Unchained - SBF Trial, Day 9: Nishad Singh Describes Former FTX CEO as a Bully and Big Spender

Episode Date: October 17, 2023

The third week of the criminal trial against Sam Bankman-Fried began Monday. Nishad Singh, one of three key witnesses for the prosecution, testified about the alleged misuse of customer funds and a toxic work environment at FTX, created by Sam Bankman-Fried. Singh's account echoed earlier testimony by former Alameda CEO Caroline Ellison and former FTX CTO Gary Wang and raised questions anew about the company's venture investments, excessive spending on sponsorships, and attempts to deceive regulators. Singh also described his growing concerns about Bankman-Fried's lavish spending, even as the company faced mounting financial difficulties.  Catch up on Unchained’s previous coverage:  SBF Trial, Day 1: Possible Witnesses Include FTX Insiders, Big Names in Crypto, and SBF’s Family SBF Trial, Day 2: DOJ Says Sam Bankman-Fried ‘Lied’ While Defense Claims His Actions Were ‘Reasonable’ SBF Trial, Day 3: Why a True Believer in FTX Flipped Once He Learned One Fact SBF Trial, Day 4: SBF’s Lawyers Annoy Judge Kaplan, While Wang Reveals Alameda’s Special Privileges SBF Trial, Day 5: SBF's Defense Finally Found Its Legs, But Can It Counter Caroline Ellison? SBF Trial, Day 6: Caroline Ellison Recalls 'The Worst Week of My Life' SBF Trial, Day 7: In SBF Trial, Did the Defense Lose Its Opportunity With the Star Witness? SBF Trial, Day 8: Former BlockFi CEO Adds Credibility to Fraud Charges Did Sam Bankman-Fried Have Intent to Defraud FTX Investors? Why These Lawyers Say It's Over for SBF-But His Only Hail Mary Is to Testify Here’s How Sam Bankman-Fried’s High-Stakes Trial Could Play Out SBF Trial: How Sam Bankman-Fried’s Lawyers Might Try and Win His Case The High-Stakes Trial of Sam Bankman-Fried Begins: What to Expect Learn more about your ad choices. Visit megaphone.fm/adchoices

Hi everyone. Thanks for tuning in to the Unchained Recap for Day 9 of the Criminal Trial for Sam Binkman-Fried. In devastating testimony for the defense, former F.TX head of engineering, Nasjad Singh, detailed instances of bullying behavior from ex-CEO Sam Binkman-Freed and numerous times when SPF used customer funds to fuel his spending spree. Singh described an organization that allegedly defrauded FTX customers by freely spending customer assets on ill-advised investments, sponsorships, and political action, all at Bankman Freed's direction, and a leadership style that browbeat and belittled to anyone who disagreed with him or expressed concerns. Singh's testimony echoed comments by the prosecution's other two-star

witnesses during the first two weeks, former Elamita CEO, Caroline Ellison, and former FTX Chief Technology Officer Gary Wong. Quote, I was blindsided and horrified. I felt really betrayed that five years of blood, sweat and tears from me and so many employees, driving towards something that I thought was a beautiful force for good, had turned out to be so evil, Singh said. I knew that customers were betrayed, so many customers had to put their trust in us. Singh, who came across as earnest and is having a strong conscience,

told jurors that SPF continued to spend excessively, even after learning of an $8 billion hole in Alameda's balance sheet, that mushroomed as crypto market slumped following the collapse of the Teraluna ecosystem in May 2022. By September, the deficit had reached $13 billion. Quote, I learned of the whole and even after that, implicitly and explicitly, I greenlit transactions that I knew must have been digging the hole deeper and therefore coming from customer funds, Singh said. Singh, who was Bankfim Fried's younger brother's friend and had known SBF since high school, was initially intimidated by the defendant after joining Alameda in

2017. But he lost faith in SPF amid his dismissiveness and seeming dishonesty for the company's financial management. Quote, I had a lot of admiration and respect for him, Singh said. Over time, I think a lot of that eroded and I grew distrustful. Singh described his increasing concern about bankman free spending, even as the company sank deeper into debt. Quote, I'd frequently go to Sam and express that I thought that the spend was too large or that it didn't make sense, in essence, a bad business decision. And I also would express that I felt kind of embarrassed and ashamed of how much it all reeked of excess and flashiness. It didn't align with what I thought we were building a company for. Some examples of the excess were that Alameda had invested $1.5 billion into Bitcoin

Minor Genesis Digital Assets in early 2022, as well as $500 million into AI startup Anthropic and $200 million into incubation firm K5, founded by Michael Kives. The K5, the K5, the K5, K5, The K-5 deal accelerated after SBF attended a Super Bowl-related party in Los Angeles with several top A-list celebrities. Hillary Clinton, Doug Emhoff, Katie Perry, Orlando Bloom, Kate Hudson, Leonardo DiCaprio, Jeff Bezos, Netflix CEO Ted Sarandos, Kendall Jenner, Chris Jenner, and Corey Gamble. Singh said SVF described the event as, quote, the most impressive collection of people he had ever seen in one location. Adding that the FTAX co-founder told him that, if asked, K5 could be a few. could probably range an FTC's dinner with Elon Musk, former President Barack Obama, Rihanna, and Mark Zuckerberg in a month. When Singh saw the term sheet with K-5, which proposed hundreds of

millions of dollars in bonuses to Kives and his partner Brian Baum, as well as $1 billion for their VC firm, he was shocked. Quote, I was worried that partnering with K-5 and giving them this much money would be really toxic to FTX and Alameda culture, that every day I was actively trying to espouse, I felt we all were, that politicking and social climbing was not going to be rewarded, and here we were rewarding people in exorbitant amounts, Singh said. He added that he asked SVF to use his own personal money for the deal so that it wouldn't affect the culture of FTX. Singh also detailed his shock at the $1.1 billion FTC spent on sponsorships,

such as the naming rights for the Miami Heat basketball arena and endorsements from top celebrities, including Steph Curry, Tom Brady, Jaselle Bunchin, and Larry David. He was also uncomfortable with the spending on real estate. For instance, before they moved into their luxury penthouse apartment, Bigman Fried and his future roommates argued over where to live. The group had initially chosen a more modest apartment, but SBF wanted to check out the penthouse. Quote, Sam really liked this one, Singh said.

Sam's a fan of views. And there was substantial disagreement about if we should go with it, in part because it was really expensive, in part because it's just super ostentatious. When discussing it with SBF, Singh said, quote, Sam said that he would pay $100 million for the drama to just be done with and go away, which I took as a pretty clear sign that I should shut up. In September 2022, Singh had a discussion with the defendant about the lack of collateral Alameda had to support its futures trading.

Singh determined that Alameda was short $10 billion of what was needed to support its trading positions and relied on its $65 billion line of credit to make up for this multi-billion dollar deficit. Bankman Freed instructed Singh to transfer SPF's Ellison's and Wong's personal SRM tokens, which were locked and therefore illiquid, into Alameda's main trading account. Singh said the transfer was meant to fool the CFTC or U.S. Commodity Futures Trading Commission by making it seem as if Alameda had posted more collateral than it had. Singh did not execute the transfer saying that it felt wrong. He said, quote, I was fine giving up my personal assets.

I'd taken on debts and given up my assets for the company countless times, but I understood the purpose of this exercise was to be, you know, to fool a U.S. regulator and to fool employees of the company, and I wasn't comfortable doing that. Singh, who was freaking out about the possibility that FTX would be unable to meet customer withdrawals, had an evening talk with the defendant in the fall of 2022 on the palational balcony of their luxurious apartment, which featured a swimming full and several lounge chairs. In this talk, Singh said he was worried about Alameda's Nav, which was his euphemism for the whole, and Bingford-Fried responded, quote, I'm not sure what there is to worry about. Nav is fantastic by almost any measure. When Singh asked how much Alameda was

short by, SBF said, quote, that is the wrong question to be asking, and then proceeded to talk about how much he could deliver within various timeframes, around $5 billion in 24 hours, substantially more in several weeks, and after that, quote, again, substantially more. At the same, some point, Singh said, Jesus fucking Christ, and Bankman Fried said that his shortcoming as several billion dollars had been taxing him about 5 to 10% of his productivity. While Singh responded, he thought it would hit him a lot harder. The prosecutor asked Singh why he didn't leave FTCS. He said he considered leaving the company every day, but added, quote, how could I live

with myself if my departure precipitated a fall that might have been unavoidable? Singh detailed how he tried to cut costs at the company and said that at first, he was, quote, pleasantly surprised and felt he was able to cut a couple hundred million dollars and spent. But further conversations with SBF made him realize that what Singh felt was, quote, an obligation was, quote, not being taken seriously, since SBF was unwilling to cut endorsement and sponsorship deals that meant another $1 billion was, quote, headed out the door. After SPF returned from his Middle East fundraising trip, Singh, who so rarely met with a former FTX CEO one-on-one, said that it was an annual occurrence, met with him privately again,

this time in one of Sam's apartments. After beginning by stating he was not doing well and thinking of quitting, Singh asked SBF how it was going with NAV. SBF, who was standing in the kitchen with his back against the fridge, said he could raise anywhere from $0 to $5 billion. He told Singh, the main plan was to make FTC's success and said to Singh, quote, that depends a huge part on you. you're one of the few people Nashad that can take that kind of work off my plate so I can focus on the rest of this. Singh admitted he had been afraid to ask SPF for the meeting

and said that he felt the defendant was, quote, very mad and that the meeting was tense with, quote, long periods of silence. Then he listed some of what he called Sam's tells for when he's upset and how SBF showed them in this conversation. Quote, puffed out his chest, hands back. He was grinding his finger, closing his eyes,

grinding his teeth or tongue in his mouth, and when he opened them to respond, he would sort of glare at me with some intensity. I ended up apologizing to him at the end for asking for the meeting because I could tell it was so unwelcome. Singh pleaded guilty to charges related to violating campaign finance laws, which involved letting donations be made in his name

even though they were funded from Alameda or as a borrow from FTCS. Some of these loans were used for Bankman Free's political donation campaign and to fund his brother's political action committee, guarding against pandemics. Additionally, he said he participated in falsifying and backdating FTCS's 2021 revenue numbers for auditors. SPF wanted FTCS's revenue, which stood at $950 million for the year, to be $1 billion because FTCS's revenue would show up on a spreadsheet that would be presented to investors.

SPF proposed creating fake revenue, backdated throughout the year, from charging for offering staking services of serum. When withdrawals began to accelerate on November 5th, Singh became, quote, concerned that this might spell doom and the end of our attempts to make customers whole and the end of the ongoing fraud. Since he knew customers, who expected full access to their assets, did not know that they were not backed. Although Singh seemed to have a strong sense of right and wrong, even he ended up doing things he wasn't proud of. Around this time, he sent SPF a signal message asking if he could, quote, make some fictitious transactions. that it looks like I had paid off this amount that I owed. Singh explained that he meant backdated transactions,

which was, quote, something I knew could be done because Sam had proposed it, once to me in other contexts. Singh acknowledged this, quote, fell wrong, and said he wasn't trying to excuse himself, but said, quote, I was in different levels of having a right mind throughout these days. On November 6th, he said a war room meeting gathered in one of Bank

and Freed's apartments. It was attended by Singh, SBF, Ellison, Wong, Romnik Aurora and by phone, head of FTCSigal Markets, Ryan Salem, who all were workshopping a draft tweet thread by Bankman Freed. Quote, there was a point when they were discussing whether or not to characterize FTCS as solvent or well capitalized. I felt very uncomfortable with both definitions, Singh said. I felt neither was true.

Singh leaned over the couch to say something like, quote, I'm not comfortable with this. I'm recusing myself. He testified, they acknowledged in a kind of a way and proceeded. Singh had wanted to halt withdrawals rather than make a statement about FTC's strength. He said, quote, I'd overheard in the conversation opinions that these tweets should be really strong, which I understood to be a euphemism for particularly misleading in such a way that will quell fears definitively. On November 8th, via signal chat, Singh and Bankman Free discussed the

fact that lawyer Dan Friedberg was angry and that Salem might resign. Singh then wrote, quote, they may need to know that it wasn't a ton of people orchestrating it. In testimony, Singh explained, quote, I really wanted Sam to clarify what everyone's role in this fraud was. I wanted him to clarify that I wasn't orchestrating it and that I learned about it really late. I wanted Sam to clarify that he was orchestrating it. I was certainly guilty for participating in it since September,

but don't feel I made the whole. And secondly, I wanted the state of my relationship with these people I loved and tried to do right by to remain intact and for them to not hate me. It was during this part of his testimony that Singh revealed he had been, quote, suicidal for days. Shortly after, his direct testimony ended, meaning that Tuesday morning, he will face his cross-examination. Unchained will be back for more recaves tomorrow. And if you like, you can also get real-time updates on my Twitter feed, at Laura Shin at around lunchtime and after 4.30 p.m. when court lets out. Thanks and see you tomorrow.