Former FTX Executives’ Alleged Misuse of $8 Billion: Testimony Sheds Light

In a startling turn of events, testimony from ex-senior FTX executive Nishad

Singh has revealed that Sam Bankman-Fried and other FTX executives purportedly

expended $8 billion in customer funds on a variety of ventures, including real

estate, venture capital investments, campaign contributions, endorsement

agreements, and even a sports stadium.

The trial of Sam Bankman-Fried, now in its third week, has brought to light the

specifics of how this substantial sum was utilized. Singh, who has already

admitted to fraud, money laundering, and campaign finance violations, disclosed

that the gaping $8 billion hole in Alameda’s financial records was initially

uncovered due to a coding error that erroneously accounted for user deposits.

Furthermore, Singh’s testimony corroborated statements made by three previous

witnesses, all closely associated with Bankman-Fried: FTX CTO Gary Wang, Alameda

CEO Caroline Ellison, and FTX engineer Adam Yedidia. Although Wang and Ellison

had pleaded guilty, all three witnesses pointed to Bankman-Fried as the

mastermind behind the alleged fraud and money laundering.

Singh went on to express his concerns about Bankman-Fried’s extravagant spending

habits, stating that he frequently discovered large expenses after the fact and

that his objections were often disregarded. He referred to Bankman-Fried’s

spending as “excessive” and claimed it did not align with the company’s intended

purpose.

The prosecution delved into the breakdown of how Alameda utilized the $8 billion

in customer funds, with Singh testifying that Bankman-Fried typically had the

final say in investment decisions. Notable investments included $1 billion in

Genesis Digital Assets, a crypto mining company, $500 million in Anthropic, an

AI safety-focused company, and a $200 million investment into K5 Global, a

venture firm led by Michael Kives, who boasted a significant network.

The latter investment seemed to have impressed Bankman-Fried immensely,

particularly after attending a star-studded Super Bowl Party hosted by K5 in Los

Angeles, where prominent figures like Hilary Clinton, Katy Perry, Orlando Bloom,

Leonardo DiCaprio, Jeff Bezos, and the Jenner family were in attendance.

A term sheet proposed by Bankman-Fried suggested substantial bonuses and up to

$1 billion in long-term capital to be given to K5, with the aim of leveraging

their extensive connections. Singh expressed reservations about such significant

investments, considering them detrimental to FTX and Alameda’s culture, as they

appeared to reward excessive politicking and social climbing.

Furthermore, Bankman-Fried believed that endorsement deals and unpaid

partnerships with celebrities would boost FTX’s influence and success. This

approach saw $205 million allocated to renaming the Miami Heat stadium as FTX

Arena, $150 million spent on endorsing Major League Baseball, and $1.13 billion

disbursed for endorsements from notable figures like Steph Curry, Riot, Larry

David, Tom Brady, and Gisele B√ľndchen.

Singh’s testimony also unveiled a series of property acquisitions using the

funds, including a $30 million penthouse in the Bahamas, which he considered

overly ostentatious. Additionally, Bankman-Fried had donated tens of millions to

political campaigns.

Despite raising concerns about the company’s spending practices, Singh often

felt dismissed, even experiencing humiliation when Bankman-Fried chastised him

for sowing doubt in the company’s decisions.

As for the origins of the $8 billion shortfall, Singh’s testimony aligned with

Yedidia’s account. In June 2022, executives discovered that Alameda owed $8

billion in FTX customer funds after Ellison shared a Google Doc displaying an

“extremely negative” balance. Singh attributed this hole to a bug inadvertently

introduced into the system by Yedidia in 2021, which prevented the correct

accounting of user deposits.

Furthermore, Singh revealed that he had developed systems on FTX that granted

Alameda special privileges, such as trading, borrowing, and withdrawing funds

exceeding their balances. A feature called “allow negative” allowed Alameda to

operate with an excess of its balance and collateral, ultimately contributing to

the financial issues. By June 2022, Alameda had accumulated a $2.7 billion

deficit on the FTX platform, resulting in the $8 billion debt to FTX.

In summary, Singh’s testimony has exposed a range of financial irregularities

and questionable spending at FTX, with Bankman-Fried at the center of these

allegations. The trial is ongoing, with additional evidence and testimonies

expected to shed further light on the case.