A former FTX executive and one-time billionaire testified against the cryptocurrency exchange’s founder, Sam Bankman-Fried, on Monday at his fraud trial, saying his admiration for him faded as he watched excessive spending on investments, property and celebrities precede a US$13 billion shortfall that left him feeling “blindsided and horrified”.
Nishad Singh, the former head of engineering at FTX, was part of Bankman-Fried’s trusted inner circle before the cryptocurrency empire collapsed last November. Bankman-Fried was arrested in The Bahamas a month later. Singh pleaded guilty to fraud charges and agreed to testify against the man he’d known since high school.
Singh told a Manhattan federal court jury that he “felt really betrayed” when he learned in a private conversation with Bankman-Fried on the balcony of their penthouse apartment in September 2022 that there was not sufficient assets to cover US$13 billion that had been spent largely on investments, properties, advertising and donations.
“I was blindsided and horrified,” he said, adding that it seemed five years of hard work was wasted and that “something that I thought was a beautiful source for good had turned out to be so evil.”
At another point, Singh said that the spending was “too large or didn’t make sense” and “it all reeked of excess and flashiness”.
Singh said he felt suicidal for several days about the crimes and the collapse of FTX.
Bankman-Fried, 31, has been jailed since August, when a judge concluded that he’d tried to influence potential trial witnesses and revoked the US$250 million personal recognizance bond that had permitted him to live with his parents in Palo Alto, California, after his December extradition from the Bahamas. He has pleaded not guilty to all charges.
As the trial entered its third week, Singh became the third former member of the inner circle to testify against Bankman-Fried after reaching a cooperation deal in a bid for leniency at sentencing.
Singh, who grew up in the San Francisco area, said he joined Alameda Research in 2017 – the year it was founded – and considered Bankman-Fried to be a “formidable character” who he’d always found intimidating.
“So I had a lot of admiration and respect for him,” he said. “Over time, a lot of that eroded. And I grew distrustful.”
Singh, who joined FTX after its 2019 founding, cited Bankman-Fried’s “excessive” spending as a catalyst for his change in attitude in 2022 as he watched Bankman-Fried’s opulent tendencies grow with the purchase of luxury properties and his billion dollar partnership with a California investment firm with connections to A-list celebrities like Amazon founder Jeff Bezos and the actor Leonardo DiCaprio.
He said US$205 million was spent to rename the Miami venue where the Miami Heat played its home games after FTX and another US$150 million was spent on a Major League Baseball endorsement, along with millions more on advertising featuring star quarterback Tom Brady and comedian Larry David.
Singh said he had little influence over Bankman-Fried. He cited the moment when Bankman-Fried purchased a luxury residence in the Bahamas that was “super ostentatious”.
Singh said he expressed his discomfort with the purchase, but Bankman-Fried said he’d pay “US$100 million for the drama to just go away, which I took as a sign that I should shut up and we should just move forward with this.”
Meanwhile, Judge Lewis A. Kaplan denied a request by Bankman-Fried lawyers that they be allowed to give their client medication to help with his confrontation.
“I can’t have lawyers coming in and giving drugs to people on trial because somebody says they need it. I just can’t do it,” Kaplan said.
Last week, Bankman-Fried’s ex-girlfriend also testified against him. Caroline Ellison spent much of her testimony on Tuesday and Wednesday walking the jury through how she repeatedly had to tap into the customer deposits at FTX to solve problems at the hedge fund or at the exchange. FTX deposits would be withdrawn to pay for new investments or political donations, or to hide steep losses on Alameda’s balance sheet, she testified. All of this was done at the direction of Bankman-Fried, she said.
Sam Bankman-Fried’s lawyer did little to dent the credibility of the government’s key witness in the former crypto mogul’s fraud trial Thursday, meandering through a cross-examination of Ellison that at times left even the judge puzzled and impatient.
The prosecution presented Ellison as a high-level insider who had, at Bankman-Fried’s direction, overseen the improper borrowing of funds from customers at the FTX crypto exchange run by Bankman-Fried. The funds often were used for investments at an affiliated trading firm, Alameda Research, that was headed by Ellison, Bankman-Fried’s one-time girlfriend.
Bankman-Fried’s lead defence attorney, Mark Cohen, was expected to try to shift the blame for the problems at Alameda to Ellison, following up on his opening statement in the trial where he said Bankman-Fried didn’t commit fraud and instead was trying to clean up a mess largely created by his lieutenants.
Cohen, however, seemed to struggle in his questioning of Ellison, failing to knock any holes in her testimony. He repeatedly changed topics, changed dates of discussion, often seemingly at random.
Ellison, 28, pleaded guilty to fraud charges in December, when Bankman-Fried was extradited to the United States from The Bahamas.