Nishad Singh, a former top executive at the once-successful crypto exchange FTX, testified Monday that his former boss, Sam Bankman-Fried, used customer funds on large and extravagant buying sprees that “reeked of excess.”
In Mr. Bankman-Fried’s fraud trial, which has become a referendum on the volatility and risk-taking of the cryptocurrency industry, Mr. Singh said he argued with the FTX founder over the hundreds of millions of dollars the company lavishly purchased real estate, investing in Start-ups and sign celebrities and sports stars such as Tom Brady, Steph Curry and Larry David.
“I felt embarrassed and ashamed,” Mr. Singh, 28, said of an investment FTX made in a company called K5, which had connections to many celebrities.
In a more than five-hour speech in a federal court in Manhattan, Mr. Singh said that he learned of an “enormous” $8 billion hole in FTX customer accounts about two months before the company collapsed last November and that he was one Much of the missing money financed Mr. Bankman-Fried’s wasteful spending and other expenses.
Mr Singh said he was “taken aback and appalled” by the deficit and felt no better after discussing the situation with Mr Bankman-Fried in two private meetings. “I felt really betrayed,” he said. “Five years of blood, sweat and tears for a force of good that had become so evil.” When FTX disbanded, he said, he even had suicidal thoughts.
Mr. Bankman-Fried, 31, was accused of orchestrating a scheme to funnel billions of dollars in FTX customer deposits into a trading firm he also owned, Alameda Research. Prosecutors allege he also used the money for political contributions, venture capital investments and real estate purchases.
Mr. Singh is one of three key executives in Mr. Bankman-Fried’s business empire who have pleaded guilty to fraud and, hoping for leniency in return, agreed to cooperate with prosecutors investigating FTX’s collapse. The others, Gary Wang and Caroline Ellison, testified last week that Mr. Bankman-Fried directed them to commit crimes that led to FTX’s implosion. A fourth top executive, Ryan Salame, also pleaded guilty but refused to cooperate with authorities.
Mr. Singh has known Mr. Bankman-Fried and his family since he was a teenager in the San Francisco Bay Area. He was a close friend of Mr. Bankman-Fried’s younger brother, Gabe, and had a relationship with his mother, Stanford law professor Barbara Fried.
At FTX, Mr. Singh was the technical lead. Prosecutors said Mr. Bankman-Fried directed Mr. Singh and Mr. Wang to develop computer code that allowed Alameda to borrow virtually unlimited amounts of money from FTX customers. Mr. Singh was also among Mr. Bankman-Fried’s inner circle of advisers, who lived with the founder in a penthouse in the Bahamas, where FTX was based.
The courtroom was more crowded than usual for Mr. Singh’s testimony. The federal prosecutors overseeing the case were joined by their boss Damian Williams, the U.S. attorney for the Southern District of New York, who sat in the front row for part of the morning. A few rows back sat Mr. Singh’s longtime girlfriend Claire Watanabe, a former FTX executive who also lived in the penthouse in the Bahamas.
On the stand, Mr. Singh, who said he was a billionaire during his time at FTX, testified that he conspired with Mr. Bankman-Fried, Ms. Ellison, Mr. Wang and Mr. Salame in committing the crimes he confessed to guilty. He said Mr. Bankman-Fried exercised great authority at FTX and Alameda and made most of the final business decisions for the companies.
“Sam always intimidated me,” Mr. Singh said. “Sam is an impressive character and I had a lot of respect for him. But over time it lessened.”
Mr. Bankman-Fried spent “excessive” amounts of Alameda’s funds, Mr. Singh said. When he withdrew from one case, Mr. Bankman-Fried became “visibly angry” and told Mr. Singh that “people like me who were sowing doubt in the company were the real problem here,” he testified. “It was pretty humbling.”
Mr. Singh also detailed Mr. Bankman-Fried’s interest in working with K5, a California investment company headed by a former Hollywood agent, Michael Kives, who had close ties to celebrities. Mr. Bankman-Fried raved about a K5-organized Super Bowl party he attended, Mr. Singh said, and the “impressive” guest list that included Jeff Bezos, Hillary Clinton, Leonardo DiCaprio, Kris Jenner and Kendall Jenner .
Mr. Bankman-Fried described it as “the most impressive group of people he had ever met in one place,” Mr. Singh testified.
But when Mr. Bankman-Fried told him the terms of a possible investment in K5, Mr. Singh said, he was shocked at the amount of money involved and expressed his concerns. The investment was hundreds of millions of dollars, Mr. Singh said.
“I was afraid that working with K5 and giving them so much money would be harmful to the FTX and Alameda culture,” he said.
A court evidence photograph of Nishad Singh. Credit…via the Office of the United States Attorney for the Southern District of New York
Mr. Singh also described Mr. Bankman-Fried’s extravagant spending on real estate in the Bahamas. The FTX founder’s colleagues disagreed about whether to close a penthouse at the Albany, a luxury apartment complex where many employees lived, Mr. Singh said. Although Mr. Bankman-Fried preferred the penthouse, which was the more expensive of two housing options, others disagreed, partly because it was “super flashy,” Mr. Singh said.
Mr. Bankman-Fried responded that he would pay $100 million “so that the drama would just go away,” Mr. Singh said, adding that he took that “as a clear sign that I should just keep my mouth shut and we in this.” things should get on with things.” .”
Mr. Singh was also part of a group of FTX executives, including Mr. Salame, who donated more than $90 million to political campaigns supporting Democrats and Republicans over several years. Mr. Singh said that many of the donations to political candidates came from loans he received from Alameda, which he later learned were funded with FTX customer funds.
Mr. Singh has pleaded guilty to participating in a “straw donor” scheme designed to circumvent campaign finance rules by concealing the source of donations. At the stand, Mr. Singh described how the system worked. He said he tended to be as “uninvolved as possible” in the fundraising process, following instructions in a text chat involving Mr. Bankman-Fried, Mr. Salame and others who were part of a political action committee run by Mr. Bankman Fried’s younger son, Brother Gabe, said.
Mr. Singh said he signed “a bunch of blank checks” from his personal account and gave them to Gabe Bankman-Fried so that the committee could make political donations to Democratic candidates on his behalf.
Judge Lewis A. Kaplan, who is presiding over the case, also commented Monday on Mr. Bankman-Fried’s dosage of the stimulant Adderall. Defense lawyers wrote to the judge on Sunday that their client was not receiving the amount prescribed to him. They argued that Mr. Bankman-Fried’s decision to testify in court may depend on whether he can receive the correct dose at the Metropolitan Detention Center in Brooklyn, where he is being held. Adderall is often used to treat ADHD
“The defense has growing concerns that due to the lack of access to Adderall, Mr. Bankman-Fried has been unable to concentrate at the level he normally would and that he will not be able to engage in meaningful activity “to participate in the defense’s presentation of the case,” his lawyers told the judge.
As the trial ended Monday, Judge Kaplan said he was not inclined to increase Mr. Bankman-Fried’s dosage.