Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
A top FTX executive confronted Sam Bankman-Fried about billions in customer funds that had been diverted from the crypto exchange to allied trading firm Alameda Research weeks before the companies collapsed, according to testimony in court on Monday.
Nishad Singh, the former head of engineering at FTX, offered his testimony in the criminal fraud trial of Bankman-Fried, who was charged after his exchange failed with a gaping hole in its customer accounts last November.
The jury saw a picture of the luxurious terrace at the Bahamas penthouse that Singh shared with Bankman-Fried, as he described a tense conversation in September 2022 after he learned Alameda had borrowed billions of dollars from FTX customer funds that it could not pay back.
Singh said he paced back and forth during the more than one hour conversation, questioning Bankman-Fried, who was reclining on a chair.
“We are a little short on deliverables,” Singh recalled Bankman-Fried saying, referring to the gap between the $5bn in liquid assets they had on hand and the $13bn that Alameda owed to FTX. Bankman-Fried controlled both companies.
The testimony, from one of the key witnesses in Bankman-Fried’s fraud trial, suggested the FTX founder knew about the hole in customer funds long before the exchange collapsed. Singh said Bankman-Fried’s efforts to raise fresh funds from equity investors in the following months was a deliberate effort to plug the gap.
Singh has pleaded guilty to fraud and campaign finance violations and is co-operating with prosecutors in hopes of receiving a lighter sentence. Bankman-Fried has pleaded not guilty and maintains his innocence.
He told the court that earlier on the day of the scene at the penthouse, Bankman-Fried had circulated a memo in which he contemplated shutting down Alameda. In a group chat with his inner circle, the trading firm’s CEO Caroline Ellison said it would be impossible to wind down Alameda because it could not pay back what it owed to FTX.
Singh said: “I was really hoping that I misunderstood. And I called for a meeting immediately.”
Singh said he wanted to quit but Bankman-Fried convinced him that he should keep working in hopes of earning the money back for customers, and to avoid the failure of the exchange. Singh testified he was increasingly distressed and “suicidal” by the exchange’s final days.
Earlier on Monday, prosecutors used Singh’s time on the witness stand to introduce evidence that suggested Bankman-Fried had a high-flying lifestyle and spent wildly on celebrity connections, investments and luxury homes.
The jury was shown a photo of the FTX founder in a blue T-shirt emblazoned with a football posing awkwardly in a stadium with the singer Katy Perry, the actor Orlando Bloom and Michael Kives, a celebrity agent-turned-investor who secured an investment from Bankman-Fried.
Singh described a document he said the former crypto billionaire wrote that listed guests at a dinner he attended at Kives’ house including Hillary Clinton, Jeff Bezos, Leonardo DiCaprio and Kris and Kendall Jenner. Asked about the Jenners, Singh responded, “I honestly could not tell you what they do,” eliciting laughter in the courtroom.
Singh walked the jury through a spreadsheet listing sponsorship deals FTX had agreed, including the agreement to rename Miami’s professional basketball arena, others with athletes, actors and other sports leagues. The total commitments reached $1.13bn by March 2022, about eight months before the exchange collapsed.
The figure represented the total value of the deals over many years in the future, so not all the money was immediately spent.
Singh said he argued against the “excessive” spending that “reeked of . . . flashiness” but Bankman-Fried rebuked him in a “humiliating” public confrontation.
Over nearly a full day of testimony, Singh said Bankman-Fried had twice asked him to backdate transactions and FTX records to inflate the appearance of collateral Alameda had to cover its borrowings and to make the exchange’s revenues look larger.
The youngest member of the FTX inner circle, Singh joined Alameda in late 2017 from Facebook. A close friend of Bankman-Fried’s younger brother, with whom he had attended high school, Singh said he initially had “a lot of admiration and respect” for the elder Bankman-Fried but that “over time, that eroded . . . I became distrustful”.
Singh is scheduled to be cross-examined by Bankman-Fried’s defence lawyers on Tuesday.
