MANHATTAN (CN) — Nishad Singh, the former director of engineering for the FTX cryptocurrency trading platform, testified on Monday that the company’s founder and public face, Sam Bankman-Fried, spent billions of dollars of company money on “ostentatious” real estate, starstruck endorsement deals with actors and athletes, and enormous venture capital investments.
Federal prosecutors have accused Bankman-Fried of fraudulently gambling in his own casino by directing his Alameda Research hedge fund to secretly commingle billions of dollars of customers’ deposit funds from his FTX exchange platform as loans for cryptocurrency futures trading on the FTX exchange he also co-founded and controlled.
Singh said that prior to FTX’s collapse into bankruptcy in November 2022, Bankman-Fried directed the company to spend large sums of money in 2021 and 2022 pursuing cultural and political powers in a bid to legitimize cryptocurrency and bolster FTX as the superlative exchange for cryptocurrency trading.
Singh, a close friend of Bankman-Fried’s younger brother, testified as a cooperating witness at trial as part of a plea agreement reached in February, in which he pleaded guilty to charges of wire fraud, commodities fraud, securities fraud, money laundering and campaign finance violations.
Singh, who started at both Alameda and FTX as a software engineer, said he pleaded guilty because he had “implicitly and explicitly greenlit transactions I knew must have been digging a little deeper, and therefore coming from customer funds.”
Singh testified he was eventually made aware of an enormous $8 billion “hole” in “funds that FTX should have had on hand to supply customer withdrawal.”
He testified that FTX’s spending around the time of the massive deficit in deposit funds included “real estate investments, VC investment, campaign donations and speculative bets and trading.”
“I’ve always been intimidated by Sam,” Singh said during direct testimony on Monday. “Sam is a formidable character, brilliant,” he said. “I had a lot of admiration for him … over time, a lot of that eroded.”
Singh was questioned by prosecutors about Bankman-Fried being lured into high-dollar celebrity endorsement deals through Michael Kives, a former aide to Hillary Clinton turned Hollywood agent and investor who now runs the K5 Global investment and incubation firm.
Singh testified that Bankman-Fried had hoped to use Kives’ and K5’s high-profile connections in entertainment and politics to “arrange a dinner with us, Elon, Obama, Rihanna, and Zuckerberg in a month.”
“He said these were all areas where increasing FTX’s influence would help propel its success,” Singh testified.
“Invest in them or some stuff, idk,” Bankman-Fried directed FTX staff in a note, using the abbreviation for "I don't know," where he described Kives’ firm as "something of a one-stop shop for relationships that we should utilize."
Singh said he was he was “pretty shocked” when he reviewed a term sheet for Alameda’s $1 billion purchase of K5's general partnership for cash and stock in 2022, which he said laid out hundreds of millions of bonuses to Kives and K5 cofounder Bryan Baum, and funding for K5’s venture capital projects.
Singh said he told Bankman-Fried he objected to the “social climbing and politicking” that would come with partnering with K5.
Prior to the bankruptcy and collapse of FTX, Bankman-Fried had been lauded as one of the most prominent evangelists of the philanthropic social philosophy known as “effective altruism,” which promotes prioritizing donations to projects that will have the largest impact on the most people.
Without expressly stating that Bankman-Fried's reckless spending would have been at odds with the guiding principles of "effective altruism," Singh said he viewed K5 Global as “value extractive,” and worried that partnering with them “would be really toxic to Alameda and FTX culture.”
Follow @jruss_jruss
