© Reuters. FILE PHOTO: Former FTX Chief Executive Sam Bankman-Fried, who faces fraud charges over the collapse of the bankrupt cryptocurrency exchange, leaves following a hearing at Manhattan federal court in New York City, U.S. January 3, 2023. REUTERS/Andrew Kelly
By Luc Cohen
NEW YORK -Sam Bankman-Fried directed that money from his Alameda Research hedge fund be used to make political donations after he learned the fund owed $13 billion to customers of his FTX cryptocurrency exchange, a former executive testified on Monday.
Nishad Singh, the third former member of Bankman-Fried’s inner circle to testify against him at his fraud trial, said he learned about the shortfall in September 2022 and confronted Bankman-Fried in an hourlong conversation on the balcony of the $35 million Bahamas penthouse they shared.
Singh said Bankman-Fried assured him he would raise more funds and cut costs. But in the meantime, Singh said he continued to receive transfers from Alameda and allow Bankman-Fried associates to use the money to donate to U.S. Democratic candidates and causes in what he called a “straw donor” scheme.
“There was an enormous hole,” said Singh, FTX’s former engineering chief. “Alameda sending me money to spend … necessarily deepened that hole.”
Prosecutors say Bankman-Fried looted billions of dollars in customer funds to prop up Alameda, buy real estate and donate more than $100 million to U.S. political campaigns to burnish his influence. He has pleaded not guilty, and argues that while he made mistakes running FTX, he did not steal funds.
The testimony from Singh, who pleaded guilty in February to wire fraud and conspiracy to violate campaign finance laws, gave the jury the most vivid insight so far into how Bankman-Fried – who, liked Singh, professed to believe in a movement called effective altruism that encouraged young people to earn high salaries and give to charity – spent the money prosecutors say was stolen.
Prosecutors showed a spreadsheet from March 2023 detailing $1.1 billion in FTX endorsement deals, which included the naming rights to the Miami Heat’s basketball arena, as well as arrangements with NFL quarterback Tom Brady, model Gisele Bundchen, basketball star Steph Curry and comedian Larry David.
They showed jurors a photograph of Bankman-Fried at the 2022 NFL Super Bowl with singer Katy Perry, actor Orlando Bloom and Michael Kives – a former aide to Hillary Clinton who ran an investment firm called K5 that Singh said Bankman-Fried called a “one-stop shop” to gain access to influential people.
Singh said another FTX executive had told him the deals were meant to help spur user growth. But Singh said the deals “reeked of excess and flashiness” and that he urged Bankman-Fried to cancel them once he learned about the shortfall in customer funds.
“This is crazy, we need to cut as much of them as we can,” Singh said he told the 31-year-old former billionaire in September 2022.
Bankman-Fried said the proposal to cancel the deals was “shortsighted,” according to Singh. FTX declared bankruptcy two months later after a wave of customer withdrawals.
‘I WAS A STRAW DONOR’
Bankman-Fried’s trial, which started on Oct. 3, has so far focused largely on how prosecutors say Bankman-Fried allowed Alameda to plunder FTX customer funds. Jurors have already heard from Gary Wang, FTX’s former technology chief, and Caroline Ellison, Alameda’s onetime chief executive officer and Bankman-Fried’s former girlfriend.
Singh gave jurors a window into Bankman-Fried’s political operation. He said he often let Guarding Against Pandemics – a political action group run by Bankman-Fried’s younger brother Gabriel – use his name to donate funds originating from Alameda.
Singh described a Signal group chat in which Sam Bankman-Fried, Gabriel Bankman-Fried, or one of their political advisors would frequently direct that a donation be made in Singh’s name.
He said another FTX executive, Ryan Salame, had access to his bank account to make donations via wire transfers. He said he also gave one of Gabriel Bankman-Fried’s assistants several signed blank checks.
“I was a straw donor for campaign donations,” Singh said. “I knew that the money for those donations was coming from customer funds.”
Bankman-Fried had grown to be known as a major donor to Democrats after founding FTX in 2019. But Singh said it would provide “advantageous optics” for some funds to look like they were coming from someone else.
Bankman-Fried’s lawyers are expected to cross-examine Singh on Tuesday. Prosecutors have said they could rest their case as soon as Oct. 26, at which point Bankman-Fried would have the chance to make a defense case.
Defense lawyers said Bankman-Fried, who has attention deficit hyperactivity disorder, needs a higher dose of Adderall than what he has been receiving each morning in jail to fully participate in his defense and decide whether to testify.
U.S. District Judge Lewis Kaplan on Monday denied a defense request to delay the trial to explore options for increasing the dosage.
