The third and final member of FTX founder Sam Bankman-Fried’s inner circle testified in the criminal trial against him this week, explaining that he was “blindsided and horrified” to learn of the company’s multibillion-dollar shortfall.
Nishad Singh, FTX’s former chief engineer, said on the stand Monday that he found out about Alameda Research’s covert use of FTX customer funds by June 2022, but that he didn’t know about FTX’s troubling financial state until just two months before the exchange filed for bankruptcy.
Singh, who had been a close friend of Bankman-Fried’s family since attending high school with his younger brother Gabe, told the court that he “felt really betrayed” when Bankman-Fried told him the company didn’t have enough assets to cover an $8 billion balance sheet hole that had developed through expenditures on luxury Bahamas real estate, political donations and celebrity endorsements, The Associated Press reported.
Singh recounted the exchange, in which he said to Bankman-Fried, “Jesus f****** Christ.”
Bankman-Fried at the time allegedly responded, “This has cost 5% to 10% of my productivity … for the last year,” according to Business Insider.
Although Singh said he wanted to leave the company, he was concerned about the company failing.
“How could I live with myself if my departure precipitated a fall that could’ve been avoidable?” Singh said in the court.
Customer funds funneled to political donations were often done under Singh’s name, he said, according to The Wall Street Journal. Singh testified that his role in these donations was “to click a button” to send them from his bank account. He said he also gave signed blank checks to political organizations, including Gabe Bankman-Fried’s pandemic-prevention organization.
Singh told the court that his name was on the checks for optics.
“It was useful for my name to be associated with some donations, even if the end recipient understood they were really coming from something else,” he said, according to The Journal.
Like Caroline Ellison and Gary Wang, the prosecution’s other star witnesses, Singh has pleaded guilty to charges of fraud and conspiracy and is cooperating with the government’s trial against his former co-worker.
Following Singh, Notre Dame University accounting professor Peter Easton — who testified on behalf of the government in the Enron investigation 22 years ago — took the stand.
Easton was hired by the Justice Department to audit Alameda and FTX post-collapse in an effort to trace the money funneled through both organizations.
When asked if he found that FTX spent customer funds, Easton responded, “Oh, yes,” according to CoinDesk.
Armed with flow charts and pie graphs, Easton shared visual representations of what he found in the course of his audits. His charts showed that customer funds were used to purchase most of FTX’s investment in SkyBridge Capital, most of a $550 million FTX investment into Bitcoin mining firm Genesis Digital Assets, and all of FTX’s purchase of Bahamas-based financial firm Modulo Capital.
When deposits were at their peak in June 2022, Easton said FTX had just $2 billion in capital to back more than $11 billion in user funds, according to CoinDesk.
The court is set to take a break from Monday to Wednesday before picking back up with the defense’s case.
Bankman-Fried's lawyer Mark Cohen told Judge Lewis Kaplan early this week that the defense was “still working through whether we are going to put a case on and, if so, of what nature,” Business Insider reported.
It remains to be seen if Bankman-Fried himself will testify. Bankman-Fried has long taken Adderall to address his diagnosed attention deficit hyperactivity disorder, but since entering police custody has been unable to take it in the quantities he once did.
Last weekend, his lawyers requested that the trial be delayed until Bankman-Fried could get the four daily doses of Adderall he requires to focus in a way that would allow him to testify.
Kaplan denied the request.