CRIMINAL CAPITALI$M

WTF

Disgraced FTX Founder SBF to Speak At New York Times DealBook Summit

FTX founder Sam Bankman-Fried to make first public appearance after the bankruptcy filing. "Nothing is off limits" said NY Times reporter

By Bhushan Akolkar
11/24/22



Sam Bankman-Fried, the disgraced founder of bankrupt crypto exchange FTX will be speaking at the New York Times’ annual DealBook Summit next week, as per the earlier schedule. SBF himself confirmed the same on his Twitter timeline a few hours back.

This would be SBF’s first public appearance since crypto exchange FTX sought bankruptcy protection. The bankruptcy proceedings have uncovered a lot of dark details about FTX. This involves the misappropriate use of customer funds, using company funds to buy personal properties, and much more.

Due to this irrational behavior with customers’ funds, FTX faced a $51 billion crash in its collateral. Speaking on this, SBF said:

“I didn’t mean for any of this to happen, and I would give anything to be able to go back and do things over again. I did not realize the full extent of the margin position, nor did I realize the magnitude of the risk posed by a hyper-correlated crash”.

What to Expect from FTX Chief At the Summit?

One of the spokespersons at the New York Times stated that SBF will participate from the island nation of the Bahamas where the crypto exchange is based. The crypto community has accused the NY Times of its soft reporting on the entire FTX episode. But in his tweet, Sorkin said:

“There are a lot of important questions to be asked and answered. Nothing is off limits.”

With the bankruptcy proceedings over the last week, SBF has already resigned as the CEO of the company. His public persona has also been muted. Instead of appearing on TV, SBF has chosen to make long tweet threads. But this social media presence has also brought trouble for the FTX founder.

In the court hearing, lawyers said that SBF’s “incessant and disruptive tweeting” were undermining their restructuring efforts. Law firm Paul Weiss noted that they have stopped representing SBF citing “conflicts”. Top U.S. regulatory agencies are now seeking help from new FTX Chief Executive Officer John J. Ray III.

Crypto Firm FTX’s Ownership of a U.S. Bank Raises Questions

Story by Stephen Gandel • Yesterday 

Among the many surprising assets uncovered in the bankruptcy of the cryptocurrency exchange FTX is a relatively tiny one that could raise big concerns: a stake in one of the country’s smallest banks.


The bankruptcy of the FTX cryptocurrency exchange is exposing a number of odd assets.© Marco Bello/Reuters

The bank, Farmington State Bank in Washington State, has a single branch and, until this year, just three employees. It did not offer online banking or even a credit card.

The tiny bank’s connection to the collapse of FTX is raising new questions about the exchange and its operations. Among them: How closely tied is FTX, which was based in the Bahamas, to the broader financial system? What else might regulators have missed? And in the hunt for FTX’s missing assets, how will Farmington get dragged into the multibillion-dollar bankruptcy?

Sign up for The Morning newsletter from The New York Times

The ties between FTX and Farmington State Bank began in March when Alameda Research, a small trading firm and sister to FTX, invested $11.5 million in the bank’s parent company, FBH.

At the time, Farmington was the nation’s 26th-smallest bank out of 4,800. Its net worth was $5.7 million, according to the Federal Deposit Insurance Corporation.

Related video: Crypto lending company Genesis suspends withdrawals, reportedly considering bankruptcy
Duration 2:05 View on Watch




What FTX Fallout Means for VC Funding in Crypto

FTX’s investment, which according to financial regulators was more than double the bank’s net worth, was led by Ramnik Arora, a top lieutenant of the exchange’s founder, Sam Bankman-Fried. Mr. Arora was responsible for many of the much larger deals that FTX signed with Sequoia Capital and other venture capitalists that eventually failed.

Farmington has more than one crypto connection. FBH bought the bank in 2020. The chairman of FBH is Jean Chalopin, who, along with being a co-creator of cartoon cop Inspector Gadget in the 1980s, is the chairman of Deltec Bank, which, like FTX, is based in the Bahamas. Deltec’s best-known client is Tether, a crypto company with $65 billion in assets offering a stablecoin that is pegged to the dollar.

Tether has long faced concerns about its finances, in part because of its reclusive owners and offshore bank accounts. Through Alameda, FTX was one of Tether’s largest trading partners, raising concerns that the stablecoin could have yet-undiscovered ties to FTX’s fraudulent operations.

Before the acquisition, Farmington’s deposits had been steady at about $10 million for a decade. But in the third quarter this year, the bank’s deposits jumped nearly 600 percent to $84 million. Nearly all of that increase, $71 million, came from just four new accounts, according to F.D.I.C. data.

It’s not clear what F.T.X.’s plan was for Farmington. Online, Farmington now goes by Moonstone Bank. The name was trademarked a few days before F.T.X.’s investment. Moonstone’s website doesn’t say anything about Bitcoin or other digital currencies. It says Moonstone wants to support “the evolution of next generation finance.”

Deltec and Moonstone did not return a request for comment.

It’s unclear how FTX was allowed to buy a stake in a U.S.-licensed bank, which would need to be approved by federal regulators. Banking veterans say it’s hard to believe that regulators would have knowingly allowed FTX to gain control of a U.S. bank.

“The fact that an offshore hedge fund that was basically a crypto firm was buying a stake in a tiny bank for multiples of its stated book value should have raised massive red flags for the F.D.I.C., state regulators and the Federal Reserve,” said Camden Fine, a bank industry consultant who used to head the Independent Community Bankers of America. “It’s just astonishing that all of this got approved.”

FTX Collapse: 'Emperor' Bankman-Fried Had No Clothes

The regime of the founder of the cryptocurrency exchange was discussed in court on November 22.

Story by Luc Olinga • Yesterday TheStreet

A face of the regime of Sam Bankman-Fried, the founder of FTX, was revealed on November 22 during the firm's first hearing in Delaware bankruptcy court.

The 30-year-old former trader was virtually considered an "emperor" among his employees: This is the image used by an FTX lawyer to describe what happened after Bankman-Fried filed for Chapter 11 bankruptcy on his crypto empire made up of FTX and Alameda Research.

Everyone realized for the "first time the emperor had no clothes," James Bromley, co-head of the restructuring practice at law firm Sullivan & Cromwell, told Judge John Dorsey.

Bromley also said the downfall of FTX was "probably" one of the "most abrupt and difficult corporate collapses in the history of corporate America."

The firm ran out of cash when its customers rushed to withdraw their money by selling the cryptocurrencies they had previously purchased on the platform. FTX was using the client cryptocurrencies as collateral to borrow money which in turn it had transferred to Alameda Research, a trading platform with which it shares several links. Alameda used this money to invest in crypto businesses and also for trading operations.

You can read the FTX collapse timeline here.

FTX books a 'complete failure', investors did 'little homework' with billions owed

A $1 Billion Personal Loan

John Ray, FTX's new CEO in charge of restructuring, had already scathingly criticized Bankman-Fried and his two associates -- Zixiao "Gary" Wang and Nishad Singh -- on November 17, explaining that they had failed on every level.

Bankman-Fried received a personal loan of $1 billion from Alameda, according to Ray,. The firm also gave a $543 million personal loan to Singh, and $55 million to Ryan Salame, the co-CEO of FTX Digital Markets, one of FTX's affiliates.

"In the Bahamas, I understand that corporate funds of the FTX group were used to purchase homes and other personal items for employees and advisors," Ray said. "I understand that there does not appear to be documentation for certain of these transactions as loans, and that certain real estate was recorded in the personal name of these employees and advisors on the records of the Bahamas."

Bankman-Fried lives in the Bahamas.

Ray further indicated that, to be reimbursed for business expenses, employees only had to submit the request by chat and a supervisor would immediately approve with a personalized emoji.

"The debtors did not have the type of disbursement controls that I believe are appropriate for a business enterprise," Ray wrote. "For example, employees of the FTX Group submitted payment requests through an on-line 'chat' platform where a disparate group of supervisors approved disbursements by responding with personalized emojis."

The conclusion of this veteran restructuring was final:

"Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here," Ray wrote in a 30-page document filed with the United States Bankruptcy Court for the District of Delaware.

"From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented."

Senate Democrats call for criminal investigation of FTX founder Sam Bankman-Fried 

ALEXANDER BOLTON - 

11/23/22 

FILE – A sign for the FTX Arena, where the Miami Heat basketball team plays, is illuminated on Nov. 12, 2022, in Miami. FTX filed for bankruptcy protection Friday, Nov. 11

. (AP Photo/Marta Lavandier, File)

Sens. Elizabeth Warren (D-Mass.) and Sheldon Whitehouse (D-R.I.) sent a letter to the Department of Justice (DOJ) Wednesday calling for a criminal investigation of what they called the “fraudulent tactics” of Sam Bankman-Fried, the founder and CEO of FTX Trading Ltd., which filed for bankruptcy this month.

“Given the department’s commitment to holding perpetrators of white-collar crime personally accountable, we expect DOJ to investigate the actions leading to the collapse of FTX with the utmost scrutiny,” the senators wrote in a letter addressed to Attorney General Merrick Garland.

The collapse of FTX, one of the world’s largest cryptocurrency exchanges, which was once valued at $32 billion, leaves investors facing as much as $8 billion in losses.

The senators pointed out that in the days leading up to FTX’s collapse, Bankman-Fried tweeted that the exchange “has enough to cover all client holdings” and asserted “we don’t invest client assets (even in treasuries).”

Bankman-Fried later admitted that an affiliated trading platform that he also founded, Alameda Research, owed FTX approximately $10 billion in customer deposits that were lent without customers’ consent, which Warren and Whitehouse called “a violation of both U.S. securities laws and FTX’s own terms of service.”

“The fall of FTX was not simply a result of sloppy business and management practices, but rather appears to have been caused by intentional and fraudulent tactics employed by Mr. Bankman-Fried and other FTX executives to enrich themselves,” the senators wrote in the letter addressed to Garland and Kenneth Polite, the assistant attorney general in charge of the DOJ’s civil division.

Warren is a member of the Senate Banking Committee, and Whitehouse sits on the Senate Judiciary Committee.

They argue that Bankman-Fried “revealed his true interests of self-enrichment last year when he siphoned $300 million to his own wallet,” citing a Wall Street Journal report.

The Journal reported that “it couldn’t be determined” what Bankman-Fried did with the $300 million, but Reuters reported on Tuesday that Bankman-Fried, his parents and senior executives at FTX bought at least 19 properties worth $121 million in the Bahamas over the past two years.

The Democratic senators also pointed out that John Jay Ray, the corporate turnaround specialist who has taken over as FTX’s CEO, reported in a recent court filing that he had never seen “such a complete failure of corporate control” at the exchange and described the use of software to conceal the misuse of customers’ funds.

“New facts will undoubtedly shed more light on how Bankman-Fried and his associates’ deception has harmed FTX’s customers, and customers of any company that was exposed to the contagion,” the senators wrote. “We urge the Department to center these ‘flesh-and-blood victims’ as it investigates, and, if it deems necessary, prosecute the individuals responsible for their harm.”

Warren called for broader federal regulation of cryptocurrency markets in a Wall Street Journal op-ed published Tuesday.

“FTX’s implosion should be a wake-up call. Regulators must enforce the law before more people get cheated, and Congress must plug the remaining holes in our regulatory structure — before the next crypto catastrophe takes down our economy,” she warned.

She urged the Justice Department to use “its full range of tools, including criminal penalties” against crypto executives who break the wall.

“If Mr. Bankman-Fried and FTX executives committed fraud, then federal prosecutors should send them to prison,” she wrote in The Journal. 2024 Tracker: Here’s who is running for the GOP nominationZelensky says UN must not be ‘hostage’ to ‘terrorist’ Russia

Bankman-Fried donated nearly $40 million to Democratic candidates, political action committees and liberal-leaning groups during the 2022 midterm elections.

His father, Joseph Bankman, a Stanford Law professor, helped draft tax legislation in 2016 and donated $2,500 to her campaign in 2011, according to reporting by Fortune and Fox News.

FTX miniseries gets go ahead, covering the ‘most brazen frauds ever committed’

The Russo’s are reported to have said that FTX “is one of the most brazen frauds ever committed” in their reasoning for wanting to create the show.

An eight-episode limited series exploring the unraveling and scandals behind sunken crypto exchange FTX and its leadership is slated to soon begin production.

The series has been purchased by technology conglomerate Amazon, and will likely air on Amazon’s video streaming service Prime.

It’s understood to be based on “insider reporting” from journalists covering FTX and its founder Sam Bankman-Fried according to a Nov. 23 report from the entertainment magazine Variety.

Brothers Joe and Anthony Russo, famed for directing Avengers: Endgame and multiple other Marvel-owned movies are reported to have sold the idea to Amazon and are slated to direct the mini-series.

Details are sparse with what direction the series will take, the source material it will draw from, and what time period and people it will focus on, with all of it still kept under wraps for the time being.

In their reason for pursuing a series on the FTX story, the Russos brothers told Variety what happened with the exchange “is one of the most brazen frauds ever committed,” and opined on Bankman-Fried:

“At the center of it all sits an extremely mysterious figure with complex and potentially dangerous motivations. We want to understand why.”

Amazon is slated to start producing the show as early as March 2023, and while the characters and the actors who will play them are unknown, it's reported the Russos are in discussions with prior Marvel actors they’ve worked with to fill the main roles.

The idea for FTX-inspired movies akin to The Big Short and the Wolf of Wall Street has already been joked around on Twitter over a week ago, with some members of the community already taking the initiative to cast who would play Sam Bankman-Fried, Alameda CEO Caroline Ellison, Binance CEO Changpeng Zhao and other related players, such as Terra's Do Kwon.

One Twitter user pitched the idea of “FTX THE MOVIE” on Nov. 12, selecting Wolf of Wall Street’s Jonah Hill to play Bankman-Fried, while comedian Jimmy O. Yang could play Changpeng Zhao.

Another user created a promotional poster with their take on the film’s title: “The Wolf of Effective Altruism” spoofing The Wolf of Wall Street and poking fun at Bankman-Fried’s philosophical stance of wanting to help others.

It appears Hollywood is eager to snap up the rights to stories centered on the collapse of the world’s top crypto exchanges.

Related: Sam Bankman-Fried still speaking at events and the community is furious

Author and financial journalist Michael Lewis, known for his book “The Big Short” on the 2008 financial crisis, is reportedly looking to sell book rights on an FTX story after spending six months with Bankman-Fried in the months leading up to FTX’s implosion.

Big Tech player Apple is reportedly the front-runner for the rights beating out competitors Amazon and Netflix, with intentions to create a film for its video-streaming service Apple TV Plus.

CRIMINAL CRYPTO CAPITALI$M

Prosecution winds up case against Bankman-Fried ahead of six-day pause in trial

Kari McMahon
Thu, October 19, 2023 


The prosecution’s case is starting to draw to a close in the criminal trial of Sam Bankman-Fried, the founder and former CEO of collapsed crypto exchange FTX. The government’s remaining witnesses will take to the stand in six days time after a brief adjournment to the trial.

The defense, if they choose to do so, are expected to start presenting their case on the afternoon of Oct. 26, according to a live blog of the trial from court reporting organization Inner City Press. The defense has been weighing up whether to have Bankman-Fried testify based on, what they claim, is insufficient access to medication.

“If we put on a case, a week and a half max,” said Mark Cohen, Bankman-Fried’s defense lawyer, regarding scheduling earlier this week.

A flurry of expert witnesses have taken to the stand since the testimony of Nishad Singh, FTX’s former director of engineering and a member of Bankman-Fried’s inner circle, earlier this week. These witnesses include FBI agent Richard Busick, who gave expert testimony on Bankman-Fried’s cell phone records, and accounting professor Peter Easton, who examined the money flows between various FTX entities. Easton confirmed that customer funds were used for political donations, real estate and venture capital investments.

FTX’s former general counsel Can Sun took to the stand today testifying that he was “shocked” to learn there was a missing $7 billion in funds from the exchange, which he discovered as part of a call with investment firm Apollo in November last year. During that call, FTX’s former head of product Ramnik Arora tried to shore up an investment from Apollo prior to the exchange’s collapse. During the process, Sun was sent a spreadsheet revealing the missing funds.

“What did you conclude from the spreadsheet?” asked the prosecution. “The funds had been misappropriated,” Sun said.

Sun told the jury that FTX still provided Apollo with the spreadsheet and in turn they requested a legal justification for the missing funds. Bankman-Fried asked Sun to come up with a justification for why they were missing without providing one himself, Sun said.

One of the potential justifications was FTX’s terms of services containing an escheatment clause, which meant abandoned customer funds could be used, as well as a margin trading clause that stated investors could lose their collateral if the account is liquidated. However, traders had to opt-in to margin trading. There was also another area within the terms of service that said customer assets belonging to them were not to be loaned out.

Sun told Bankman-Fried that these clauses would not be enough to explain the missing billions in customer funds. Bankman-Fried acknowledged this at the time, but later used the margin reasoning in a media interview with Good Morning America, which was played to the jury in court.

Later that day, Singh revealed to Sun that he had known about the missing funds since late summer and that Bankman-Fried told him “It is what it is.”

“When did you leave FTX?” the prosecution asked. “The next day. I resigned,” Sun said.

Sun found out about Alameda Research’s auto-liquidation exemption and asked for it to be removed, he told the prosecution. He testified that Bankman-Fried and members of the inner circle pushed back on this demand and told him the exemption had never been triggered.

The defense probed Sun on FTX’s terms of service during the cross examination but revealed little new information.

After Sun’s testimony, Robert Boroujerdi, an investor at hedge fund Third Point, took the stand, sharing with the jury that the firm’s $60 million investment in FTX was now worth zero.

“Did you know Alameda was exempt from the risk engine?” asked the prosecution. “No, we would not have invested,” said Boroujerdi. “There should be no preferential treatment.”

Court was adjourned following Boroujerdi’s testimony and will return on Oct. 26.

Third Point managing director doubles down on SBF investor fraud in trial testimony


Jacquelyn Melinek

TechCrunch
Thu, October 19, 2023

Image Credits: Bryce Durbin / TechCrunch

Robert Boroujerdi, managing director at Third Point, testified on Thursday at Sam Bankman-Fried’s trial in assistance with the government’s case to try and find the defendant guilty on seven counts related to fraud and money laundering.

Boroujerdi formerly served as the head of global securities research at Goldman Sachs. He testified that while he got access to FTX’s “data room,” which is digital documents that consisted of strategic decks, organizational charts and financial statements, they weren’t made aware of the interrelationships between FTX and its sister company Alameda.

Third Point is an institutional alternative asset manager that serves pension funds, endowments and high-net-worth individuals. The hedge fund was founded in 1995 by billionaire Daniel Loeb. Boroujerdi’s job is to look for investment opportunities for the firm and as a result, he learned about FTX.

In the late first quarter to early second quarter of 2021, Boroujerdi first emailed with Bankman-Fried and other related parties as a first step to potentially invest in the crypto exchange. By mid-March of that year, the witness had a Zoom call with Bankman-Fried and Third Point investment team members. He testified that on the call, Bankman-Fried mainly led the conversation and talked about FTX’s growth, strategic plans, financial aspects and so on.

Third Point relied on the financial data provided by FTX to invest and was not told of other expenses not shown in the data room, Boroujerdi testified. Everything should be shown, whether it’s “good or bad,” he added.

They had a second Zoom call meeting several weeks later.

Boroujerdi said Alameda came up on the call and Bankman-Fried spoke of it as something he co-founded, but called its relationship with FTX an “arm's length business” and that it “operated independently and had its own self-interests.” He added that Bankman-Fried shared that he had equity in Alameda, but it wasn’t impacting the relationship.

Third Point was under the impression Alameda was treated like every other trading firm that used the exchange. “There should be no preferential treatment on an exchange,” Boroujerdi said. If the firm knew Alameda had special privileges and that it could withdraw customer funds from FTX, Third Point would not have invested, he added.

But, Boroujerdi and Third Point were in the dark at the time and the firm went ahead with initially investing $35 million in FTX’s $900 million Series B capital raise in July 2021. That round had over 60 investors, including VC firm Sequoia Capital, SoftBank Group Corp and British billionaire hedge fund manager Alan Howard. At the time, FTX’s valuation rose to $18 billion (it hit a $32 billion valuation at its peak.)

Boroujerdi recalled being told by FTX that the capital would be used to expand the team, increase market share and for strategy, among other things. He testified he was not aware that the money was being transferred to Alameda and had he known that, again, Third Point wouldn’t have invested.

But the firm didn’t know — and Third Point provided more capital for additional funding rounds, marking its total investment in FTX to $60 million, Boroujerdi testified.

When asked by prosecutors what was the value of the firm’s investment in FTX, Boroujerdi responded stiffly, “Zero.” But the firm seems to be doing all right — Loeb wrote in Third Point’s Q2 2023 investor letter that it still sees a “healthy upside in the valuations of [its] portfolio.”

In a similar tune, Matt Huang, co-founder and managing partner of crypto investment firm Paradigm, testified during Bankman-Fried’s trial earlier this month that the red flags in FTX would have affected his firm’s decision on investing in the exchange — especially if they knew FTX used customer funds to prop up Alameda.

Over two funding rounds between 2021 and 2022, Paradigm invested $278 million into FTX. When prosecutors asked what Paradigm estimates the current value of that investment to be, Huang replied, “We have marked it to zero.”

Both testimonies point to the damage that FTX's and Alameda’s collapse have caused to investors. These witnesses may also strengthen the government’s case against Bankman-Fried in regards to whether he committed the alleged fraud.

While the trial will be on recess until October 26, the government shared that its final three potential witnesses will consist of an FBI agent, an investor and a customer.

After that, Bankman-Fried’s main lawyer, Mark Cohen, shared that “if there’s a defense case, it’ll be one week or less.” It was not clarified whether Bankman-Fried will testify during that time.

Sam Bankman-Fried used $1.2 billion of customer money to buy out Binance CEO Changpeng Zhao, witness says. Will CZ pay it back?


Ben Weiss
Thu, October 19, 2023

When the government called Peter Easton, an accounting professor at the University of Notre Dame, to the witness stand on Wednesday, his testimony was unsurprising: Sam Bankman-Fried, the former CEO of the now-bankrupt crypto exchange FTX, took customer funds for years.

To buttress his conclusions, the accounting professor pointed to examples of when Bankman-Fried, now on trial for fraud, deployed customers’ cash and crypto: venture investments, political donations, and a $2.2 billion buyback of equity in FTX from Changpeng Zhao, CEO of rival crypto exchange Binance. And $1.2 billion of that $2.2 billion—denominated in the cryptocurrencies BUSD, BNB, and FTT—specifically came from customers, Easton said.

Representatives for Binance did not immediately respond to a request for comment from Fortune about Easton’s testimony and whether Zhao will be asked to return the funds. A spokesperson for the FTX estate declined to comment.

The Binance CEO has previously brushed off concerns over receiving that money from Bankman-Fried. “I think we’ll leave that to the lawyers. I think our legal team is perfectly capable of handling it,” he said in response to whether he was prepared to send that money back to the FTX estate.

But now that a witness for the government has explicitly said that over half of the more than $2 billion Zhao got from Bankman-Fried came directly from customers, how, if at all, have Binance’s legal obligations changed?

‘Implications later’

Mark Pfeiffer, a bankruptcy lawyer at Buchanan Ingersoll & Rooney, told Fortune that both U.S. bankruptcy law as well as state civil law provides the FTX estate multiple ways to “claw back” funds from Binance.

Federal law allows the FTX estate to get back money either previously sent out in an effort to defraud its creditors or if a deal occurred while FTX was insolvent and lawyers can prove it was a bad business decision. The deal has to have occurred within two years of an entity declaring bankruptcy, which happens to be the case with Bankman-Fried’s share buyback. “If you’re purchasing your stock at the time you’re insolvent, that’s always going to be a problem,” said Edward Morrison, a professor at Columbia Law School who specializes in bankruptcy law.

And civil law across most U.S. states is even simpler. “If I borrow your car and sell it to a third party, you, as the owner of that car, can sue the third party to claw it back,” Pfeiffer said.

Morrison, the Columbia professor, added that even if the FTX estate could persuade a judge to compel Binance to return at least the $1.2 billion, actually getting that money back is another issue. (He also added that bankruptcy law with respect to financial markets can get complicated, so Binance may have obscure legal defenses.)

Assets for the world’s largest crypto exchange don’t primarily reside within the U.S., and where the majority of Binance’s capital resides is an open question. “It’s true that the bankruptcy court may have limited power to enforce the judgment abroad,” Morrison said. “On the other hand, Binance presumably may need access to U.S. markets and U.S. courts in the future. And so bad behavior now can have implications later.”

This story was originally featured on Fortune.com

SBF asked FTX general counsel to create ‘legal justification’ for using billions in customer funds amid collapse

Jacquelyn Melinek
Updated Thu, October 19, 2023 

Image Credits: Michael M. Santiago / Getty Images

Can Sun, former FTX general counsel, took the stand on Thursday to testify on behalf of the prosecution’s case against Sam Bankman-Fried. Sun has a non-prosecution agreement in exchange for his cooperation.

The Yale law school grad joined FTX at the end of August 2021 and stayed until early November 2022 shortly after the crypto exchange collapsed. Before going in-house at the exchange, Sun worked for Fenwick & West, where he also advised FTX as outside counsel.

Once in-house, Sun’s role consisted of various legal functions, like obtaining regulatory licenses for the exchange and dealing with how FTX treated customer assets — or so he thought, he testified. Bankman-Fried had allegedly told him that FTX customer deposits were unequivocally “safeguarded, segregated and protected.”

When asked by prosecutors whether he ever approved FTX’s use of customer assets, Sun replied, “no, absolutely not” and said he was told the customer funds were held in a separate account that didn’t include FTX’s own proprietary funds, and he was not aware Alameda was getting FTX customer deposits.

“In all my conversations with Sam, it was always said that customer assets were “safeguarded, segregated and protected,” Sun said.

During Sun’s testimony, prosecutors highlighted the terms of service, which did not permit the exchange to touch customer funds. (Sun testified he had worked on the TOS but that it was largely finished by the time he joined.) One provision stated that “none of the digital assets in your accounts are the property of, or shall or may be loaned to FTX trading”; there was another that said customers “control the digital assets held in your account.”

Bankman-Fried wore a gray suit that bunched up on his shoulders and neck as he sat. He spent most of the day typing on his laptop or passing notes to his legal team. His parents sat in the same bench they’ve occupied since the start of trial.

When the terms of service were brought up in evidence, Bankman-Fried’s mother, Barbara Fried, looked up the ceiling, took notes, looked at the monitor and then back at her son on rotation. She also put her head in her hands and pressed her thumb to her temple, rubbed her eyes a few times, and looked back at Bankman-Fried during the prosecution’s testimony.

Sun learned that Alameda was not exempt from auto liquidation, which allowed the trading firm to go “infinitely negative,” on FTX’s platform in August or September 2022. “I was shocked … [it] went against everything we told regulators and users.” He added that he was told that Alameda’s liquidation exemption had never been triggered — which other witnesses like FTX co-founder Gary Wang have testified to not be true. Regardless, Sun asked for it to be removed, and he was told that Bankman-Fried and Nishad Singh, head of FTX engineering, said “no.”

Instead, Sun testified that he got the related parties to agree that it would be made clear to users and regulators that the Alameda’s privileges would be changed to delayed liquid mechanisms. It was approved by FTX’s legal team, but it never made it through the business side at the time of FTX’s collapse in November, Sun said.

During cross-examination, Sun said he thought about resigning over the situation, but he didn’t know at the time that it was the same mechanism Alameda used to take FTX funds.

Documenting loans

During Sun’s time at FTX, he was also responsible for documenting loans for FTX. There were over 30 loans he documented where Alameda loaned money to Bankman-Fried, Wang and Singh. He testified that he thought Alameda would make personal loans to the three individuals and inject funds into FTX for capital. “I had no idea customer funds were being used,” Sun said.

Sun created a spreadsheet that kept track of the more than 30 loans made to Bankman-Fried, Wang and Singh; the loans totaled over $2.17 billion. “If they were not on my spreadsheet, I was not aware of them,” Sun said.

Sun also received a personal loan of $2.3 million as part of a “management incentive program” to get him to move to the Bahamas from Hong Kong, shortly after he joined the company. He also got a bonus of $3.5 million in January 2022, about five months after joining FTX.

November talks with Apollo

On November 7, 2022, four days before FTX filed for bankruptcy, Sun joined a call with Apollo Global Management, Ramnik Arora of FTX Ventures and others in an attempt to raise capital from the firm and “help solve the liquidity problem that FTX had for customer withdrawals.”

After an initial call, Apollo asked for FTX’s financial statements and Sun and related parties shared them. “I was shocked because it showed FTX was short $7 billion.”

Sun said he asked questions about how it was calculated — he said the spreadsheet was messy — and he “did not get straight responses,” but instead just “vague answers” from Singh and Bankman-Fried. Looking back at that moment, Sun recalls Bankman-Fried was there “typing away” on his laptop, barely speaking. While Singh was “pale and gray” and looked like his “soul [was] plucked away from him,” Sun said.

After sharing the numbers with Apollo, Bankman-Fried told Sun that the firm asked for legal justification for missing funds and allegedly asked Sun to come up with one. Sun proposed three “theoretical arguments,” but “there were no legal justifications for funds missing.”

Sun testified he went on a walk that night with Bankman-Fried around an apartment at the luxury resort, The Albany, where many FTX employees lived. During that conversation, Sun told Bankman-Fried that none of the theoretical arguments would justify why the FTX funds were missing; Sun testified that SBF replied “yup, yup” and “got it.”

During a conversation with Singh later that night, Sun said the former engineer disclosed to him that Alameda’s “no liquidation” method was how the firm withdrew the billions of dollars in customer deposits.

Sun resigned from the company the next day.

Apollo Balked at FTX Rescue After Questioning Missing Funds

Allyson Versprille and Yueqi Yang
Thu, October 19, 2023




(Bloomberg) -- Apollo Global Management balked at a last-minute rescue of FTX after learning billions of dollars in customer funds were unaccounted for and the exchange wasn’t able to provide legal justifications for the shortfall, a former top lawyer at Sam Bankman-Fried’s crypto empire testified.

Can Sun told federal court in New York that despite entreaties from Bankman-Fried, he couldn’t find anything that would explain why the missing customer money had been channeled to Alameda Research, an affiliated hedge fund. He’d been asked to come up with a possible justification after a call with Apollo occurring just days before both FTX and Alameda filed for bankruptcy.

He broke the news to Bankman-Fried, FTX’s co-founder, that there was no justification while they took a walk a bit later.

“I was actually expecting a bigger response but it was very muted,” Sun, who joined FTX as a general counsel in August 2021, said at Bankman-Fried’s fraud trial. “He was not surprised at all.”

Apollo quickly pulled out of talks to finance FTX after learning of the exchange’s financial situation. The private equity firm declined to comment on Sun’s testimony.

Days later, the crypto exchange imploded.

Sun revealed during his testimony that he had a non-prosecution agreement with the government. He said he didn’t do anything wrong, but was involved in some transactions that in hindsight could have involved misappropriated customer funds.

The 37-year-old is the latest company insider to testify at the trial, bolstering prosecutors’ allegations that Bankman-Fried oversaw a massive fraud.

Bankman-Fried is facing decades in prison on charges that he directed the transfer of FTX customer money into Alameda for risky investments, political donations and expensive real estate before both companies spiraled into bankruptcy last year. Sun said Thursday that until the company’s final days he was completely in the dark about the misuse of customer funds.

Binance, Apollo

FTX was scrambling to raise capital in the days prior to its bankruptcy so that it could meet an uptick in user withdrawal requests — even asking a rival exchange, Binance Holdings Ltd. for help, a play that ultimately didn’t pan out.

But according to Sun, the firm had also turned to Apollo.

Sun testified that he and another FTX executive in November 2022 got on a call with the firm, which asked for financial statements before making a decision. Sun said he later got a spreadsheet to provide to Apollo from either Bankman-Fried or someone else at FTX. The spreadsheet showed that there was a multi-billion dollar shortfall in customer funds.

Failing to safeguard users’ money went against everything FTX had been telling its customers and regulators about the platform’s policies, Sun said.

Some customers, including hedge fund Sculptor Capital Management, had even received false promises that their assets would be safe in the event of an insolvency, he testified. Sculptor didn’t return a request for comment.

Alameda Backdoor

Sun, who had previously worked at the law firm Fenwick & West, also described interactions he had with Nishad Singh, FTX’s former director of engineering, around that time the company collapsed. His “entire face was pale, gray,” Sun recalled.

Singh also testified against the crypto mogul earlier in the trial as did former Alameda Chief Executive Officer Caroline Ellison and Gary Wang, FTX co-founder and former chief technology officer. All three have pleaded guilty to criminal charges and are cooperating with prosecutors in hopes of receiving lighter sentences.

Sun said that in August or September 2022 he had learned that Alameda was exempt from a mechanism on the FTX exchange that automatically liquidated customer accounts if they didn’t have enough collateral to cover trading positions. The backstop applied to everyone else that used the platform.

“I was shocked,” he said Thursday. “It went against everything we have told regulators and our users about the relationship between FTX and Alameda.”

Sun said he pushed for the special treatment to be revoked, but was told Bankman-Fried and Singh were opposed. Eventually some tweaks were agreed to: Alameda would be subject to a delayed liquidation rather than a total exemption; other large customers would get access to the same benefit; and regulators and users would be made aware of previous misrepresentations.

FTX filed for bankruptcy before any of those changes saw the light of day.

Sun said that Singh told him in November that that same mechanism exempting Alameda from liquidation also allowed the firm to draw on customer funds.

“In all my conversations with Sam it has always been represented to me that customer assets were protected and segregated,” Sun testified.

©2023 Bloomberg L.P.

So How Much Did Sam Bankman-Fried Pay Steph Curry and Larry David? We Found Out!

Nitish Pahwa
Wed, October 18, 2023 

Photo illustration by Slate. Photos by Alexander Grey/Unsplash, Joe Raedle/Getty Images, Angela Weiss, Arun Sankar/AFP via Getty Images, Drew Angerer/Getty Images, Ronald Martinez/Getty Images, Stefani Reynolds/AFP via Getty Images, Michael Kovac/Getty Images for Panerai,Win McNamee/Getty Images, and Joe Raedle/Getty Images.


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.

A big part of the story of FTX is that it rode an overall wave of enthusiasm for cryptocurrency in 2020 and 2021 to become one of the biggest players in the industry. But it also spent heavily on celebrity endorsements and campaign donations in order to attract more customers and gain political allies. The federal government alleges that the crypto exchange and its sister hedge fund, Alameda Research, accomplished this primarily by using money that customers had trusted that FTX would handle responsibly. On Monday, the prosecution in The United States v. Samuel Bankman-Fried offered a stunning, if incomplete, look into the FTX marketing and influence machines. The company and its execs spent fortunes that didn’t really belong to them—on athletes and comedians, on Republicans and Democrats—all to boost the crypto exchange.

Following testimony from a customer who lost money stored on FTX, the government brought in one of its key witnesses: Nishad Singh, a co-founder and the former director of engineering of FTX. Like earlier witnesses Gary Wang and Caroline Ellison, Singh was a core member of SBF’s inner circle. SBF watchers have long kept a close eye on Singh, not least because he was a resident of SBF’s infamous Bahamas penthouse, and because he’d pleaded guilty in February to charges of wire fraud, conspiracies to commit commodities and securities fraud, money laundering, and—perhaps most distinctively—campaign finance violations. He also, late in the game, got a close view of how much Sam Bankman-Fried’s companies were spending on celebrity endorsers.


Singh and Bankman-Fried go way back. They both attended the Bay Area’s prestigious Crystal Springs Uplands School, though Singh only became close with the defendant after befriending his younger sibling, Gabriel Bankman-Fried (more on him soon). Thanks to that connection, Singh went to work at Alameda Research and helped to code the nascent firm’s trading systems. Two years later, Singh would create the architecture for FTX’s customer trading platforms as Wang and SBF got the new business off the ground. Even though all three played instrumental roles in launching FTX to the stratosphere, as Singh related on the stand, their roles were never equal: SBF never coded himself, but he gave orders to Wang regarding FTX’s coding changes and functions; in turn, Wang “supervised me on every technical situation,” Singh said. In 2020, while FTX ballooned, Singh began managing other software engineers and building a dedicated team, yet his position among FTX’s founding fathers was unusual. For one, after leaving Alameda in 2019 to get FTX going, he still technically worked for Alameda until “sometime in early or mid-2020,” after which he formally ceded his position at the hedge fund. Singh also had a smaller stake in FTX than SBF and Wang, holding only 6 percent of company equity as compared with the latter’s 16 percent (though even this single-digit percentage technically made him a “billionaire”). And Singh was roped into SBF tasks that Wang didn’t seem to have much involvement in, such as the CEO’s desired startup investments as well as his transmission of political donations and endorsements.

Because of Singh’s work—both voluntary and somewhat involuntary, he’d explain—in those spheres, his courtroom interactions with the government were accompanied by a gallery of spreadsheets, text documents, and social media screenshots that conveyed the mind-boggling details of SBF’s high-power relationships. This was the week that the government moved beyond broadcasting FTX commercials with Tom Brady and Larry David, beyond displaying photos of Bankman-Fried hanging out with Tony Blair and Bill Clinton, and actually began laying out the particulars of those encounters. Which, as the assistant U.S. attorneys are arguing, were an important step in SBF’s scheme to get users to trust that he wouldn’t do the things he allegedly ended up doing—i.e., collecting billions of dollars of customers’ deposits without their express consent.

The jumping-off point was the investment firm K5 Global, an entity you may recall from the recordings of Caroline Ellison’s confessional all-hands meeting with Alameda staff in the midst of company collapse. In that context, K5 Global was mentioned as one of the many companies that received hefty payments from Alameda using FTX customer funds—in this case, about $300 million that was wired over in March 2022. You may also remember K5 making public waves this summer, when the bankruptcy experts overseeing the recovery of FTX and Alameda’s lost billions sued K5 and its leaders, Michael Kives and Bryan Baum, to claw back $700 million. (Two additional $200 million disbursements were sent in May and September 2022 at Bankman-Fried’s behest, as Fortune Crypto’s Ben Weiss documented in June; Kives and Baum pocketed a nice $125 million each.)

All of that is less important, though, than what K5 and its execs represented to SBF. As was revealed in a document dated Feb. 15, 2022, SBF really wanted to cultivate a relationship with Kives in particular because “he is, probably, the most connected person I’ve ever met.” How did he know this? Because just days beforehand, SBF had twice hung out with Kives—for a dinner at his Los Angeles residence, and at the dang Super Bowl. (Yes, the same Super Bowl during which those lovely FTX ads aired on TV, setting up their celebrity sponsors for future lawsuits.) At the time, Bankman-Fried wrote, Kives was vacationing with Katy Perry, Orlando Bloom, and Kate Hudson; they’d been guests at the L.A. dinner along with Doug Emhoff, Leonardo DiCaprio, Jeff Bezos, Ted Sarandos, Kendall and Kris Jenner, and Corey Gamble. (“I honestly could not tell you what [the Jenners] do,” said Singh, inviting some laughs from the courtroom.) SBF likewise mentioned that Hillary and Bill Clinton had spoken at Kives’ wedding, and included a link to a Hollywood Reporter dispatch from the K5 head’s 2018 marriage ceremony. Curiously, Bankman-Fried did not mention that Kives entered the Clintons’ circle at Stanford University (yes, that’s where SBF’s parents taught), after covering Chelsea’s 2001 graduation from the school for the student paper. From there, Kives landed a gig working with Huma Abedin for Sen. Hillary Clinton, after which he spent 15 years rising through the ranks at Creative Artists Agency and representing everyone from Perry to Mikhail Gorbachev. He then left that career to start K5 Global in 2018; startup funder Bryan Baum joined the company in 2020.

So yeah, Kives was quite connected, and Bankman-Fried noted that “he’s been very friendly to us, and already started to create valuable relationships,” linking to an Instagram post from Katy Perry captioned, “im quitting music and becoming an intern for @ftx_official ok 👋🏻.” (That same post was linked later in the doc as an example of a “potential unpaid partnership with celebrities.”) Per the bankruptcy suit, SBF first corresponded with Kives on Nov. 16, 2021, when the latter introduced the crypto titan to the pop artist Sia, soon after which “Kives began inviting Bankman-Fried to dinner parties with Wall Street titans, Academy Award–winning actors, and NBA stars.” All that led to SBF being included in Kives’ Super Bowl posse, a photo from which fellow attendee Katy Perry later posted to Instagram—and which came up as evidence in the courtroom, where the prosecution asked Singh to identify the people in the football stands. Though he didn’t go through all eight people in the group, Singh did pick out the key players: Perry, Bloom, Kives, and SBF.

Screenshot from Instagram

Essentially, SBF wanted to make the case for investing in and establishing a tight relationship with K5 Global because FTX could benefit from Kives’ “essentially infinite connections” to get “potential endorsement deals” and “political connections,” among other things. (“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,” SBF had also written.) In turn, K5 wanted FTX to guide the firm through the crypto industry, to “work with them on Democratic politics,” and potentially “to invest in them or some stuff, idk.” Considering the eventual deal pledged up to $3 billion for K5, that’s gotta be the priciest “idk” I’ve ever seen—and yes, Singh was asked to explain the meaning of “idk” on the stand.

With friends like Kives, SBF was primed to keep making the types of lofty payments and partnerships that were detailed in a separate piece of evidence: a “Master List” of FTX sponsorships from 2021, which included several entries extending beyond the already well-known (and now nullified) deals with the Miami Heat, FTX Arena, Kevin O’Leary, and the esports team TSM. According to the document, FTX agreed to sponsor the League of Legends Championship Series for $99.8 million over a span of seven years. It had promised $148 million to Major League Baseball for a five-and-a-half-year deal that would include both “sponsorship” and “cryptocurrency integration.” It had three-year contracts with Steph Curry where it would pay the basketball star $28.5 million, along with another $1.5 million to the charity bearing his name. It agreed to pay $5 million to Barstool for some football-related branding. Japanese baseball wonder Shohei Ohtani would get $11 million for five years of shilling. To Coachella, $25 million over three years. For the International Cricket Council, $19.5 million over two years. Hey, there’s Larry David, who got $10 million! And there’s all-time chess great Magnus Carlsen, who netted $3.25 million for sponsorships during international chess tourneys like the FTX Crypto Cup. (As it happens, I asked Carlsen about that sponsorship deal before FTX fell.)

Singh, for his part, did not feel good about this marketing. “I mostly learned about them after the fact and certainly learned about the amounts after the fact,” he told the court, explaining that he saw the master list for the first time in late 2022 when FTX’s head of finance, Jayesh Peswani, showed him the eyebrow-raising figures as part of an inquiry into FTX’s user growth. Singh also expressed doubts about K5 when the prospect of working with Kives was raised earlier in the year. “I was worried that partnering with K5 and giving them this much money would be really toxic to FTX and Alameda culture,” he related to the jury. “Every day I was actively trying to espouse—I felt we all were—that politicking and social climbing was not going to be rewarded, and here we were rewarding people in exorbitant amounts.” (Although, as the defense pointed out Tuesday, Singh clearly wasn’t so concerned as to turn down a bedroom in the $35 million Bahamian penthouse.) From this answer it would appear that Singh, at least privately, was more devoted to the “earn-to-give” altruism that supposedly guided Bankman-Fried than Bankman-Fried himself was. Singh also told the court that he’d relayed his concerns about K5 to SBF after the CEO sent him and Gary Wang “a term sheet of Google Docs” that “laid out hundreds of millions of dollars of bonuses to Michael Kives and Bryan Baum, and proposed up to a billion dollars, long term, of capital to give to” K5 Global. He’d also asked SBF if the company could “go back” on the K5 arrangement, only for him to respond that it was “basically done.”

Now, the political stuff.

Singh made political donations allegedly on behalf of Sam Bankman-Fried, according to some of the juiciest parts of Monday’s testimony. SBF is not facing campaign finance charges in this trial; thanks to various legal knots in his extradition to the United States from the Bahamas, he’ll be contesting those allegations in March. Judge Lewis A. Kaplan made that fact clear early in Singh’s appearance, emerging after a sidebar with attorneys to “remind [the jury] that, as I said earlier in the trial, the defendant is not charged with any criminal violation of campaign finance laws in this case. This evidence is coming in for other purposes, not least of which would be the fact that this witness has pleaded guilty to such a violation.” Still, this stuff was fascinating.

Another government exhibit laid out an elaborate spreadsheet that tracked political donations and charitable gifts made from SBF, FTX’s U.S. branch, Singh, Ellison, and “RDS,” whom we can safely assume to be FTX exec Ryan D. Salame. Throughout mid-to-late 2021—notably, before he first linked up with Kives—SBF donated about $5,800 each to six congressional Democrats: Sens. Alex Padilla, Joe Manchin, Patty Murray, and John Hickenlooper (with another $5k for his Hickenlooper Leadership PAC) along with Reps. Peter Aguilar and Hakeem Jeffries. Other Dems received varying amounts: $2,900 each for Reps. Julia Brownley, Raul Ruiz, Tony Cardenas, and Jim Himes; $5,700 for New Jersey Sen. Cory Booker, who later praised SBF’s “Afro”; and $20,800 for New Hampshire Sen. Maggie Hassan. There were a few Republicans in the mix, too, with $5,800 each going to Sens. Susan Collins, Mitt Romney, Ben Sasse, Bill Cassidy, Lisa Murkowski, and Richard Burr.

The donations really rocketed up in 2022, which my colleagues Ben Mathis-Lilley and Alexander Sammon have chronicled in detail, so let me just pull out this interesting data point: In August, SBF donated a whopping $10 million to One Nation, the dark-money nonprofit aligned with Mitch McConnell. The only other entities that received more in total donations were orgs primarily run and managed by either Sam or his brother, Gabe Bankman-Fried, including Guarding Against Pandemics, Protect Our Future, and Building a Stronger Future. (Huh!) Similarly, all of FTX.US’s donations to political organizations went to groups that threw cash at major Republicans such as Kevin McCarthy (Congressional Leadership PAC), Patrick McHenry (American Patriots PAC), Joni Ernst (the Bastion Institute), and John Boozman (Heartland Resurgence Fund). One of those Republicans, incidentally, included Salame’s romantic partner, the failed Long Island congressional candidate Michelle Bond, who got a nice $200,000 from the GMI PAC (to which SBF donated $2 million in January 2022, per the donations spreadsheet).

As for the donations in Singh’s name? Turns out, Singh testified, “There were political donations made in my name … through my bank account, funds deposited straight from Alameda,” which consisted of FTX customer funds and/or bits of Singh’s own FTX-linked money (salary, personal FTX account). His personal “involvement” in ordering those donations was “very, very minimal,” Singh mentioned, elaborating that this process churned through a Signal group chat formed in March 2022 called “Donations Processing.” This forum included, among others, SBF, Singh, Ellison, Gabe Bankman-Fried, and a couple of the younger Bankman-Fried’s associates: Michael Sadowsky, who’d worked with Gabe at Civis Analytics and went on to kickstart the aforementioned Protect Our Future PAC, as well as Keenan Lantz, who became an executive for Gabe’s Guarding Against Pandemics nonprofit. In that group chat, Singh expounded, any of these folks “would request that a donation be made in my name.” Then “Ryan Salame, who had access to my bank account, would transfer money out of my bank account for that purpose.”

An October screenshot from “Donations Processing,” published to the jury, showed Lantz specifically asking Salame if $20,000 could be sent in Singh’s name to the Delaware Democratic Party, and Salame informing Singh that the donation was “queued up” so that Singh could digitally sign off on it. (Singh told the prosecution he was “not at all” involved with the decision to splurge on Delaware’s Dems.) Another one requested in Singh’s name encompassed $107,000 to the New York State Democratic Committee, although this one didn’t seem so urgent, per a message from Salame: “if [Gov. Kathy Hochul] does loose we have an A+ relationship with zledin haha,” referring to GOP gubernatorial candidate Lee Zeldin. Singh’s “donations” as laid out in the spreadsheet consisted not just of “political” contributions (whose recipients included Gabe Bankman-Fried himself as well as Mind the Gap, the PAC started by his mother), but also “gifts” to myriad figures and organizations in the effective altruism and longtermism movements, like the Future of Life Institute and the A.I. startup Anthropic. To tangle it all into one incestuous knot: A “political gift” of $19,144 was granted under Singh’s name to effective altruist writer Avital Balwit—who herself appears to have been a member of the “Donations Processing” group. (She is currently a communications lead for Anthropic.)

Nishad Singh, sending the blue messages, asks Michael Sadowsky about the political donations being made under his name on July 5, 2022. In the response texts, Sadowsky explains that the money is meant to support candidate Becca Balint. Signal

Sadowsky, who sent the gray messages, explains to Singh that this donation to the LGBTQ+ Victory Fund is being used for “transactional purposes”—i.e., “to help BB win, and to help get on her good side.” He also explains why Singh’s name is being used for money being funneled toward “woke shit.” Signal

What about when Singh did weigh in on donation recommendations? A separate Signal chat showcased to the jury displayed Singh corresponding with Sadowsky on July 5, 2022, over a potential donation in Singh’s name to the LGBTQ+ Victory Fund—the same chat where Sadowsky infamously referred to Singh as “the center left face of our spending,” meaning that Singh would appear to be “giving to a lot of woke shit. For transactional purposes.” Singh testified, “On its face a donation may appear to be for one purpose, say, going to a PAC called the LGBTQ+ Victory Fund. But, in reality, the true purpose is something else, and it may be the funds end up affecting some outcome that seems unrelated to LGBTQ efforts.” The chat indeed seemed to provide an example, with the fund donation appearing to be “a passthrough to run ads in favor of” Becca Balint, a Democrat who was elected in the midterms to represent Vermont’s at-large congressional district. “This is both to help [Balint] win, and to get on her good side,” Sadowsky expounded—which would be advantageous if she, say, eventually became one of Vermont’s senators, the consultant added.

Anyway, “for the donations that were made in your name in the fall of 2022 that were funded with wires from Alameda, from where did you understand the money was coming from?” Assistant U.S. Attorney Nicolas Roos asked Nishad Singh. Quoth the witness: “Customers.

(Crypto) Empire State of Mind: Sam Bankman-Fried allegedly met with Bill Clinton and Kathy Hochul in NYC 2 months before FTX collapsed

Ben Weiss
Wed, October 18, 2023

Jeenah Moon—Bloomberg/Getty Images

In early September 2022, Sam Bankman-Fried, former CEO of FTX, had an emotional conversation with FTX lieutenant Nishad Singh about how his now-shuttered crypto hedge fund had siphoned approximately $13 billion from his now-bankrupt crypto exchange. “I was blindsided and horrified,” Singh, former head of engineering at FTX, testified on Monday.

But just weeks after his conversation with Singh, and less than two months before FTX collapsed, Bankman-Fried, according to court documents, was ping-ponging through New York City as he hobnobbed with some of the world’s most influential and wealthy personalities, including former President Bill Clinton, New York Gov. Kathy Hochul, and Yasir Al-Rumayyan, chairperson of oil behemoth Saudi Aramco.

Here’s how the onetime crypto mogul—now on trial accused of defrauding customers, investors, and lenders—spent a week in the Big Apple, just before his empire spectacularly collapsed.
Politicians…

Emails and calendar invites exhibited at court on Tuesday—primarily to prove that New York prosecutors have the jurisdiction to bring charges against the crypto founder—show that Bankman-Fried had the politically powerful at his beck and call.

After an alleged meeting with NYC Mayor Eric Adams in March 2022 at Osteria La Baia, which offers customers “a journey to Italy without leaving Manhattan,” Bankman-Fried ventured back to Manhattan on Sept. 16 to meet with Hochul from 5 p.m. to 5:30 p.m. at (most likely) the Capital Grille, whose menu features filet mignon, “a timeless entrée prepared to your liking.”

Cellular phone data confirmed that the former FTX CEO was indeed in Manhattan during scheduled meetings with both New York politicians, according to an FBI agent who did a forensic analysis of Bankman-Fried’s phone. However, a spokesperson for Hochul did not immediately respond to a request for comment from Fortune about where she met with Bankman-Fried and what, if any, entrée she ordered. And neither did the press team for Adams immediately respond to whether their meetup indeed mirrored a “journey to Italy.”

Then, on Sept. 20, the former FTX CEO was scheduled to meet with Bill Clinton, once the leader of the free world, from 4 p.m. to 5 p.m. at the New York Hilton Midtown. Cell data, again, confirmed that he was in the vicinity. And yet again, media representatives at the Clinton Foundation did not immediately respond to a request for comment from Fortune on the details of said encounter.
…and moneymen

Bankman-Fried not only had a taste for political power but for money, and court exhibits illustrate that he spent part of his visit to New York looking to drum up capital, including a late-night dinner at The Pierre, a five-star hotel that overlooks Central Park.

It was there, according to a calendar invite and subsequent cell data, that Bankman-Fried dined with Yasir Al-Rumayyan, the chair of Saudi Aramco and governor of Saudi Arabia’s sovereign wealth fund. (Media representatives for Saudi Aramco did not immediately respond to a request for comment.)

And the next day, emails indicate that Bankman-Fried met with even more moneymen, including Khalid A. Al-Falih, Saudi Arabia’s minister of investment, as well as Alfred Chuang, founder and general partner of Race Capital, a venture outfit.

According to testimony from three lieutenants-turned-government-witnesses, Bankman-Fried was trying to raise money to fill what eventually would be exposed as an $8 billion hole in FTX finances after the former CEO allegedly directed staff members to use customer funds.

Saudi money never materialized, FTX collapsed, Bankman-Fried’s crypto empire crumbled with it, and he eventually ended up indicted by the Justice Department.

Now, Bankman-Fried is back in New York for what’s been called the “trial of the decade,” but, instead of dinners with the wealthy and powerful, he’s staring at potentially decades in prison and eating more PBJs.

This story was originally featured on Fortune.com

FTX top lieutenant Nishad Singh bought US$3.7 million house after learning about the exchange’s misuse of customer funds


Kari McMahon
Tue, October 17, 2023 


FTX’s director of engineering Nishad Singh testified that he was “late in the game” in finding out about the exchange’s misuse of customer funds during the criminal trial of FTX founder and former CEO Sam Bankman-Fried. However, that didn’t stop him from purchasing a US$3.7 million vacation home.

Singh purchased the 10-acre estate on Orcas Island in Washington State in October last year. That was weeks after he claims he first learned about the US$13 billion in customer funds missing from the exchange and just weeks before the collapse of the exchange.

The purchase was made possible thanks to a loan from FTX, which was wired to him in mid-to-late October 2022, Bloomberg reported. Yesterday, Singh testified that after learning about the misuse of customer funds in September he had urged Bankman-Fried to cut his spending, particularly on endorsement deals. He called Bankman-Fried’s spending “excessive” and “flashy.”

“I was upset at the endorsement deals, it was a billion dollars. I said this is crazy, cut this,” Singh told the jury.

The details of Singh’s home purchase were revealed in the defense’s cross examination, according to a live blog of the trial from court reporting organization Inner City Press. Singh is a key witness for the government and has been cooperating with them after pleading guilty to criminal charges including fraud and political campaign violations in relation to the collapse of FTX. Singh forfeited the home as part of the plea agreement.

So far, the defense have struggled to poke holes in the prosecution’s case against Bankman-Fried but managed to see some success with Singh whose memory remained hazy throughout questioning. He struggled to recall details on a range of matters, from what was said in court yesterday, to a meeting with prosecutors that took place in January.

“Did you expect FTX to last as a business?” asked Mark Cohen, Bankman-Fried’s lawyer. “I don’t recall what I expected,” Singh said.

After Singh’s cross-examination, the prosecution called FBI agent Richard Busick to the stand.

When asked about scheduling by the judge, the prosecution said they might run out of witnesses before the end of the day on Thursday. The court will take a recess for six days in which the prosecution expects to close on the Thursday that court returns.

“If we put on a case, a week and a half max,” said Cohen on the defense’s scheduling plans. The defense is still weighing up whether to have Bankman-Fried testify.