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.
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.
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.
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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