The third week of Sam Bankman-Fried‘s (SBF) trial started with more explosive revelations as former FTX engineering director Nishad Singh took the stand to testify against the former billionaire.

Following Singh’s confession and revelations, forensic accountants and FTX‘s former general counsel took the stand to give more insight into the misuse of customer funds between the exchange and its sister hedge fund, Alameda Research.

Day 1: The Confession

The trial’s third week kicked off with bombshell testimony from Nishad Singh, a member of FTX’s leadership and a close associate of SBF, who confessed to stealing customer funds for illegal political donations.

Singh disclosed that Alameda would send stolen customer funds to an account Singh held, which he then used to spend on political contributions. Singh also alleged that his accounts were usually used without his prior permission for these transactions.

One of the most striking aspects of Singh’s testimony was his role as a “straw donor.” He candidly admitted his part in the scheme, telling the jury:

“My role was to click a button.”

Singh further disclosed that he provided signed blank checks to a team led by SBF’s brother, Gabriel Bankman-Fried, who used them to make political contributions.

Perhaps the most troubling aspect of these revelations was that Singh was aware that these funds originated from FTX’s customer accounts. The contributions were usually directed towards center-left recipients and were made in his name for the sake of optics.

During his testimony, Singh presented himself as a credible and confident witness, occasionally delving into technical jargon that prompted questions from the judge. He recounted his initial acquaintance with SBF in high school, followed by his employment at Alameda in 2017 and later at FTX after a brief stint at Facebook.

Day 2: Lavish spending, investments

The second day of Singh’s testimony continued to peel back the layers of financial extravagance at FTX, including reckless spending on endorsements and risky investments.

Prosecutors presented a spreadsheet dated March 2023 revealing that FTX had inked a staggering $1.1 billion in endorsement deals. These deals included high-profile naming rights, such as the Miami Heat’s basketball arena—briefly known between 2021 and 2022 as FTX Arena.

FTX also cut several celebrity endorsement deals with such figures as NFL quarterback Tom Brady, supermodel Gisele Bundchen, basketball star Steph Curry, and renowned comedian Larry David.

The jury was also shown a photograph depicting SBF at the 2022 NFL Super Bowl, rubbing shoulders with celebrities like Katy Perry, Orlando Bloom, and Michael Kives, the head of venture capital firm K5 Global.

Singh disclosed that SBF allocated a substantial $700 million to K5, utilizing funds prosecutors allege were stolen from FTX customers. He said that SBF was drawn to the prospect of celebrity connections by investing in the venture capital firm, which he believed to be a “one-stop shop” for such a network.

Singh’s testimony also shed light on his concerns about FTX’s spending habits and lavish investments. He revealed that there had been a dispute over SBF’s real estate investments, specifically about whether to purchase a luxury penthouse for a group of ten FTX and Alameda employees, including Singh, Gary Wang, and Caroline Ellison.

SBF admired the apartment, but some found it extravagant and costly. However, in the end, SBF went ahead with the purchase despite the disapproval of his colleagues and friends, who were reluctant to pursue the matter further.

Singh’s cross-examination covered some of his personal expenses, including purchasing a multi-million dollar property with money borrowed from FTX despite knowing about the misuse of customer funds. He told the jury he regretted the purchase and had forfeited the property.

Day 3: Forensic accounting, political donations

The third day of the week saw the entrance of forensic accounting experts who provided detailed insights into the disappearance of $9 billion in FTX customer funds and the alleged misuse of these funds by Alameda Research.

Professor Peter Easton’s testimony was a meticulous analysis that unveiled the extent of the purported misappropriation of FTX customer and investor funds by Alameda Research.

Easton disclosed that from January 2021 until November 11, 2022, accounts held by Alameda on FTX consistently displayed substantial deficits despite continuing payouts to meet financial obligations.

Easton revealed that out of the $11.3 billion in FTX customer funds that were supposed to be held by Alameda Research, only $2.3 billion were found in its bank accounts.

He detailed how these funds were diverted for various purposes, including investments at SkyBridge Capital, property acquisitions, political contributions, and charity foundations.

Easton asserted that a staggering 68% of Alameda’s third-party loans, valued at roughly $4.5 billion, were serviced with FTX customer funds. He told the jury that this was a disturbing mingling of funds between the two firms.

FBI accountant Paige Owens provided further insights into the extensive political donations attributed to SBF, Nishad Singh, and Ryan Salame, totaling millions of dollars.

These contributions were allegedly made through a complex network of transactions, drawing increased scrutiny to FTX’s involvement in political activities.

Day 4: Former FTX General Counsel testifies

The fourth day of the week saw FTX General Counsel Can Sun take the stand to testify about the weeks leading up to the exchange’s collapse.

Sun began his testimony by telling the jury that he had “no idea” that the exchange was misusing customer funds and only found out about the shortfall a few weeks before FTX collapsed.

He testified that SBF directed him to raise funds to deal with a customer fund crisis in November 2022. He recounted engaging private equity firm Apollo Global on a call at the time, and the firm requested a balance sheet, which was provided by either SBF or former FTX head of product Ramnik Arora.

Sun told the jury that the balance sheet painted a grim picture of FTX’s financial situation and revealed a $7 billion shortfall, causing Apollo to decline the investment.

Sun also told the courtroom that Apollo sought explanations for the missing customer funds, and SBF told him to provide “theoretical justifications” for their disappearance. He emphasized that these justifications lacked factual evidence and legal backing.

Following Sun’s cross-examination, Robert Boroujerdi, a managing director at asset manager Third Point, took the stand. Third Point had invested a substantial amount in FTX, which it ultimately wrote off as a total loss.

Boroujerdi revealed that FTX had not informed him that Alameda was exempt from FTX’s risk engine, meaning its trading accounts could not be liquidated and could go negative infinitely. He added that FTX’s so-called “speedy” risk engine made it feel safe about the investment.

When asked how his investment strategy would have changed if he had known about Alameda’s special privileges, Boroujerdi stated unequivocally that Third Point would not have proceeded with the investment.

Looking Ahead

As the trial progresses, the prosecution is on track to conclude its case, with only a few more witnesses expected to testify. The defense’s strategy and potential witnesses remain uncertain.

The trial continues to captivate legal observers and cryptocurrency enthusiasts, unveiling allegations of financial misconduct and political contributions linked to a prominent figure in the cryptocurrency industry.

With each day’s revelations, the case against Sam Bankman-Fried seems to grow stronger. If convicted of the charges against him, SBF faces a lengthy prison sentence.

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Filed under: Bitcoin - @ October 21, 2023 1:25 am