to spending as “excessive.”
When he confronted Bankman-Fried about spending, Singh said the company co-founder lashed out and said people like Singh casting doubts on FTX were the “real insidious problem here.”
“It was pretty humiliating,” Singh said.
In late 2021 and 2022, there was lots of spending on real estate and endorsement deals, Singh said.
From 2021: NBA’s Steph Curry Seals FTX Crypto Pact Similar to Tom Brady’s
Singh Testifies He Was Always ‘Intimidated’ by SBF (10:30 a.m.)
Singh told the court that he had always been intimidated by Bankman-Fried, drawing an objection from defense lawyers, which was overruled.
“Sam is a formidable character, brilliant,” Singh said. “So I had a lot of admiration and respect for him. Over time a lot of that eroded.”
Bankman-Fried stayed focused on his laptop during the exchange.
Singh also said that he had the third-largest equity stake in FTX, had a base salary of $200,000 and collected bonuses of about $1 million each through 2020.
Singh Says He Committed Crimes With SBF, Ellison (10:15 a.m.)
Nishad Singh took the stand, held the microphone, and said “Am I coming through clear? My name is Nishad Singh.”
He quickly said that he committed crimes with Bankman-Fried and other FTX and Alameda officials including Gary Wang, Caroline Ellison and Ryan Salame.
“I defrauded customers, investors,” Singh said, wearing a dark suit and red tie.
©2023 Bloomberg L.P.
FTX exec Nishad Singh testifies on Bankman-Fried’s ‘excessive’ and ‘flashy’ spending
Kari McMahon
Mon, October 16, 2023
Former FTX engineering director Nishad Singh called the spending habits of his former business partner “excessive” and “flashy” as he took to the stand Monday in the third week of the criminal trial of FTX founder and former CEO Sam Bankman-Fried.
Along with several other executives of the collapsed crypto exchange FTX, Singh pleaded guilty to multiple criminal charges including fraud and campaign finance law violations in relation to the collapse and has been cooperating with the government. The prosecution hope his testimony will demonstrate Bankman-Fried ran both FTX and its sister company Alameda Research, a crypto trading firm he founded, and is responsible for misusing billions of dollars in FTX customer funds to prop up Alameda Research.
Singh’s testimony is expected to bolster similar claims made in the past two weeks by the prosecution’s “star” witness, Alameda Research’s co-CEO Caroline Ellison, as well as FTX and Alameda co-founder Gary Wang.
“SBF would unilaterally spend Alameda’s money,” Singh told the jury, according to a live blog of the trial from court reporting organization Inner City Press.
Singh initially joined Alameda Research as a software engineer before moving to FTX and becoming its head of engineering. He met Bankman-Fried through his friendship with his brother Gabe Bankman-Fried.
“Sam is a formidable character — I came to distrust him,” said Singh, telling the jury how he did not agree with Bankman-Fried’s excessive spending.
“I’d complain about the excess & flashiness which I found different that what we were building the company for,” Singh said. “He’d say I didn’t understand, he was out there interacting with people. I thought we were fleeced for US$20 million, he said I was sowing doubt.”
Starstruck
Bankman-Fried’s differentiating factor compared to the other co-founders was that he did the endorsement deals, Singh said. Singh walked the jury through some of FTX’s many prominent partnerships and relationships including with NBA superstar Steph Curry and comedian Larry David for the exchange’s memorable Super Bowl ad. The total endorsement spend amounted to around US$1.3 billion, he said.
Bankman-Fried splurged not only on celebrities, but also on insiders. Singh described reviewing a term sheet that would provide former Hollywood agent Michael Kives and colleague Bryan Baum millions in bonuses as well as a billion dollar investment in their VC firm K5.
“I asked that it be done with Sam’s money and not FTX’s money,” Singh said. But Bankman-Fried told Singh the deal was “basically” already done, he said.
The attraction to K5 came from its connections. Bankman-Fried was impressed by Kives star studded guest list at a Super Bowl party featuring former U.S. presidential candidate Hilary Clinton and actor Leonardo DiCaprio, Singh said.
“Late in the game”
While Singh disagreed with Bankman-Fried’s excessive spending, he only found out about Alameda Research’s use of over US$13 billion in FTX customer funds when the team discussed closing down Alameda in September last year. He said he was “aware late in the game.”
“Gary said Alameda was borrowing US$13 billion from FTX,” Singh said. “I was hoping I’d misunderstood. FTX itself didn’t have that much money.”
Still, Bankman-Fried continued to pursue investment deals as well as fundraise for FTX, including the potential purchase of messaging service Telegram for US$120 million. Singh was “nervous” about the funds coming from customers, he said.
“I was upset at the endorsement deals, it was a billion dollars,” Singh said. “I said this is crazy, cut this. He said he didn’t think these were bad spends. I pointed at a couple. He said he agreed, but that cutting would cost 70% of seeing them through.”
Funds from Alameda also went toward political donations and were coordinated through a Signal chat called “Donations Processing,” Singh said. This group included Gabe Bankman-Fried, who ran Guarding Against Pandemics, a nonprofit advocacy group.
The defense strategy
The defense expects to spend four to five hours tomorrow on the cross examination. They proposed a half day tomorrow to focus on issues surrounding Bankman-Fried’s prescription of Adderall. On Sunday night, they requested help from the judge, via a letter, in getting Bankman-Fried access to his prescribed dose of Adderall during trial hours due to the fact he is struggling “to concentrate to the level he ordinarily would.”
The letter hinted that Bankman-Fried might take the stand in the trial, but the lack of access to medication is making it difficult for the defense in deciding how to proceed as “he will not be able to meaningfully participate in the presentation of the defense case” with the current dosage.
Rebecca Bellan
Updated Tue, October 17, 2023
Sam Bankman-Fried and other FTX executives spent $8 billion worth of customer funds on real estate, venture capital investments, campaign donations, endorsement deals and even a sports stadium, according to testimony from former senior FTX executive Nishad Singh.
Singh's testimony, which kicked off the third week of Bankman-Fried’s trial, provides fresh details of exactly where that money went.
Singh, who has already pled guilty to fraud, money laundering and violation of campaign finance laws, said Monday that he learned of the massive hole in Alameda's books as a result of a coding error that "prevented the correct accounting" of user deposits by around $8 billion.
Singh's testimony helps corroborate the statements given by three previous prosecution witnesses, all of whom were in Bankman-Fried's inner circle: FTX CTO Gary Wang, Alameda CEO Caroline Ellison and FTX engineer Adam Yedidia. While Wang and Ellison have pled guilty, each witness has pointed to Bankman-Fried as the orchestrator of fraud and money laundering.
Singh said that even after learning about the hole, "implicitly and explicitly, I green-lit transactions that I knew must have been digging the hole deeper and therefore coming from customer funds."
Singh went on to describe Bankman-Fried's spending as "excessive." He said that he often learned about large spends after the fact and that his expressions of concern weren't taken seriously.
"I also would express that I felt kind of embarrassed or ashamed of how much it all reeked of excess and flashiness," said Singh. "It didn't align with what I thought we were building a company for."
Where the money went
Prosecutor Nicolas Roos and Singh went through spreadsheets detailing different ways Alameda spent the $8 billion in customer funds. Singh testified that Bankman-Fried was "in general the one making the final decision on investments and investment team decisions as a whole."
In addition to going over a $1 billion on Genesis Digital Assets, a crypto mining firm in Kazakhstan, and $500 million on Anthropic, an AI company focused on safety, the prosecution focused on Alameda's $200 million investment into K5 Global, a venture firm led by investor Michael Kives who is known for his extensive network.
That network seemed to deeply impress Bankman-Fried. After attending a Super Bowl party hosted by K5 in Los Angeles, the former crypto mogul told Singh that he had met "the most impressive collection of people he ever had in one location." Faces at the party included Hillary Clinton, Katy Perry, Orlando Bloom, Leonardo DiCaprio, Jeff Bezos, Kendall and Kris Jenner and Kate Hudson.
Bankman-Fried had proposed a term sheet to Singh and Wang one night that laid out hundreds of millions of dollars of onuses to Kives and Bryan Baum, co-founder and managing partner of K5. The sheet also proposed up to $1 billion long-term capital to give to the VC firm, according to Singh.
"We can get from them essentially infinite connections," wrote Bankman-Fried in a letter to FTX leadership that was shared at Monday's trial. "I think that if we asked them to arrange a dinner with us, Elon, Obama, Rihanna and Zuckerberg in a month, they would probably succeed."
Singh said he expressed concern about partnering with K5 and giving them such substantial funds, which would be "really toxic to FTX and Alameda culture." He said that "politicking and social climbing was not going to be rewarded, and here we were rewarding people in exorbitant amounts."
The former FTX executive suggested that Bankman-Fried use his own money, not FTX's, to make some of these investments. Those protestations didn't yield results, according to the spreadsheet, which showed the K5 deal went through Alameda's venture arm.
Bankman-Fried also believed that endorsement deals and even "unpaid partnerships with celebrities" would help increase FTX's influence to propel its success, said Singh.
To that end, about $205 million of that $8 billion chunk was spent renaming the Miami Heat stadium to FTX Arena. Another $150 million was spent to endorse the MLB. Other items on a spreadsheet shown to the jury show FTX paid out $1.13 billion in exchange for endorsements from basketball player Steph Curry; video game developer Riot; Seinfeld writer Larry David, who endorsed FTX in a Super Bowl ad; football star Tom Brady; and model Gisele Bündchen, with whom FTX was coordinating on some philanthropic efforts, according to Singh.
Singh's testimony also revealed a range of properties that had been purchased with the funds, including a $30 million penthouse in the Bahamas that Singh said was "too ostentatious."
Bankman-Fried has also donated tens of millions to election campaigns.
The former FTX executive, who also went to high school with Bankman-Fried and was a close friend of his brother, testified that he expressed concern about the company's spending, but was usually blown off.
Singh recalled one instance where Bankman-Fried got visibly angry with him and said that people like him were "sowing seeds of doubt in the company decisions" and were "the real insidious problem here."
"It was pretty humiliating," said Singh.
Where did this $8 billion hole come from?
Singh's testimony aligned with Yedidia's that states in June 2022, the executives learned that Alameda owed $8 billion worth of FTX customer money after Ellison shared a Google Doc displaying the "extremely negative" balance.
Singh told the court this hole was due to a bug that Yedidia accidentally introduced into the system in 2021. The bug "prevented correct accounting for fiat@FTX.com's balances on specific types of withdrawals," said Singh. Fiat@FTX.com was an internal accounting system that recorded user deposits.
On top of this, Singh testified that he built out systems on FTX that gave Alameda "special privileges" not afforded to other users. A feature called "allow negative" let Alameda trade, borrow and withdraw FTX funds in excess of its balance and collateral amounts, according to Singh. He testified that he coded an initial version of the feature in 2019 at Bankman-Fried and Wang's advisement.
A later version of this code allowed Alameda to borrow from FTX without having its collateral liquidated. In effect, it could "withdraw money that it didn't have," meaning it could "lose money" that "belonged to customers," Singh said.
By June 2022, Alameda had built up its own $2.7 billion deficit on the FTX platform.
"This seemed like a real abuse of a feature that until this point I believe was serving FTX, not hurting it," said Singh.
Alameda at this point also owed $8 billion in user funds to FTX that it no longer had on hand. In total, the negative account balance and accounting bug contributed to a $11 billion hole on FTX's balance sheet, Singh testified.
SBF Trial: FTX Exec Felt ‘Suicidal’ in Crypto Exchange’s Final Days
Sam Kessler, Nikhilesh De
Updated Tue, October 17, 2023 at 7:00 AM MDT·7 min read
“I was blindsided and horrified.”
That’s how Nishad Singh recalled feeling after a fateful September 2022 meeting with FTX founder Sam Bankman-Fried where his boss laid bare the full scope of the exchange’s financial problems. Singh was the head of engineering at FTX before it imploded in November 2022 and lost billions of dollars worth of its users’ funds.
Singh told a jury on Monday that his September meeting with Bankman-Fried was the first time he realized that Alameda, FTX’s sister trading firm, had spent billions of dollars of FTX user deposits, and had left a gaping hole in both companies’ balance sheets.
“I felt betrayed,” said Singh.
You're reading The SBF Trial, a CoinDesk newsletter bringing you daily insights from inside the courtroom where Sam Bankman-Fried will try to stay out of prison. Want to receive it directly? Sign up here.
Singh is a key witness in the government’s case against Sam Bankman-Fried, and – like other star witnesses – he’s pleaded guilty to a slate of fraud and conspiracy charges that he says he committed hand-in-hand with the FTX founder. Singh told the jury he was driven by purpose in building FTX, but he realized after his meeting with Bankman-Fried that “five years of blood, sweat, and tears turned out to be for something evil.”
Monday’s testimony from Singh was perhaps the strongest evidence yet from prosecutors that Bankman-Fried was the key decision maker at FTX, and the main culprit behind the firm’s alleged crimes.
Singh was, by his own admission, culpable for much of what went wrong at FTX. He admitted to making key changes to FTX’s code that gave Alameda special privileges. Once he eventually became privy to the firms’ theft of FTX user funds in September 2022, he stayed on with the company even as it made more big expenditures and courted investors to plug the hole in its balance sheet.
In presenting Singh’s testimony – and to portray Bankman-Fried as the key wrongdoer who helmed FTX – prosecutors leaned into Singh’s apparent knack for storytelling. In addition to an admitted co-conspirator, Singh – according to his and the government’s telling – was himself a sort of tragic victim of the Bankman-Fried saga.
When Singh recounted the time he confronted Bankman-Fried on the balcony of their Bahamas apartment, prosecutors splashed an image on the screen of the FTX team’s Caribbean rooftop balcony and its sparkling swimming pool at dusk – when Singh said the conversation took place.
Singh and other top FTX/Alameda executives noticed a shortfall in FTX’s balance sheet two months earlier, and they’d grown more worried in the time since. “Caroline is really freaked out,” Singh recalled telling Bankman-Fried, “and so am I.” According to Singh, his boss eventually revealed that FTX had borrowed around $13 billion but only had $5 billion on-hand to pay back depositors.
Afterwards, when Singh asked exactly “how much are we short?” Bankman-Fried apparently retorted that this was “the wrong question.” The right question? “How can we deliver?”
“Jesus f’ing Christ,” Singh recalled saying in response.
“This has cost 5-10% of my productivity… for the last year,” Bankman-Fried said, referring to the shortfall, according to Singh. Singh recalled feeling more concerned, responding “this is going to be doing a lot more damage to me.”
Singh said he agreed to stay on at FTX despite his misgivings about its use of customer deposits – swayed by Bankman-Fried’s insistence that his friend and deputy was instrumental to FTX’s operations and uniquely positioned to aid in its survival. “How could I live with myself if my departure precipitated a fall that could’ve been avoidable?” Singh reflected.
Singh recounted several more confrontations with Bankman-Fried – these centering around the firm’s continued use of FTX user funds on expenditures which were, in Singh’s view, unnecessary.
Like Ellison, who sobbed as she recounted FTX’s final days, Singh’s testimony veered darker as he played through the events of November 2022 – when FTX ultimately collapsed.
As his testimony closed, Singh remarked on the heavy toll that the FTX saga took on his mental health: “I had been suicidal for some days.”
Campaign finance
While Bankman-Fried isn’t charged with campaign finance violations or defrauding the Federal Election Commission in this trial, prosecutors have spent quite a bit of time demonstrating the evidence they have toward that charge – first with former Alameda Research CEO Caroline Ellison, and again Monday with Singh.
Monday’s testimony, however, is the first to really demonstrate the extent to which Bankman-Fried (allegedly) had a sophisticated operation for funneling money to political candidates and causes. Singh testified that there was a group chat, where hired political consultants made recommendations on where to move funds. Ryan Salame, the former FTX Digital Markets CEO who pleaded guilty to campaign finance charges last month, executed wire transfers from Singh’s account at Prime Trust (which he repeatedly referred to as a bank account, even though Prime Trust wasn’t a bank) to move the funds to recipients.
Singh also testified that he signed literal “blank checks” from his Wells Fargo account, which he sent to Gabriel Bankman-Fried (Sam’s brother) through an assistant. These checks would be signed in bulk by Singh, and distributed by Gabriel Bankman-Fried to choice political causes.
Sam Bankman-Fried also funded Guarding Against Pandemics, the political action committee his brother ran, Singh said.
Prosecutors said in August they folded campaign finance allegations into a wire fraud charge that Bankman-Fried already faces, after having to drop an explicit campaign finance-related charge due to extradition treaty obligations with the Bahamas.
— Sam Kessler, Nikhilesh De
Courtroom scenes
Bankman-Fried continued tapping away at his laptop Monday. During one section of Singh’s testimony, the former head of product described a conversation he had with Bankman-Fried, where the then-FTX CEO was angry with Singh, saying there were certain physical tics that indicated Bankman-Fried’s anger: Bankman-Fried “puffed out his chest, had his hands back, he was … closing his eyes, grinding his teeth and when he opened them to respond he would sort of glare at me.” The defendant did not look up during this part.
Sam Bankman-Fried’s parents looked anxious when Singh testified about the campaign finance scheme, a reporter for another outlet who was in the courtroom told CoinDesk. (Our reporters were all in the courthouse overflow room at the time.)
Judge Lewis Kaplan rejected the defense’s motion to either adjourn court temporarily or administer Sam Bankman-Fried his prescription Adderall for ADHD, saying he had not received any recent reports from physicians on Bankman-Fried’s needs. “I can’t have lawyers coming in and giving drugs to people on trial because somebody says they need it,” the judge said.
This CoinDesk reporter was seen frantically digging through his backpack for a pen after the one he was using ran dry, the second in as many weeks to die in service of covering this trial.
— Nikhilesh De
What we're expecting
The prosecution wrapped up its questioning of Singh at the end of the trial day on Monday, meaning the defense team will open up Tuesday with its cross-examination of the former product lead. We also heard from Tareq Morad, an FTX customer, on Monday, meaning several others named last Friday have yet to testify.
We otherwise still seem to be on track for the DOJ resting its case by Oct. 26 (next Thursday). The defense continues to estimate that its case will take about a week and a half, suggesting that we may move to closing statements by Nov. 7 or 8.
Bankman-Fried also can’t bring up the success of his investment in the company Anthropic during the trial, Judge Kaplan said in a written ruling published after Monday’s court session. Last week, the judge likened the plan to boasting about spending stolen funds on a winning Powerball lottery ticket.
— Nikhilesh De
FTX Latest: Singh Lived in the ‘Nicest Room’ in the Penthouse
Yueqi Yang, Bob Van Voris and Allyson Versprille
Tue, October 17, 2023
(Bloomberg) -- Nishad Singh, the former director of engineering at FTX, faces cross-examination at the Sam Bankman-Fried trial Tuesday.
Under questioning by prosecutors on Monday, Singh, 28, said he was intimidated by Bankman-Fried, and at times humiliated by him. He also detailed the FTX co-founder’s spending on a Bahamian penthouse and political donations.
Like previous witnesses, Caroline Ellison and Gary Wang, Singh has pleaded guilty to fraud and conspiracy counts and has agreed to cooperate with prosecutors.
Here are a few stories to catch up on Singh’s testimony and the trial:
FTX Insider Says Work With SBF Left Him in ‘Severe’ Distress
SBF’s Friends Force Him Into ‘Hail Mary’ Choice on Testimony
Group Chats, Tweets and Audio Tape: The Evidence Against SBF
The Key Players at Sam Bankman-Fried’s Historic Fraud Trial
Here’s the latest from court (all times are NY):
Defense Lawyer’s Questioning Meets Difficulties (10:45 a.m.)
Bankman-Fried’s defense lawyer, Mark Cohen, ran into some early difficulties in his questioning of Singh.
Singh said Cohen misunderstood his comments to prosecutors in January about whether it “felt wrong” to borrow from anywhere as long as you have the assets.
Singh explained that his language was specific to the discussion of bank accounts, not borrowing in general.
At one point, Judge Lewis Kaplan intervened Cohen’s requests for Singh to read out multiple items on a spreadsheet. “We are not performing eye examinations here.”
The spreadsheet “says what it says,” Kaplan said to Cohen.
After that, Cohen changed his approach and read out excerpts of Singh’s testimony directly before asking questions.
Singh Lived in the ‘Nicest Room’ in the Penthouse (10:15 a.m.)
Despite complaining about the cost of the penthouse, Singh volunteered Tuesday that he and his girlfriend, Claire Watanabe, moved into the “nicest room in the house.”
Asked by Cohen if it was excessive for billionaires to live in a $30 million home, Singh replied that the cost is the same no matter the “wealth of the people living in it.”
“I really don’t know what’s reasonable for billionaires to do,” Singh said. “I don’t know other billionaires.”
Watanabe, another former FTX executive, was in court Monday to watch his testimony.
Singh Said There Could Be Benefits to Celebrity Deals (10:00 a.m.)
After testifying Monday about what he believed was FTX’s lavish spending on celebrity endorsements, Singh said under cross Tuesday that it was Bankman-Fried’s job to make those determinations.
“I believe it could be valuable to the business...depending on the circumstances,” Singh said under questioning by Bankman-Fried lawyer Mark Cohen. “I understood it had business benefits and costs.”
After questions about the sponsorship of a Miami arena and other deals, Cohen said that on Monday the court was told that many of these things were “reckless spending” and that his job today is to show “there was way more to it than we were told.”
Singh still pointed to an investment in a tequila brand run by a celebrity as an example of excessive spending.
©2023 Bloomberg L.P.
Yueqi Yang, Bob Van Voris and Allyson Versprille
Tue, October 17, 2023
(Bloomberg) -- Nishad Singh, the former director of engineering at FTX, faces cross-examination at the Sam Bankman-Fried trial Tuesday.
Under questioning by prosecutors on Monday, Singh, 28, said he was intimidated by Bankman-Fried, and at times humiliated by him. He also detailed the FTX co-founder’s spending on a Bahamian penthouse and political donations.
Like previous witnesses, Caroline Ellison and Gary Wang, Singh has pleaded guilty to fraud and conspiracy counts and has agreed to cooperate with prosecutors.
Here are a few stories to catch up on Singh’s testimony and the trial:
FTX Insider Says Work With SBF Left Him in ‘Severe’ Distress
SBF’s Friends Force Him Into ‘Hail Mary’ Choice on Testimony
Group Chats, Tweets and Audio Tape: The Evidence Against SBF
The Key Players at Sam Bankman-Fried’s Historic Fraud Trial
Here’s the latest from court (all times are NY):
Defense Lawyer’s Questioning Meets Difficulties (10:45 a.m.)
Bankman-Fried’s defense lawyer, Mark Cohen, ran into some early difficulties in his questioning of Singh.
Singh said Cohen misunderstood his comments to prosecutors in January about whether it “felt wrong” to borrow from anywhere as long as you have the assets.
Singh explained that his language was specific to the discussion of bank accounts, not borrowing in general.
At one point, Judge Lewis Kaplan intervened Cohen’s requests for Singh to read out multiple items on a spreadsheet. “We are not performing eye examinations here.”
The spreadsheet “says what it says,” Kaplan said to Cohen.
After that, Cohen changed his approach and read out excerpts of Singh’s testimony directly before asking questions.
Singh Lived in the ‘Nicest Room’ in the Penthouse (10:15 a.m.)
Despite complaining about the cost of the penthouse, Singh volunteered Tuesday that he and his girlfriend, Claire Watanabe, moved into the “nicest room in the house.”
Asked by Cohen if it was excessive for billionaires to live in a $30 million home, Singh replied that the cost is the same no matter the “wealth of the people living in it.”
“I really don’t know what’s reasonable for billionaires to do,” Singh said. “I don’t know other billionaires.”
Watanabe, another former FTX executive, was in court Monday to watch his testimony.
Singh Said There Could Be Benefits to Celebrity Deals (10:00 a.m.)
After testifying Monday about what he believed was FTX’s lavish spending on celebrity endorsements, Singh said under cross Tuesday that it was Bankman-Fried’s job to make those determinations.
“I believe it could be valuable to the business...depending on the circumstances,” Singh said under questioning by Bankman-Fried lawyer Mark Cohen. “I understood it had business benefits and costs.”
After questions about the sponsorship of a Miami arena and other deals, Cohen said that on Monday the court was told that many of these things were “reckless spending” and that his job today is to show “there was way more to it than we were told.”
Singh still pointed to an investment in a tequila brand run by a celebrity as an example of excessive spending.
©2023 Bloomberg L.P.
'I'd been suicidal for days': Sam Bankman-Fried lieutenant testifies about immense pressure to keep FTX crypto scam going — before it all crashed
Jacob Shamsian
Updated Tue, October 17, 2023
Scroll back up to restore default view.
Nishad Singh was the top engineer at FTX.
He testified at the Sam Bankman-Fried trial that he was 'suicidal' over the crypto scam.
At one point, he said, Alameda borrowed $13 billion from FTX — which it didn't have.
Nishad Singh thought he misunderstood.
It was September 2022 and he was in a small groupchat with FTX executive Gary Wang, Alameda Research CEO Caroline Ellison, and the owner of both companies, Sam Bankman-Fried.
In the chat, Wang had just said that Alameda, the cryptocurrency trading firm, was borrowing $13 billion from FTX, the popular cryptocurrency exchange.
Singh thought that couldn't possibly be right, he testified Monday in the criminal trial against Bankman-Fried.
FTX didn't even have $13 billion.
Alarmed, Singh, the top engineer at FTX, called for an emergency meeting with the group. He turned to Bankman-Fried, who was sitting next to him in their office in the Bahamas.
Bankman-Fried appeared unsurprised to hear about the $13 billion figure and made "a false excuse for dodging the meeting," Singh said.
Singh met with Bankman-Fried's other lieutenants in the groupchat. His fears were confirmed.
According to Wang and Ellison — both of whom have also testified in the trial in the downtown Manhattan courtroom this month — Alameda Research had been taking money not just from FTX's profits, but from the deposits of ordinary customers. Wang, Ellison, and Bankman-Fried had known for months, according to court testimony.
If those customers wanted to withdraw their money from the exchange, FTX wouldn't have the funds to make them whole.
That evening, Singh said in court, he met with Bankman-Fried privately on the balcony of their shared penthouse in a luxury resort in the Bahamas, which had been purchased for $35 million by Alameda Research. Bankman-Fried sat on a chaise lounge chair while Singh paced between the towering columns that framed towering views of the Atlantic Ocean.
Bankman-Fried expressed regret at even bringing up the topic in the groupchat, Singh said. He said he'd been living with the stress over the billions of dollars in funds for about a year.
"Yeah, this has been taxing me some 5 to 10% of my productivity," Bankman-Fried said, according to Singh's testimony Monday.
"I think this is going to be doing a lot more damage to me, hitting me a lot harder," Singh responded.
Nishad Singh.Jane Rosenberg/Reuters
Scroll back up to restore default view.
Nishad Singh was the top engineer at FTX.
He testified at the Sam Bankman-Fried trial that he was 'suicidal' over the crypto scam.
At one point, he said, Alameda borrowed $13 billion from FTX — which it didn't have.
Nishad Singh thought he misunderstood.
It was September 2022 and he was in a small groupchat with FTX executive Gary Wang, Alameda Research CEO Caroline Ellison, and the owner of both companies, Sam Bankman-Fried.
In the chat, Wang had just said that Alameda, the cryptocurrency trading firm, was borrowing $13 billion from FTX, the popular cryptocurrency exchange.
Singh thought that couldn't possibly be right, he testified Monday in the criminal trial against Bankman-Fried.
FTX didn't even have $13 billion.
Alarmed, Singh, the top engineer at FTX, called for an emergency meeting with the group. He turned to Bankman-Fried, who was sitting next to him in their office in the Bahamas.
Bankman-Fried appeared unsurprised to hear about the $13 billion figure and made "a false excuse for dodging the meeting," Singh said.
Singh met with Bankman-Fried's other lieutenants in the groupchat. His fears were confirmed.
According to Wang and Ellison — both of whom have also testified in the trial in the downtown Manhattan courtroom this month — Alameda Research had been taking money not just from FTX's profits, but from the deposits of ordinary customers. Wang, Ellison, and Bankman-Fried had known for months, according to court testimony.
If those customers wanted to withdraw their money from the exchange, FTX wouldn't have the funds to make them whole.
That evening, Singh said in court, he met with Bankman-Fried privately on the balcony of their shared penthouse in a luxury resort in the Bahamas, which had been purchased for $35 million by Alameda Research. Bankman-Fried sat on a chaise lounge chair while Singh paced between the towering columns that framed towering views of the Atlantic Ocean.
Bankman-Fried expressed regret at even bringing up the topic in the groupchat, Singh said. He said he'd been living with the stress over the billions of dollars in funds for about a year.
"Yeah, this has been taxing me some 5 to 10% of my productivity," Bankman-Fried said, according to Singh's testimony Monday.
"I think this is going to be doing a lot more damage to me, hitting me a lot harder," Singh responded.
Nishad Singh.Jane Rosenberg/Reuters
Singh pleaded guilty in the plot to take money from FTX customers
Singh is set to continue answering questions under oath Tuesday under cross-examination from Bankman-Fried's legal team.
In his testimony so far, Singh has described his time working for Bankman-Fried, first as a software engineer for Alameda and later for FTX.
Singh was close with Bankman-Fried's family, befriending his brother Gabe Bankman-Fried, in high school. Unlike most other FTX employees, Singh had a stake in the company, accepting shares instead of bonuses on top of his $200,000 annual salary starting in 2020.
He ultimately accrued a 6 to 7% ownership share in FTX, he said, making him an on-paper billionaire. Starting in December 2021, he moved to the Bahamas to live in the penthouse, which was shared with his girlfriend, Bankman-Fried, and other members of Bankman-Fried's inner circle, including Wang, Ellison, and developer Adam Yedidia.
According to prosecutors, Bankman-Fried defrauded FTX's customers and investors, and Alameda's lenders, through the scheme where he siphoned money from FTX customers into Alameda Research, which he owned.
Singh — along with Ellison, Wang, and another FTX executive, Ryan Salame — all pleaded guilty to the conspiracy. Singh's guilty plea includes six criminal counts, and he said he was testifying as part of a cooperation agreement in hopes of getting a lighter sentence than the 75-year maximum for the charges.
"I've always been intimidated by Sam," Singh testified Monday. "Sam's a formidable character. Brilliant. And so I had a lot of respect for him."
"Over time, that eroded, and I became distrustful," he continued.
Before the September 2022 realization that Alameda was taking FTX customer money, Singh had participated in fraudulent activity in other ways.
At the end of 2021, FTX had made around $950 million in revenue, Singh said. He testified Monday that, at the end of December in 2021, Bankman-Fried asked him to juice FTX's revenues by about $50 million by making new transactions and then backdating them in the company's transaction history. Those falsified figures were given to investors to make it seem like the company had $1 billion in revenue that year, Singh said.
In another instance, also in 2021, a flaw in FTX's margin trading system had led to a $1 billion loss. At Bankman-Fried's direction, Singh transferred the losses to Alameda to hide it from FTX's investors, Singh testified.
Earlier in 2022, Singh had some inkling that things weren't all right with how Alameda's funds were accounted for on FTX's platform. That June, he was roped into a project to figure out the true value of Alameda's balances on FTX after a bug misrepresented the number by about $8 billion. Alameda was billions of dollars in the red, but Singh testified that he believed the company had assets elsewhere and that the company was still solvent and customer funds were untouched.
But when Singh saw that Alameda had taken customer funds, he believed that crossed a line, he said.
"I was blindsided and horrified," he said on the witness stand Monday. "I felt really betrayed, that five years of blood, sweat, and tears from me and so many employees, driving towards something that I thought was a beautiful force for good, had turned out to be so evil."
FTX founder Sam Bankman-Fried leaves Federal court, Wednesday, July 26, 2023, in New York.AP Photo/Mary Altaffer
'Sam has some physical twitches for when he gets angry'
Singh considered leaving the company "every day," he said in court. But he stuck around, believing the best approach would be to make FTX as successful as possible, hoping that its profits could fill the hole created by Alameda's borrowing. He believed FTX would have to fake it 'til it made it.
"How could I live with myself if my departure precipitated a fall that might have been avoidable?" he said.
Singh pressed Bankman-Fried to wind down what he saw as precipitous spending, cut back on investments, and find new sources of funds.
A month after the September meeting, Bankman-Fried went on a trip to several Gulf states in the Middle East with Anthony Scaramucci, who had invested in FTX, to try to raise more funds. When he returned, the FTX CEO told Singh that he believed he could get $5 billion more in investments, Singh testified.
But the hole at that point was $13 billion deep. Meeting in Bankman-Fried's room in their Bahamas apartment, Singh asked what else they could do to get more money quickly.
"Sam was on edge, and I felt he was very mad at me for talking about this," Singh said. "It was tense. There were long periods of silence."
He was visibly upset, according to Singh.
"Sam has some physical twitches for when he gets angry," he said.
Sam Bankman-Fried before his detainment ahead of trial.AP Photo/Seth Wenig
The "physical tells for when he is thinking hard or is upset" were "on display," Singh said.
"Puffed out his chest, had his hands back, he was grinding his finger, closing his eyes, grinding his teeth or tongue in his mouth," Singh said. "When he opened them to respond, he would sort of glare at me with some intensity."
"This didn't happen for the whole conversation, but it did happen at specific points," Singh continued. "Like when I asked, 'Dear god, what else is there? Give me some updates.'"
Singh said Bankman-Fried handled the meeting poorly.
"I ended up apologizing to him at the end for asking for the meeting because I could tell it was so unwelcome," he said.
In her own testimony earlier in the trial, Ellison said that Bankman-Fried didn't raise any money from the trip.
Singh got sucked into Bankman-Fried's efforts to burnish FTX's reputation in other ways. In October and November, he participated in a straw donor scheme to give money to Democratic candidates and political action committees.
In reality, Singh testified, Salame — who himself later pleaded guilty to breaking campaign finance laws by funneling FTX funds to Republican candidates — had access to one of his bank accounts and made the donations with political consultants. All Singh did was press buttons to approve wire transfers and write blank checks for donations, he testified. (Prosecutors have charged Bankman-Fried with campaign finance violations; a separate trial on those charges is scheduled for next year.)
I'd been suicidal'
By November, Singh's fears were coming through. The crypto news publication Coindesk published an article about a leaked copy of Alameda's balance sheet, which illustrated some of the unusually close ties between it and FTX — although Ellison testified earlier this month that the companies were even more closely integrated than it appeared.
FTX customers began to withdraw their funds from the platform en masse, and FTX didn't have their money.
Singh suggested freezing withdrawals until they could figure out another step, like persuading Binance, a bigger cryptocurrency exchange that Bankman-Fried considered a rival, to purchase FTX.
Sam Bankman-Fried, the founder of bankrupt cryptocurrency exchange FTX, is seen during a hearing as a U.S judge revoked his bail, at a courthouse in New York.REUTERS/Jane Rosenberg
Bankman-Fried and Ellison dismissed the idea "in a kind of annoyed way and proceeded" to draft tweets falsely claiming that FTX and Alameda were solvent.
In the chaos, Singh said, he asked Bankman-Fried to forgive all of the loans he had taken from FTX.
Bankman-Fried appeared inclined to grant the request, according to text messages shown as evidence in the trial. But Singh decided not to go through with it.
"It felt wrong. I mean, I was fine giving up my personal assets. I'd taken on debts and given up my assets for the company countless times," Singh said. "But I understood the purpose of this exercise to be, you know, to fool a US regulator and to fool employees of the company, and I wasn't comfortable with that."
As the chaos continued to roil FTX, Bankman-Fried, Ellison, and other executives pointed fingers at each other while employees and customers demanded answers, Singh said. Singh urged them to come clean, even if it meant disclosing his own role in the cover-up. He had little to lose.
"I'd been suicidal for some days," Singh said.
Besides, he wanted them to focus on the problem at hand.
"People weren't being productive," Singh said. "Now more than ever, to salvage whatever we could, FTX employees needed to be productive, and resolving the blame game quickly and definitively seemed like it would be a path towards that."
On November 11, Singh resigned from FTX and its caretaker CEO immediately declared bankruptcy. Around a week later, he met with prosecutors for the first time. He was on his way to a cooperation agreement
FTX Latest: SBF Calendar Showed Meetings With Clinton, Hochul
Yueqi Yang, Bob Van Voris and Allyson Versprille
Tue, October 17, 2023
(Bloomberg) -- Nishad Singh, the former director of engineering at FTX, faces cross-examination at the Sam Bankman-Fried trial Tuesday.
Under questioning by prosecutors on Monday, Singh, 28, said he was intimidated by Bankman-Fried, and at times humiliated by him. He also detailed the FTX co-founder’s spending on a Bahamian penthouse and political donations.
Like previous witnesses, Caroline Ellison and Gary Wang, Singh has pleaded guilty to fraud and conspiracy counts and has agreed to cooperate with prosecutors.
Here are a few stories to catch up on Singh’s testimony and the trial:
FTX Insider Says Work With SBF Left Him in ‘Severe’ Distress
SBF’s Friends Force Him Into ‘Hail Mary’ Choice on Testimony
Group Chats, Tweets and Audio Tape: The Evidence Against SBF
The Key Players at Sam Bankman-Fried’s Historic Fraud Trial
Here’s the latest from court (all times are NY):
SBF Calendar Showed Meetings With Clinton, Hochul (4:30 p.m.)
Bankman-Fried had scheduled meetings in Manhattan with several influential people — from former President Bill Clinton to New York Governor Kathy Hochul — in the months prior to FTX’s collapse, according to evidence presented by the government Tuesday.
According to a calendar invite, he had a meeting scheduled with Clinton at the New York Hilton Midtown in September 2022. A meeting with Hochul was scheduled to take place a month earlier. Emails and calendar invites also showed the former crypto billionaire had dinner scheduled in September 2022 with Yasir Al Rumayyan, the head of Saudi Arabia’s Public Investment Fund, at The Pierre hotel in New York. Another pointed to a March 2022 dinner with New York City Mayor Eric Adams.
The meetings were revealed while the government was questioning FBI agent Richard Busick about an analysis he did on an AT&T phone allegedly used by Bankman-Fried. He testified that the various dinners and meetings from emails and calendar entries corresponded with the phone’s location at those times.
During cross-examination, Bankman-Fried’s lawyers cast doubt on the accuracy of the location data.
Singh Forfeited House He Bought One Month Before FTX Collapse (3:15 p.m.)
Singh said he forfeited the Orcas Island property that he bought in October 2022 using money borrowed from FTX even after learning the company was misusing customer funds.
“My spending on it was egregious, unnecessary and selfish,” Singh said. “I was embarrassed and ashamed, and forfeiting seems to be one of the ways to right the wrong, at least a little.”
Singh finished his testimony and left the courtroom.
Singh Said He Thought FTX Would ‘Last for Years’ (2:30 p.m.)
Singh said under questioning by Bankman-Fried’s lawyer that he took a loan from the company to purchase a vacation home on Orcas Island for the use of himself and his friends even after he learned about the financial issues.
He said the funds were wired to purchase the apartment in mid- to late October of 2022. He has testified that he pushed Bankman-Fried to cut expenses.
Read more: FTX’s Singh Bought Dream House in October. It’s Uncle Sam’s Now.
Mark Cohen asked if Singh remembered telling prosecutors that he thought FTX would last “for years” even after learning about Alameda’s growing deficit in September 2022.
“I did tell prosecutors that I thought FTX would last for years,” Singh said.
Singh Wasn’t ‘Required’ to Be Face of FTX Political Donations (1:15 p.m.)
Singh acknowledged that he wasn’t “required” to be the face of FTX’s political donations and performed the role despite personal reservations.
In a Signal chat group, Singh told Michael Sadowsky, a political consultant, that he was averse to supporting “explicitly woke stuff.”
Still, Singh said that he became “really excited” in 2018 about California Proposition 12, a ballot proposition titled the “Prevention of Cruelty to Farm Animals Act,” which imposed minimum space requirements for egg-laying hens, pigs and veal calves.
Singh said he had money deducted from his floating balance at Alameda to fund political donations on the proposition.
Later, he worked with people including his “dear” friend, Sam Bankman-Fried’s brother Gabe, to make political donations.
Singh has pleaded guilty to conspiring to violate campaign finance laws by acting as an illegal straw donor to funnel donations to political campaigns - mostly to Democrats.
The court is on lunch break until 2:00 p.m.
Singh Says Alameda Special Privilege Initially Intended to Help Customers (12:20 p.m.)
Singh said under questioning that one of Alameda Research’s special privileges — which eventually resulted in a nearly unlimited line of credit — was initially designed to help customers.
Singh recalled an instance in mid-2020 in which an auto-deleveraging event happened on the FTX exchange because no backstop liquidity providers were eligible to step in, resulting in random FTX customers being forced to take on risky positions.
It was “undesirable” for customers to take on these positions without opting in, Singh said.
After the event, Gary Wang concluded that Alameda failed to step in and absorb the trades because the trading firm didn’t have enough free collaterals, due to them being tied up by a large amount of pending trades.
“Ultimately Sam asked me why should it depend at all on free collaterals,” since the pending positions exhausted collaterals, not actual trades, Singh recalls.
Singh testified he later wrote in a code proposal to make auto-deleveraging events less likely, including being “careful not to liquidate” Alameda.
Singh Describes ‘Sense of Relief’ About Alameda Balance Size (11:30 a.m.)
Cohen cross-examined Singh closely on the discovery of a software bug that, by mid-June 2022, had introduced an error in Alameda’s balance in its main account on the FTX exchange totaling about $8 billion.
Singh told jurors that Caroline Ellison produced data showing that the bug explained many discrepancies between the balance of the account and Alameda transactions records.
He testified about a long discussion over Google Meet, lasting possibly an hour, involving Bankman-Fried, Ellison, Wang and himself. Adam Yedidia, who testified against Bankman-Fried earlier in the trial, had inadvertently introduced the bug in 2021.
“The next thing I do recall was sensing from others a palpable sense of relief, even elation,” at discovering the balance was negative $11 billion and not negative 19 billion, Singh testified.
Defense Lawyer’s Questioning Meets Difficulties (10:45 a.m.)
Bankman-Fried’s defense lawyer, Mark Cohen, ran into some early difficulties in his questioning of Singh.
Singh said Cohen misunderstood his comments to prosecutors in January about whether it “felt wrong” to borrow from anywhere as long as you have the assets.
Singh explained that his language was specific to the discussion of bank accounts, not borrowing in general.
At one point, Judge Lewis Kaplan intervened Cohen’s requests for Singh to read out multiple items on a spreadsheet. “We are not performing eye examinations here.”
The spreadsheet “says what it says,” Kaplan said to Cohen.
After that, Cohen changed his approach and read out excerpts of Singh’s testimony directly before asking questions.
Singh Lived in the ‘Nicest Room’ in the Penthouse (10:15 a.m.)
Despite complaining about the cost of the penthouse, Singh volunteered Tuesday that he and his girlfriend, Claire Watanabe, moved into the “nicest room in the house.”
Asked by Cohen if it was excessive for billionaires to live in a $30 million home, Singh replied that the cost is the same no matter the “wealth of the people living in it.”
“I really don’t know what’s reasonable for billionaires to do,” Singh said. “I don’t know other billionaires.”
Watanabe, another former FTX executive, was in court Monday to watch his testimony.
Singh Said There Could Be Benefits to Celebrity Deals (10:00 a.m.)
After testifying Monday about what he believed was FTX’s lavish spending on celebrity endorsements, Singh said under cross Tuesday that it was Bankman-Fried’s job to make those determinations.
“I believe it could be valuable to the business...depending on the circumstances,” Singh said under questioning by Bankman-Fried lawyer Mark Cohen. “I understood it had business benefits and costs.”
After questions about the sponsorship of a Miami arena and other deals, Cohen said that on Monday the court was told that many of these things were “reckless spending” and that his job today is to show “there was way more to it than we were told.”
Singh still pointed to an investment in a tequila brand run by a celebrity as an example of excessive spending.
A previous version of the story was corrected to reflect the location of the property on Orcas Island.
FTX Latest: Singh Testifies He Was Always ‘Intimidated’ by SBF
Allyson Versprille, Bob Van Voris and Yueqi Yang
Mon, October 16, 2023
(Bloomberg) -- The Sam Bankman-Fried trial resumed Monday with more prosecution witnesses, including Nishad Singh, the former director of engineering at FTX.
Like previous witnesses, Caroline Ellison and Gary Wang, Singh has pleaded guilty to fraud and conspiracy counts and has agreed to cooperate with prosecutors.
Singh is another witness with close ties to Bankman-Fried. He was a childhood friend of Bankman-Fried’s younger brother, Gabriel, and lived with Bankman-Fried in the Bahamas.
Here are a few stories to catch up on the trial last week:
SBF’s Friends Force Him Into ‘Hail Mary’ Choice on Testimony
Group Chats, Tweets and Audio Tape: The Evidence Against SBF
Caroline Ellison Says ‘Sam Was the One’ Who Caused FTX Collapse
The Key Players at Sam Bankman-Fried’s Historic Fraud Trial
Here’s the latest from court (all times are NY):
SBF Lawyers Revisit Access to Adderall (5:30 p.m.)
After the jury was sent home, Mark Cohen, one of Bankman-Fried’s lawyers, again raised the issue of his client’s access to Adderall, the drug prescribed to treat his ADHD and depression.
Bankman-Fried’s team said in a letter late last night that he may not be able to “meaningfully participate” in his own defense because he hadn’t been receiving his full dose of Adderall.
Bankman-Fried has continually raised this issue since Kaplan revoked his bail in August.
“As we approach the defense case and the critical decision of whether Mr. Bankman-Fried will testify,” Cohen said in the letter, “the defense has a growing concern that because of Mr. Bankman-Fried’s lack of access to Adderall he has not been able to concentrate at the level he ordinarily would and that he will not be able to meaningfully participate in the presentation of the defense case.”
Read More: SBF Lawyers Say FTX Co-Founder May Need Adderall to Testify (2)
Kaplan rejected two solutions proposed by Cohen, a half-day delay to work out the issue and the possibility that Bankman-Fried’s legal team could bring his medication to court for him.
The judge said he hadn’t been given information from a doctor on the issue since August and that he’s “not professionally competent” to make medication decisions or allow lawyers to administer drugs.
“I can’t write the prescription,” he said.
The judge also said he hadn’t observed a problem with Bankman-Fried and is “inclined to push ahead” with the trial.
Bankman-Fried was paying close attention to the discussion, but appeared dejected when the judge denied the request.
His lawyers will begin cross-examination of Singh in the morning.
Singh Describes ‘Crazy, Blame Game’ in Final Days (5:15 p.m.)
Singh said that in the days leading up to FTX’s demise “there was a crazy, blame game going on and people were not being productive.”
Singh says he spoke to Daniel Friedberg, FTX’s former chief regulatory officer, and that he was mad about Alameda’s borrowing.
The attorney, who he described as FTX’s “chief legal decision maker,” blamed Singh, Bankman-Fried and Wang for the company’s problems.
Singh testifies that the accusations left him in “severe emotional distress” and that he “had been suicidal for some days.”
Because of this, Singh testified that he asked Bankman-Fried to clarify everyone’s role in the fraud scheme, saying he wanted it made clear that he’d only been aware of the misuse of customer funds since September 2022. Singh said he wanted Bankman-Fried to take the blame for orchestrating everything.
FTX Bahamas, US Arms More Intertwined Than Suggested (4:45 p.m.)
At times, Bankman-Fried, Wang and Singh would receive loans from Alameda that would be used to fund investments and acquisitions for FTX’s US unit. Singh testified that they would work with company lawyers to set the transactions up.
The testimony suggests that the Bahamas-based company and US arm were more intertwined than what was suggested publicly and that money for the latter’s investments may have come from customer funds.
Political Donations Made for ‘Advantageous Optics’ (4:00 p.m.)
Singh said that a lot of the money for FTX-related political donations went through his accounts.
He said that funds were often taken from Alameda’s account, and then would be wired to Singh’s Prime Trust account. From there, Ryan Salame, the former CEO of FTX’s Bahamian unit, had access to the account to make donations and the contributions would be made in Singh’s name.
Salame has pleaded guilty to one campaign finance violation and one charge of operating an illegal money-transmitting business.
Similarly, Singh would sign blank checks for Gabriel Bankman-Fried, Sam Bankman-Fried’s younger brother, who was head of a political action committee called Guarding Against Pandemics, which also made political donations.
Singh said he wasn’t comfortable with his name being used for political donations and tried to find someone who could replace him in that capacity.
But he said donations were made in his name for “advantageous optics.”
Singh was friends with Gabriel Bankman-Fried before joining FTX. The younger Bankman-Fried hasn’t been charged with a crime.
‘We Came, We Saw, We Researched’ Memo on Alameda (3:30 p.m.)
Singh said, like other witnesses, that there were serious discussions about shutting down Alameda in September 2022.
There was a memo called “We Came, We Saw, We Researched” that looked at the issue.
Singh suggested keeping Alameda open, but shut down Alameda’s account on FTX.
That was first proposed inside a chat with himself, Gary Wang, Caroline Ellison and Bankman-Fried.
But Ellison said, “that’s impossible,” Singh recalled.
Wang said there’s $13 billion that couldn’t be paid back.
Bankman-Fried said that FTX was “short on deliverables” in 24 hours if pressed, $5 billion, “substantially more.”
I said something like “Jesus f’ing Christ.”
“I think this is going to be doing a lot more damage to me,” Singh said. “I understand it’s not productive for me to react emotionally.”
Singh Tried to Stop ‘Crazy’ Spending on Endorsements (3:10 p.m.)
As late as September 2022 as Alameda’s debts piled up, Singh said he was fighting to stop spending on endorsements and other expenses.
Singh said he complained about spending about $1 billion on endorsement deals. “This is crazy, we need to cut this,” Singh said.
But Bankman-Fried “didn’t think these were bad spends,” Singh recalled.
After September, spending was necessarily “digging the customer deficit hole deeper,” Singh said.
Singh Thought About Quitting Company Every Day (2:55 p.m.)
Singh said that he considered leaving the company “every day.”
“I was blindsided and horrified,” he said about FTX and Alameda’s worsening financial condition. “I felt really betrayed.”
He thought he was working five years for something good, but it turned out “so evil.” The only reason he didn’t quit was because he didn’t want to trigger a collapse.
FTX Latest: Judge Seeks Explanation of Blockchain, Crypto Mining (12:40 p.m.)
Judge Lewis Kaplan was unusually active during Singh’s testimony, asking him to simplify technical matters and asking his own questions to amplify the testimony. The judge asked Singh to explain terms including “venture investing,” “blockchain” and “algorithmic failure.”
When the topic turned to crypto mining, the judge again intervened, noting that in his day, mining meant “digging things out of the ground.”
At one point, he asked questions to clarify what Singh knew about the ability of Alameda to borrow FTX customer funds early on.
Kaplan, who was a litigator before being appointed to the bench, nudged the prosecutor, Nicolas Roos, several times for failing to elicit background testimony - or “lay a foundation” - for some of his questions.
The court is taking a lunch break until 2 p.m.
Singh Knew About FTX Customers’ Transfers to Alameda at an Early Stage (12:05 p.m.)
Singh said he knew that FTX was accessing customer funds very early. He described an FTX OTC system that supported transferring FTX customer funds into Alameda’s bank account.
Singh said he was told by Bankman-Fried that the reason was the difficulty for FTX to open a bank account.
The setup allowing FTX customers to deposit funds into Alameda’s bank account in order to trade on FTX was “from FTX’s inception,” Singh said.
Bankman-Fried Attended Star-Studded Dinner in LA (11:40 a.m.)
Singh recalled a star-studded dinner that Bankman-Fried attended in LA at the home of Michael Kives, co-founder of K5 Global investment firm and a former Hillary Clinton aide.
After the dinner, Bankman-Fried was impressed by Kives’s connections and decided to invest in K5.
Singh said he told Bankman-Fried that he was “worried that partnering with K5 and giving them this amount of money would be really toxic to FTX and Alameda culture.” He explained the investment would go against their corporate culture, in which politicking and social climbing shouldn’t be rewarded.
Bankman-Fried went ahead with the K5 investment and subsequently made his way into the celebrities and politicians circle, allowing FTX to gain major endorsement deals.
The prosecutor showed Bankman-Fried’s notes from after the dinner:
“In LA met with Michael Kives and his firm K5. He is, probably, the most connected person I’ve ever met. In attendance at the dinner at his house were:
Hillary Clinton, Doug Emhoff, Katy Perry, Orlando Bloom, Kate Hudson, Leonardo DiCaprio, Jeff Bezos, Ted Sarandos, Kendall Jenner, Kris Jenner, Corey Gamble, etc.”
Asked to identify each person on the list, Singh quickly pointed out Clinton as a presidential candidate, and Bezos as the chief executive officer of Amazon.
When asked about Kendall Jenner and Kris Jenner, Singh said, “I honestly could not tell you what they do,” prompting laughter.
FTX Seeks $700 Million From Bankman-Fried’s Celebrity Connector
SBF Lashed Out When Confronted About Spending (10:40 a.m.)
Singh described Bankman-Fried’s approach to spending as “excessive.”
When he confronted Bankman-Fried about spending, Singh said the company co-founder lashed out and said people like Singh casting doubts on FTX were the “real insidious problem here.”
“It was pretty humiliating,” Singh said.
In late 2021 and 2022, there was lots of spending on real estate and endorsement deals, Singh said.
From 2021: NBA’s Steph Curry Seals FTX Crypto Pact Similar to Tom Brady’s
Singh Testifies He Was Always ‘Intimidated’ by SBF (10:30 a.m.)
Singh told the court that he had always been intimidated by Bankman-Fried, drawing an objection from defense lawyers, which was overruled.
“Sam is a formidable character, brilliant,” Singh said. “So I had a lot of admiration and respect for him. Over time a lot of that eroded.”
Bankman-Fried stayed focused on his laptop during the exchange.
Singh also said that he had the third-largest equity stake in FTX, had a base salary of $200,000 and collected bonuses of about $1 million each through 2020.
Singh Says He Committed Crimes With SBF, Ellison (10:15 a.m.)
Nishad Singh took the stand, held the microphone, and said “Am I coming through clear? My name is Nishad Singh.”
He quickly said that he committed crimes with Bankman-Fried and other FTX and Alameda officials including Gary Wang, Caroline Ellison and Ryan Salame.
“I defrauded customers, investors,” Singh said, wearing a dark suit and red tie.
©2023 Bloomberg L.P.
FTX exec Nishad Singh testifies on Bankman-Fried’s ‘excessive’ and ‘flashy’ spending
Kari McMahon
Mon, October 16, 2023
Former FTX engineering director Nishad Singh called the spending habits of his former business partner “excessive” and “flashy” as he took to the stand Monday in the third week of the criminal trial of FTX founder and former CEO Sam Bankman-Fried.
Along with several other executives of the collapsed crypto exchange FTX, Singh pleaded guilty to multiple criminal charges including fraud and campaign finance law violations in relation to the collapse and has been cooperating with the government. The prosecution hope his testimony will demonstrate Bankman-Fried ran both FTX and its sister company Alameda Research, a crypto trading firm he founded, and is responsible for misusing billions of dollars in FTX customer funds to prop up Alameda Research.
Singh’s testimony is expected to bolster similar claims made in the past two weeks by the prosecution’s “star” witness, Alameda Research’s co-CEO Caroline Ellison, as well as FTX and Alameda co-founder Gary Wang.
“SBF would unilaterally spend Alameda’s money,” Singh told the jury, according to a live blog of the trial from court reporting organization Inner City Press.
Singh initially joined Alameda Research as a software engineer before moving to FTX and becoming its head of engineering. He met Bankman-Fried through his friendship with his brother Gabe Bankman-Fried.
“Sam is a formidable character — I came to distrust him,” said Singh, telling the jury how he did not agree with Bankman-Fried’s excessive spending.
“I’d complain about the excess & flashiness which I found different that what we were building the company for,” Singh said. “He’d say I didn’t understand, he was out there interacting with people. I thought we were fleeced for US$20 million, he said I was sowing doubt.”
Starstruck
Bankman-Fried’s differentiating factor compared to the other co-founders was that he did the endorsement deals, Singh said. Singh walked the jury through some of FTX’s many prominent partnerships and relationships including with NBA superstar Steph Curry and comedian Larry David for the exchange’s memorable Super Bowl ad. The total endorsement spend amounted to around US$1.3 billion, he said.
Bankman-Fried splurged not only on celebrities, but also on insiders. Singh described reviewing a term sheet that would provide former Hollywood agent Michael Kives and colleague Bryan Baum millions in bonuses as well as a billion dollar investment in their VC firm K5.
“I asked that it be done with Sam’s money and not FTX’s money,” Singh said. But Bankman-Fried told Singh the deal was “basically” already done, he said.
The attraction to K5 came from its connections. Bankman-Fried was impressed by Kives star studded guest list at a Super Bowl party featuring former U.S. presidential candidate Hilary Clinton and actor Leonardo DiCaprio, Singh said.
“Late in the game”
While Singh disagreed with Bankman-Fried’s excessive spending, he only found out about Alameda Research’s use of over US$13 billion in FTX customer funds when the team discussed closing down Alameda in September last year. He said he was “aware late in the game.”
“Gary said Alameda was borrowing US$13 billion from FTX,” Singh said. “I was hoping I’d misunderstood. FTX itself didn’t have that much money.”
Still, Bankman-Fried continued to pursue investment deals as well as fundraise for FTX, including the potential purchase of messaging service Telegram for US$120 million. Singh was “nervous” about the funds coming from customers, he said.
“I was upset at the endorsement deals, it was a billion dollars,” Singh said. “I said this is crazy, cut this. He said he didn’t think these were bad spends. I pointed at a couple. He said he agreed, but that cutting would cost 70% of seeing them through.”
Funds from Alameda also went toward political donations and were coordinated through a Signal chat called “Donations Processing,” Singh said. This group included Gabe Bankman-Fried, who ran Guarding Against Pandemics, a nonprofit advocacy group.
The defense strategy
The defense expects to spend four to five hours tomorrow on the cross examination. They proposed a half day tomorrow to focus on issues surrounding Bankman-Fried’s prescription of Adderall. On Sunday night, they requested help from the judge, via a letter, in getting Bankman-Fried access to his prescribed dose of Adderall during trial hours due to the fact he is struggling “to concentrate to the level he ordinarily would.”
The letter hinted that Bankman-Fried might take the stand in the trial, but the lack of access to medication is making it difficult for the defense in deciding how to proceed as “he will not be able to meaningfully participate in the presentation of the defense case” with the current dosage.
FTX engineer and former SBF classmate testifies in fraud trial
Nicholas Jacobino and Josh Lipton
Mon, October 16, 2023
An explosive testimony from FTX's former Head of Engineering Nishad Singh was heard by prosecutors today. Singh, also a former high school classmate of defendant Sam Bankman-Fried, is one of three top executives who have already pleaded guilty to multiple fraud charges and have agreed to cooperate with the prosecution. Singh walked the prosecution through conversations with Bankman-Fried that illustrate the FTX co-founder's original intent to commit fraud.
Yahoo Finance reporter Alexis Keenan details Singh's testimony and what it means for the prosecution's case.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Video Transcript
[AUDIO LOGO]
JOSH LIPTON: More blockbuster testimony in the fraud trial of Sam Bankman-Fried. This time, from FTX's former director of engineering. Alexis Keenan is back from the courthouse with the very latest. Alexis.
ALEXIS KEENAN: Hey, there. Yes so pretty explosive testimony today. And it came from, as you said, the head engineer for FTX and a former high school classmate of Bankman-Fried's, Nishad Singh. Now he's one of three top executives at FTX that have already pleaded guilty to multiple criminal charges and have agreed to cooperate with the prosecution's case.
Now Singh described Sam Bankman-Fried as, quote, "the architect" of the computer systems that allowed its hedge fund, the sister hedge fund, Alameda Research, access to FTX funds. Though, he did say that FTX was not coded by Sam Bankman-Fried. That the computer coding, that was done by others.
Now he said that he really had the same experience as what we heard from some of the other insider witnesses. He corroborated their story, saying that, as of June 2022, that it was that time that he knew that Alameda was using customer funds in order to go ahead and perform its trading, pay his expenses, and other things that Alameda had under its roof.
He said that Alameda at that time was owing FTX $13 billion. And he said he asked Bankman-Fried about how much money it had at that time to pay customers back, to pay into that fund for FTX. And at that time, he said that bankman-fried said that there was just $5 billion against that $13 billion in deliverables or liquid assets in order to put money back into those accounts.
Now his big revelation was that after all of this, he said, he called for two separate private conversations with Bankman-Fried. And one of those took place on the balcony, at this $35 million luxury condominium that he shared as a place to live with Bankman-Fried and some of the other executives. And he said at that time, he asked Bankman-Fried, quote, "what the hell the plan was" for this company to make good to its customers.
And he said at that time, Bankman-Fried said he was going to try to go and raise money, which he did. He flew to the Mideast. He tried to raise money from the Saudi Prince Mohammed bin Salman. That didn't work out so well as we've come to learn. But he also said that all while knowing this, that FTX that through Alameda continue to make political donations to various candidates and causes and also to continue to make investments that included to Anthony Scaramucci's SkyBridge Capital, among others.
But the point here that the prosecution was trying to make is that, all while this was going on, that customers were owed money, they continued to make these excessive is what he called them expenditures.
JULIE HYMAN: This trial just continues to be fascinating. Thanks so much for giving us this update, Alexis
Mon, October 16, 2023
An explosive testimony from FTX's former Head of Engineering Nishad Singh was heard by prosecutors today. Singh, also a former high school classmate of defendant Sam Bankman-Fried, is one of three top executives who have already pleaded guilty to multiple fraud charges and have agreed to cooperate with the prosecution. Singh walked the prosecution through conversations with Bankman-Fried that illustrate the FTX co-founder's original intent to commit fraud.
Yahoo Finance reporter Alexis Keenan details Singh's testimony and what it means for the prosecution's case.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Video Transcript
[AUDIO LOGO]
JOSH LIPTON: More blockbuster testimony in the fraud trial of Sam Bankman-Fried. This time, from FTX's former director of engineering. Alexis Keenan is back from the courthouse with the very latest. Alexis.
ALEXIS KEENAN: Hey, there. Yes so pretty explosive testimony today. And it came from, as you said, the head engineer for FTX and a former high school classmate of Bankman-Fried's, Nishad Singh. Now he's one of three top executives at FTX that have already pleaded guilty to multiple criminal charges and have agreed to cooperate with the prosecution's case.
Now Singh described Sam Bankman-Fried as, quote, "the architect" of the computer systems that allowed its hedge fund, the sister hedge fund, Alameda Research, access to FTX funds. Though, he did say that FTX was not coded by Sam Bankman-Fried. That the computer coding, that was done by others.
Now he said that he really had the same experience as what we heard from some of the other insider witnesses. He corroborated their story, saying that, as of June 2022, that it was that time that he knew that Alameda was using customer funds in order to go ahead and perform its trading, pay his expenses, and other things that Alameda had under its roof.
He said that Alameda at that time was owing FTX $13 billion. And he said he asked Bankman-Fried about how much money it had at that time to pay customers back, to pay into that fund for FTX. And at that time, he said that bankman-fried said that there was just $5 billion against that $13 billion in deliverables or liquid assets in order to put money back into those accounts.
Now his big revelation was that after all of this, he said, he called for two separate private conversations with Bankman-Fried. And one of those took place on the balcony, at this $35 million luxury condominium that he shared as a place to live with Bankman-Fried and some of the other executives. And he said at that time, he asked Bankman-Fried, quote, "what the hell the plan was" for this company to make good to its customers.
And he said at that time, Bankman-Fried said he was going to try to go and raise money, which he did. He flew to the Mideast. He tried to raise money from the Saudi Prince Mohammed bin Salman. That didn't work out so well as we've come to learn. But he also said that all while knowing this, that FTX that through Alameda continue to make political donations to various candidates and causes and also to continue to make investments that included to Anthony Scaramucci's SkyBridge Capital, among others.
But the point here that the prosecution was trying to make is that, all while this was going on, that customers were owed money, they continued to make these excessive is what he called them expenditures.
JULIE HYMAN: This trial just continues to be fascinating. Thanks so much for giving us this update, Alexis
Nitish Pahwa
SLATE
Mon, October 16, 2023
Sam Bankman-Fried with lawyers Christian Everdell and Mark Cohen. Jane Rosenberg/Reuters
This is part of Slate’s daily coverage of the intricacies and intrigues of the Sam Bankman-Fried trial, from the consequential to the absurd. Sign up for the Slatest to get our latest updates on the trial and the state of the tech industry—and the rest of the day’s top stories—and support our work when you join Slate Plus.
Most people shut up after they lawyer up, but not Sam Bankman-Fried. For five months, following the collapse of his crypto exchange FTX in November, the company’s co-founder and former CEO made his case in the court of public opinion, to his advisers’ chagrin. While sifting through the corporate rubble from his Bahamas penthouse, he did live interviews with whoever asked, including Andrew Ross Sorkin at a live New York Times event. After his December arrest on fraud and other federal charges—which led to ankle-monitored confinement at his parents’ Palo Alto residence—Bankman-Fried continued to give his take on what had happened to the billions his company had allegedly misappropriated and ethered, on Substack and to various journalists. He tweeted. He weaved a narrative—not very successfully, mind you—until a federal judge clamped down on his phone and internet use.
I noted back in December that this never-ending gab was remarkably devoid of substance. His main points: that he’s innocent and didn’t know jack. That he was just trying to do the right thing, like he always does. And that his businesses had been fine, actually, and everybody else, including the lawyers, fucked this up. Especially the lawyers!
I’ve often thought back to those early defenses from SBF as I’ve reported from his federal trial in Manhattan this month. He couldn’t have been an easy client to have back then. And I have to wonder what kind of client he is now.
These days, we’re not hearing anything from SBF, although apparently his team is considering having him testify. But something feels amiss with his defense. Among observers of the trial, few of us seem to have a clue about what SBF’s current attorneys—consisting of eight lawyers from the celebrated firm Cohen & Gresser—are doing.
Right now, the prosecution is still presenting its case in the trial. To generalize from my own observations over the past couple of weeks, the cross-examinations (often by Mark S. Cohen and Christian R. Everdell) have rarely, if ever, directly rebutted the government’s severe allegations, which encompass wire fraud, money laundering, and five conspiracy counts related to securities and commodities fraud, among others. More often, the attorneys repeat simple questions on matters the prosecution has already established, before building their way up to potential conclusions that never seem to land (e.g., the government has met with this witness a lot and granted them a deal; this witness couldn’t know what was really going on in this part of the company; SBF was working so hard in his role as the face of FTX). Cohen’s opening arguments presented Bankman-Fried as a business whiz who was just doing what he was allowed to do in an industry (crypto) the government hardly understands: “Sam did not steal from anyone. He did not intend to steal from anyone.” If he commingled customer deposits from FTX through his crypto hedge fund, Alameda Research, even after stepping down as the latter’s CEO? That’s fine, because he remained the majority owner of both companies and was entitled to run them as he saw fit. And he had said Alameda was a market maker on FTX! Really, it was just doing more market making! “Nothing wrong with that,” Cohen told the jury, a phrase he would employ again and again in a soft, avuncular tone.
Cohen & co. do have a most unenviable task, and it’s not just because their famed client appears to have shed all public goodwill, or because so many people think—perhaps prematurely!—that this thing is already over. Remember: SBF has emphasized over and over that the advice of counsel rarely figures into his “utilitarian” reasoning. In a Nov. 16 call with YouTuber Tiffany Fong (who’s also been covering the trial in person), SBF ranted about the lawyers who told him to stop making public statements about the FTX/Alameda bankruptcy. His response to them? “I told them to go fuck themselves.” That very month, one of SBF’s hired counselors left him behind, saying only that “conflicts ha[d] arisen.” Bankman-Fried continued to dis other lawyers who had been in his employ, especially from Sullivan & Cromwell, which had worked for FTX pre-collapse before shepherding its Chapter 11 bankruptcy process; SBF yapped for months afterward about how agreeing to that filing was his “biggest” regret, that his businesses would have been fine had he not filed for bankruptcy, and that Sullivan & Cromwell was basically nothing less than the devil. (SBF’s defense is now prohibited from attacking SullCrom during the federal trial.) Such anti-lawyer sentiment far predates his own legal tangles. In a 2021 tweet, SBF put forth this thought experiment: “If you think lawyers are never wrong—what happens when two lawyers disagree with each other?” The mind of a genius!
Meanwhile, Bankman-Fried’s gab did lead to various legal consequences: federal campaign finance charges based on the transcript of his call with Fong, and revoked bail thanks in part to his leak of ex-girlfriend and Alameda CEO Caroline Ellison’s private writings to the New York Times. I imagine his lawyers also loved it when he ticked off Judge Lewis A. Kaplan by using a VPN during house arrest (he claimed that it was to watch the NFL playoffs). Indeed, after Kaplan sent SBF to jail in August, he repeatedly struck down bids to have the defendant released ahead of the October trial for defense preparation. At least in his parents’ crib in Palo Alto, SBF had reliable internet connections and a flexible trial-prep schedule. Even when his browsing and messaging privileges were curtailed, he was still allowed to access resources useful for his defense. But in Brooklyn’s Metropolitan Detention Center, where power outages are frequent, SBF could use Wi-Fi for only five hours a day. Kaplan did grant the defendant two days a week where he could meet with his lawyers, though I’m sure Cohen’s team would have preferred more time. (I fully believe SBF biographer Michael Lewis when he claims that his subject is more afraid of having no internet than of sitting behind bars.)
It can’t be easy for any lawyer, no matter how skilled, to work with such a troublesome client even before you figure out how to tackle the government’s serious accusations. And make no mistake, SBF appears to have hired some skilled attorneys. As the Wall Street Journal wrote back in January, both Cohen and Everdell have handled some big cases. Everdell is an alum of the Southern District of New York, where he helped prosecute El Chapo; Cohen previously helped hedge fund Wynnefield Capital escape persistent SEC charges. Both also represented Ghislaine Maxwell in her sex-trafficking case and managed to get her down to a 20-year sentence from a potential 35-year maximum. Not a small feat—although Seth Stevenson, who reported on the 2021 Maxwell trial for Slate, likewise noted that her defense “often stumbled and looked overmatched,” presenting a case that “turned out to be shockingly flimsy.” Keep in mind, Bankman-Fried is facing up to 115 years.
Maxwell and Bankman-Fried are, obviously, accused of very different crimes. But it can be fairly stated that both of them are loathed almost universally, having come under the type of media scrutiny and fire reserved most often for the worst of the worst. Like with Maxwell, the case against SBF appears pretty unambiguous: His high school friend and former colleague (Gary Wang), his ex-girlfriend and former direct report (Ellison), his generous Alameda lender (former BlockFi CEO Zac Prince), and a onetime employee from his hedge fund (Christian Drappi) have all said, under oath, that Bankman-Fried directed FTX and Alameda to use money in ways that he did not appropriately disclose to anyone, whether they were customers, investors, or lenders.
Again, Cohen and Everdell have not denied any of these charges. Their interrogation of the witnesses, rather, focused on the contrasts between them and their former boss in terms of job duties, knowledge of the FTX/Alameda architecture, strategies when dealing with specific cryptocurrencies (whether FTT or Bitcoin), and willingness to cooperate with the government. But the vague gestures have seemed more improvised than planned, not least because the lawyers still do basic things like mess up the pronunciation of former FTX Digital Markets CEO Ryan Salame’s last name. (Sounds like “Salem.”) And witnesses themselves are more than willing to push back. One from Prince, in response to published evidence from the defense regarding BlockFi’s assessments of SBF: “You’re showing me a credit memo where [my credit risk management team] is saying, ‘We recommend not making this loan,’ and I’m telling you we did not make this loan.” Or this back-and-forth with former FTX employee Adam Yedidia:
Everdell: In meetings, the prosecutors went over the questions they were going to ask you on the stand, right?
Yedidia: They asked me questions in the meetings, yes.
Everdell: They went over your responses to the questions.
Yedidia: They would ask me questions and I would respond.
Everdell: They would ask you questions about what they might ask you on the stand, right?
Yedidia: They would ask me questions.
Various outlets covering the trial have made the apparent weaknesses clear from the headlines alone. The Verge, following the trial’s Oct. 4 kickoff: “Is Sam Bankman-Fried’s Defense Even Trying to Win?” CBS Moneywatch, from Thursday: “Sam Bankman-Fried’s Lawyer Struggles to Poke Holes in Caroline Ellison’s Testimony.” A particularly creative one from CoinDesk, on Friday: “Things SBF’s Defense Lawyers Should Be Freaking Out About.” Another one from last week, courtesy of my editor: “The Judge Is So Fed Up With Sam Bankman-Fried’s Lawyers.” (Kaplan is still fed up, in case you were wondering—so much so that the New York Times has referred to this factor as “an ominous sign for the defense.”)
It could be the case, as CoinDesk’s Daniel Kuhn has posited, that such pessimistic outlooks on the defense’s performance may stem from “the schadenfreude many might feel seeing team SBF squirm.” Plus, Kaplan’s habit of sniping at attorneys when he feels it’s warranted has long been recognized by legal observers. (One example in this trial: “I want to express my growing concern about the extent of the entirely unnecessary repetition.”) And he’s most often rapped the knuckles of the defense, though the prosecution has hardly escaped censure. (“I don’t know what you’re asking.”)
But seriously, what’s the defense lawyers’ endgame? Are they going to blow this in a way that causes SBF to later blame them for botching his case? Do they have a blockbuster document that will turn this whole thing around? Do they have anything to say that goes beyond “nothing wrong with that”? As Crystal Kim writes in Axios, one tack Cohen and Everdell may take is to argue that FTX customers’ expectations regarding the service should not be considered in evaluating the allegations. It’s still hard to tell what the overall thrust will resemble. In a recent interview with Time’s Andrew Chow, Lewis related, “Mark Cohen said this to me: ‘You get up, you tell one story, and they tell the other story, and the question is which story the jury believes.’ ” The prosecution certainly has a story—that Sam Bankman-Fried committed old-fashioned fraud with funny money. Do his lawyers have any story at all?
Mon, October 16, 2023
Sam Bankman-Fried with lawyers Christian Everdell and Mark Cohen. Jane Rosenberg/Reuters
This is part of Slate’s daily coverage of the intricacies and intrigues of the Sam Bankman-Fried trial, from the consequential to the absurd. Sign up for the Slatest to get our latest updates on the trial and the state of the tech industry—and the rest of the day’s top stories—and support our work when you join Slate Plus.
Most people shut up after they lawyer up, but not Sam Bankman-Fried. For five months, following the collapse of his crypto exchange FTX in November, the company’s co-founder and former CEO made his case in the court of public opinion, to his advisers’ chagrin. While sifting through the corporate rubble from his Bahamas penthouse, he did live interviews with whoever asked, including Andrew Ross Sorkin at a live New York Times event. After his December arrest on fraud and other federal charges—which led to ankle-monitored confinement at his parents’ Palo Alto residence—Bankman-Fried continued to give his take on what had happened to the billions his company had allegedly misappropriated and ethered, on Substack and to various journalists. He tweeted. He weaved a narrative—not very successfully, mind you—until a federal judge clamped down on his phone and internet use.
I noted back in December that this never-ending gab was remarkably devoid of substance. His main points: that he’s innocent and didn’t know jack. That he was just trying to do the right thing, like he always does. And that his businesses had been fine, actually, and everybody else, including the lawyers, fucked this up. Especially the lawyers!
I’ve often thought back to those early defenses from SBF as I’ve reported from his federal trial in Manhattan this month. He couldn’t have been an easy client to have back then. And I have to wonder what kind of client he is now.
These days, we’re not hearing anything from SBF, although apparently his team is considering having him testify. But something feels amiss with his defense. Among observers of the trial, few of us seem to have a clue about what SBF’s current attorneys—consisting of eight lawyers from the celebrated firm Cohen & Gresser—are doing.
Right now, the prosecution is still presenting its case in the trial. To generalize from my own observations over the past couple of weeks, the cross-examinations (often by Mark S. Cohen and Christian R. Everdell) have rarely, if ever, directly rebutted the government’s severe allegations, which encompass wire fraud, money laundering, and five conspiracy counts related to securities and commodities fraud, among others. More often, the attorneys repeat simple questions on matters the prosecution has already established, before building their way up to potential conclusions that never seem to land (e.g., the government has met with this witness a lot and granted them a deal; this witness couldn’t know what was really going on in this part of the company; SBF was working so hard in his role as the face of FTX). Cohen’s opening arguments presented Bankman-Fried as a business whiz who was just doing what he was allowed to do in an industry (crypto) the government hardly understands: “Sam did not steal from anyone. He did not intend to steal from anyone.” If he commingled customer deposits from FTX through his crypto hedge fund, Alameda Research, even after stepping down as the latter’s CEO? That’s fine, because he remained the majority owner of both companies and was entitled to run them as he saw fit. And he had said Alameda was a market maker on FTX! Really, it was just doing more market making! “Nothing wrong with that,” Cohen told the jury, a phrase he would employ again and again in a soft, avuncular tone.
Cohen & co. do have a most unenviable task, and it’s not just because their famed client appears to have shed all public goodwill, or because so many people think—perhaps prematurely!—that this thing is already over. Remember: SBF has emphasized over and over that the advice of counsel rarely figures into his “utilitarian” reasoning. In a Nov. 16 call with YouTuber Tiffany Fong (who’s also been covering the trial in person), SBF ranted about the lawyers who told him to stop making public statements about the FTX/Alameda bankruptcy. His response to them? “I told them to go fuck themselves.” That very month, one of SBF’s hired counselors left him behind, saying only that “conflicts ha[d] arisen.” Bankman-Fried continued to dis other lawyers who had been in his employ, especially from Sullivan & Cromwell, which had worked for FTX pre-collapse before shepherding its Chapter 11 bankruptcy process; SBF yapped for months afterward about how agreeing to that filing was his “biggest” regret, that his businesses would have been fine had he not filed for bankruptcy, and that Sullivan & Cromwell was basically nothing less than the devil. (SBF’s defense is now prohibited from attacking SullCrom during the federal trial.) Such anti-lawyer sentiment far predates his own legal tangles. In a 2021 tweet, SBF put forth this thought experiment: “If you think lawyers are never wrong—what happens when two lawyers disagree with each other?” The mind of a genius!
Meanwhile, Bankman-Fried’s gab did lead to various legal consequences: federal campaign finance charges based on the transcript of his call with Fong, and revoked bail thanks in part to his leak of ex-girlfriend and Alameda CEO Caroline Ellison’s private writings to the New York Times. I imagine his lawyers also loved it when he ticked off Judge Lewis A. Kaplan by using a VPN during house arrest (he claimed that it was to watch the NFL playoffs). Indeed, after Kaplan sent SBF to jail in August, he repeatedly struck down bids to have the defendant released ahead of the October trial for defense preparation. At least in his parents’ crib in Palo Alto, SBF had reliable internet connections and a flexible trial-prep schedule. Even when his browsing and messaging privileges were curtailed, he was still allowed to access resources useful for his defense. But in Brooklyn’s Metropolitan Detention Center, where power outages are frequent, SBF could use Wi-Fi for only five hours a day. Kaplan did grant the defendant two days a week where he could meet with his lawyers, though I’m sure Cohen’s team would have preferred more time. (I fully believe SBF biographer Michael Lewis when he claims that his subject is more afraid of having no internet than of sitting behind bars.)
It can’t be easy for any lawyer, no matter how skilled, to work with such a troublesome client even before you figure out how to tackle the government’s serious accusations. And make no mistake, SBF appears to have hired some skilled attorneys. As the Wall Street Journal wrote back in January, both Cohen and Everdell have handled some big cases. Everdell is an alum of the Southern District of New York, where he helped prosecute El Chapo; Cohen previously helped hedge fund Wynnefield Capital escape persistent SEC charges. Both also represented Ghislaine Maxwell in her sex-trafficking case and managed to get her down to a 20-year sentence from a potential 35-year maximum. Not a small feat—although Seth Stevenson, who reported on the 2021 Maxwell trial for Slate, likewise noted that her defense “often stumbled and looked overmatched,” presenting a case that “turned out to be shockingly flimsy.” Keep in mind, Bankman-Fried is facing up to 115 years.
Maxwell and Bankman-Fried are, obviously, accused of very different crimes. But it can be fairly stated that both of them are loathed almost universally, having come under the type of media scrutiny and fire reserved most often for the worst of the worst. Like with Maxwell, the case against SBF appears pretty unambiguous: His high school friend and former colleague (Gary Wang), his ex-girlfriend and former direct report (Ellison), his generous Alameda lender (former BlockFi CEO Zac Prince), and a onetime employee from his hedge fund (Christian Drappi) have all said, under oath, that Bankman-Fried directed FTX and Alameda to use money in ways that he did not appropriately disclose to anyone, whether they were customers, investors, or lenders.
Again, Cohen and Everdell have not denied any of these charges. Their interrogation of the witnesses, rather, focused on the contrasts between them and their former boss in terms of job duties, knowledge of the FTX/Alameda architecture, strategies when dealing with specific cryptocurrencies (whether FTT or Bitcoin), and willingness to cooperate with the government. But the vague gestures have seemed more improvised than planned, not least because the lawyers still do basic things like mess up the pronunciation of former FTX Digital Markets CEO Ryan Salame’s last name. (Sounds like “Salem.”) And witnesses themselves are more than willing to push back. One from Prince, in response to published evidence from the defense regarding BlockFi’s assessments of SBF: “You’re showing me a credit memo where [my credit risk management team] is saying, ‘We recommend not making this loan,’ and I’m telling you we did not make this loan.” Or this back-and-forth with former FTX employee Adam Yedidia:
Everdell: In meetings, the prosecutors went over the questions they were going to ask you on the stand, right?
Yedidia: They asked me questions in the meetings, yes.
Everdell: They went over your responses to the questions.
Yedidia: They would ask me questions and I would respond.
Everdell: They would ask you questions about what they might ask you on the stand, right?
Yedidia: They would ask me questions.
Various outlets covering the trial have made the apparent weaknesses clear from the headlines alone. The Verge, following the trial’s Oct. 4 kickoff: “Is Sam Bankman-Fried’s Defense Even Trying to Win?” CBS Moneywatch, from Thursday: “Sam Bankman-Fried’s Lawyer Struggles to Poke Holes in Caroline Ellison’s Testimony.” A particularly creative one from CoinDesk, on Friday: “Things SBF’s Defense Lawyers Should Be Freaking Out About.” Another one from last week, courtesy of my editor: “The Judge Is So Fed Up With Sam Bankman-Fried’s Lawyers.” (Kaplan is still fed up, in case you were wondering—so much so that the New York Times has referred to this factor as “an ominous sign for the defense.”)
It could be the case, as CoinDesk’s Daniel Kuhn has posited, that such pessimistic outlooks on the defense’s performance may stem from “the schadenfreude many might feel seeing team SBF squirm.” Plus, Kaplan’s habit of sniping at attorneys when he feels it’s warranted has long been recognized by legal observers. (One example in this trial: “I want to express my growing concern about the extent of the entirely unnecessary repetition.”) And he’s most often rapped the knuckles of the defense, though the prosecution has hardly escaped censure. (“I don’t know what you’re asking.”)
But seriously, what’s the defense lawyers’ endgame? Are they going to blow this in a way that causes SBF to later blame them for botching his case? Do they have a blockbuster document that will turn this whole thing around? Do they have anything to say that goes beyond “nothing wrong with that”? As Crystal Kim writes in Axios, one tack Cohen and Everdell may take is to argue that FTX customers’ expectations regarding the service should not be considered in evaluating the allegations. It’s still hard to tell what the overall thrust will resemble. In a recent interview with Time’s Andrew Chow, Lewis related, “Mark Cohen said this to me: ‘You get up, you tell one story, and they tell the other story, and the question is which story the jury believes.’ ” The prosecution certainly has a story—that Sam Bankman-Fried committed old-fashioned fraud with funny money. Do his lawyers have any story at all?
Top FTX witness says he confronted SBF on missing funds
Reuters Videos
Mon, October 16, 2023
STORY: Sam Bankman-Fried knew about a $13 billion hole in customer funds, before his crypto exchange FTX collapsed, but he continued to spend money on political donations, celebrities and pet causes.
That's according to a top witness at Bankman-Fried's criminal fraud trial on Monday.
Nishad Singh is the former head of engineering at FTX.
The jury heard Singh describe a conversation with Bankman-Fried in September last year, on the balcony of a Bahamas penthouse they shared.
Singh confronted the founder about the shortfall.
Bankman-Fried assured him he would raise more funds and cut costs.
But in the meantime, Singh said he kept receiving transfers from Bankman-Fried's Alameda Research hedge fund, money that FTX associates would use for endorsements to boost Bankman-Fried's image.
Those included some high-profile deals: naming rights to the Miami Heat's basketball arena, as well as arrangements with NFL quarterback Tom Brady, Brady's then-wife, the model Gisele Bundchen, and basketball star Steph Curry, among others.
Singh said these "reeked of excess and flashiness" and that he urged Bankman-Fried to cancel them once he learned about the shortfall in customer funds.
Bankman-Fried refused.
FTX declared bankruptcy two months later after a wave of customer withdrawals.
Singh also admitted in court to being a "straw donor" for campaign donations to the US Democratic Party.
He described how members of FTX's inner circle would often direct a donation be made in his name.
Bankman-Fried's trial has heard testimonies from other members of that inner circle since it began earlier this month.
Former technology chief Gary Wang and Alameda's onetime CEO Caroline Ellison, who was also Bankman-Fried's ex-girlfriend, have both testified.
Bankman-Fried's lawyers are expected to cross-examine Singh on Tuesday.
Sam Bankman-Fried pushed for $30 million Bahamas penthouse despite concern from FTX colleagues it would be ‘ostentatious’
Leo Schwartz
Mon, October 16, 2023
Despite Sam Bankman-Fried's public commitment to charitable giving and the philanthropic movement of effective altruism, the FTX founder also had a taste for the finer things in life, from private jets to luxury apartments.
On Monday, former FTX engineering chief Nishad Singh testified that Bankman-Fried had personally pushed for the now infamous $30 million penthouse in the Bahamas that housed members of his inner circle—fellow effective altruists.
According to Singh, the group of friends all wanted to live together after relocating FTX headquarters to the Bahamas, which led to a "substantial disagreement" over potential accommodations.
Some were opposed to the penthouse, which occupied the top floor of the Orchid building of the Albany, a luxury resort in a secluded corner of the Bahamas. As adherents to effective altruism—which espouses maximizing a person's impact, often through charitable giving—they were concerned about the penthouse's extravagant price tag and "ostentatious" appearance, according to Singh.
Bankman-Fried, however, was a fan. "Sam is a fan of views," Singh testified. "He said he would pay $100 million for the drama to be done with." Ten of them ended up moving into the apartment, with its panoramic vistas of the Albany's marina. Bankman-Fried ultimately moved out after breaking up with one of the housemates, Caroline Ellison—also the CEO of his trading firm, Alameda Research.
'Politicking and social climbing'
Bankman-Fried's criminal trial entered its third week on Monday, with prosecutors from the Department of Justice building their case that the FTX founder illegally used customer funds from the crypto exchange for his own purposes, from real estate to venture investments.
Former FTX CTO Gary Wang and Ellison cooperated with prosecutors and, in earlier testimony, admitted to committing fraud under the direction of Bankman-Fried. Singh is just the latest member of Bankman-Fried's inner circle to testify against him.
A childhood friend of Bankman-Fried's brother, Singh played an essential role in Bankman-Fried's investment and charitable giving campaigns. He was a major political donor, with prosecutors charging Singh with breaking campaign donation laws. The DOJ initially brought similar charges against Bankman-Fried, although those allegations were dropped due to extradition technicalities with the Bahamas.
In his testimony on Monday, Singh detailed the profligate spending FTX oversaw, including investments totaling $1 billion in a venture firm run by Michael Kives and Bryan Baum, whom Bankman-Fried viewed as valuable due to their connections to celebrities and prominent figures.
Singh testified that he thought the spending was excessive, with the investment to Kives and Baum running contrary to effective altruism's principles. Singh said he was concerned it "would be really toxic to FTX and Alameda culture," which he understood as reflecting that "politicking and social climbing was not going to be rewarded."
This story was originally featured on Fortune.com
Former FTX executive Nishad Singh describes conversation with Sam Bankman-Fried over customer funds: ‘I was blindsided and horrified’
Ben Weiss
Mon, October 16, 2023
Jane Rosenberg—Reuters
Witnesses speaking out against Sam Bankman-Fried, former CEO of the now-bankrupt crypto exchange FTX, have often punctuated their testimony with come-to-Jesus moments: a discussion on a tennis court, an office confession in Hong Kong, or an emotionally raw conversation over Signal.
On Monday, Nishad Singh, the former of head of engineering at FTX and one of three key lieutenants who took plea deals from the government, sketched out where he was when he finally realized how far FTX had strayed from its seemingly idealistic origins: the balcony of a luxury penthouse in the Bahamas.
Singh's description of his confrontation with Bankman-Fried, who's on trial for allegedly hoodwinking FTX customers, investors, and lenders, was some of the most vivid testimony to come from the former executive, after two other key members of FTX's inner circle—Gary Wang and Caroline Ellison—finished testifying last week.
"I was blindsided and horrified," Singh said to prosecutor Nicolas Roos, in reference to the penthouse meeting.
'Turned out to be so evil'
In September 2022, shortly before Bloomberg was set to publish an article digging into the links between Bankman-Fried's crypto hedge fund Alameda Research and FTX, Bankman-Fried sent a Google Doc over Signal to Singh, Ellison, and Wang to argue why "it might be time for Alameda Research to shut down." (As part of the document, he drafted a thread for X, then Twitter, to announce the hedge fund's closing. "We came, we saw, we researched," was how the former crypto mogul proposed starting off.)
Singh suggested only cutting off Alameda's relationship with FTX, but Ellison responded over text that that was "impossible." In a private meeting with her and Wang, one that Singh said Bankman-Fried purposefully avoided, he learned why: Alameda owed $13 billion to FTX, and much of that was customers' money. "This was absolutely devastating," he testified on Wednesday.
Shortly afterward, Singh, who said he rarely ever met with Bankman-Fried one-on-one, asked him to talk privately. In the evening, they met up for more than an hour on the balcony of their Bahamas penthouse—where Singh, Bankman-Fried, and eight other FTX and Alameda staffers lived.
Pacing near a circular pool, Singh asked Bankman-Fried, who was sitting on a white chaise lounge chair, if what he had heard from Wang and Ellison was correct. "Well, we are a little short on deliverables," Bankman-Fried said, referring to liquid funds FTX could use to immediately honor customer withdrawals.
"Jesus effing Christ," exclaimed Singh.
"Yeah, this has been taxing five to ten percent of my productivity," the former FTX CEO responded.
Being $13 billion in the hole, Singh said, would affect his own productivity much more than a few percentage points, but Bankman-Fried replied that he wasn't worried. He said he planned to cut expenses and that the expansion of FTX.US into the futures market would help increase the amount of funds on hand for customers.
Singh, though, was mortified. "I felt really betrayed," he testified, "that five years of blood, sweat, and tears from me and so many employees, driving towards something that I thought was a beautiful force for good, had turned out to be so evil."
Update, Oct. 16, 2023: Changed the final quote to accord with what was on the court transcript, which was released later in the evening.
This story was originally featured on Fortune.com
Another member of SBF's inner circle says crimes were committed at FTX
Alexis Keenan
·Reporter
Updated Mon, October 16, 2023
Another former member of Sam Bankman-Fried’s inner circle at FTX told a jury Monday that he committed crimes alongside the 31-year-old crypto entrepreneur, saying he was aware FTX customer money had been routed to Bankman-Fried’s crypto trading firm.
"I defrauded customers, investors," said Nishad Singh, the former director of engineering at the now-bankrupt cryptocurrency exchange, who first met Bankman-Fried while he was in high school.
Nishad Singh, far right, is questioned Monday by a government prosecutor in this courtroom sketch. He is the former director of engineering at FTX. (Jane Rosenberg/REUTERS) (JANE ROSENBERG / reuters)
Singh pleaded guilty in February to wire fraud and conspiring to violate US campaign finance laws. He is one of three close colleagues of Bankman-Fried to plead guilty and testify against the former FTX founder.
The others — Caroline Ellison and Gary Wang — appeared during the first two weeks of the trial. Still another high-ranking FTX insider, software developer Adam Yedidia, testified against Bankman-Fried last week.
Prosecutors are arguing that Bankman-Fried committed wire fraud and six other crimes by embezzling billions in FTX customer funds and lying to investors and lenders.
Singh, who reported to Bankman-Fried and Wang, corroborated testimony from his former coworkers. He said by June 2022, he and others in the executive ranks knew that FTX customer deposits were spent by Alameda Research, a crypto trading firm controlled by Bankman-Fried.
He said he overheard Bankman-Fried back in December 2019, when FTX’s computer databases were being created, saying that customer deposits needed to be made into Alameda bank accounts because it was then difficult for FTX to open its accounts.
Singh also testified that he followed Wang’s direction to write computer code that made an exception for Alameda so that it could carry negative balances in its FTX account. In his mind, Singh testified, the feature was to be used for incidental transfers and small amounts.
"I defrauded customers, investors," said Nishad Singh, the former director of engineering at the now-bankrupt cryptocurrency exchange, who first met Bankman-Fried while he was in high school.
Nishad Singh, far right, is questioned Monday by a government prosecutor in this courtroom sketch. He is the former director of engineering at FTX. (Jane Rosenberg/REUTERS) (JANE ROSENBERG / reuters)
Singh pleaded guilty in February to wire fraud and conspiring to violate US campaign finance laws. He is one of three close colleagues of Bankman-Fried to plead guilty and testify against the former FTX founder.
The others — Caroline Ellison and Gary Wang — appeared during the first two weeks of the trial. Still another high-ranking FTX insider, software developer Adam Yedidia, testified against Bankman-Fried last week.
Prosecutors are arguing that Bankman-Fried committed wire fraud and six other crimes by embezzling billions in FTX customer funds and lying to investors and lenders.
Singh, who reported to Bankman-Fried and Wang, corroborated testimony from his former coworkers. He said by June 2022, he and others in the executive ranks knew that FTX customer deposits were spent by Alameda Research, a crypto trading firm controlled by Bankman-Fried.
He said he overheard Bankman-Fried back in December 2019, when FTX’s computer databases were being created, saying that customer deposits needed to be made into Alameda bank accounts because it was then difficult for FTX to open its accounts.
Singh also testified that he followed Wang’s direction to write computer code that made an exception for Alameda so that it could carry negative balances in its FTX account. In his mind, Singh testified, the feature was to be used for incidental transfers and small amounts.
'This cannot be correct'
In June 2022 Singh said he became aware of an accounting project commissioned by Bankman-Fried that fixed a bug in FTX’s accounting. Before the fix, Alameda appeared to owe FTX $19 billion.
Singh said Bankman-Fried told him, Ellison, and Wang that "this cannot be correct." After a fix to the bug, Alameda’s balance sheet showed a smaller "hole" in liabilities to FTX of roughly $8 billion in missing money.
Sam Bankman-Fried watches during his fraud trial over the collapse of FTX in this courtroom sketch from Oct. 11. (Jane Rosenberg/REUTERS) (JANE ROSENBERG / reuters)
Singh said he learned from Bankman-Fried that the money was being used by Alameda for investments, political donations, and real estate. By then, he said, the size of the negative balance exception for Alameda "couldn’t have been a mistake."
Singh said Bankman-Fried was "ultimately" in charge of Alameda and responsible for the "architecture" of the way it and FTX could transfer and account for funds held by each entity. Bankman-Fried, he said, at times kept Alameda’s transfers on one of six monitors that he used while leading FTX as CEO.
"My understanding was in the end Bankman-Fried held a lot of the final say," Singh testified.
'Excessive' spending
He said he frequently expressed to Bankman-Fried concerns about "excessive" spending by Alameda, while he talked the jury through a spreadsheet showing Alameda’s expenditures. One included a bitcoin mining deal with a company in Kazakhstan for $1.5 billion.
When the judge asked Singh how he knew that Bankman-Fried decided to invest that money for Alameda, he admitted: "I don’t know that he was the one pulling the trigger."
One point of concern that Singh said he talked to Bankman-Fried about was celebrity endorsement spending.
He walked the jury through a spreadsheet showing a series of endorsement deals.
The FTX Arena after the cryptocurrency exchange won naming rights. (Megan Briggs/Getty Images) (Megan Briggs via Getty Images)
They included $205 million for the naming rights to the arena of the Miami Heat NBA basketball team, $150 million to Major League Baseball, and $10 million to Seinfeld co-creator Larry David to star in an ad that aired during the Super Bowl.
There were tens of millions more to NBA star Steph Curry and former NFL quarterback Tom Brady along with his then-wife Giselle.
Singh told the courtroom that he had “always been intimidated by Sam,” and thought of him as brilliant and formidable, but that his admiration "eroded" over time.
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