Updates on the ongoing Sam Bankman-Fried (SBF) trial are arriving almost by the day now, with the latest talking point coming yesterday by way of Nishad Singh’s testimony.
For context, Singh is a former senior engineer at FTX - who like other FTX executives, began his relationship with SBF at high school.
Given his executive role at the now-defunct crypto platform, he previously pleaded guilty to fraud charges relating to the landmark case, and was making a testimony in the hope of a lesser sentence.
Here is a rundown on his poignant and ever-insightful time in the stands yesterday (Monday 16th October).
Nishad Singh’s Testimony
Nishad Singh’s testimony essentially saw him sure-up the statements made by previous FTX inner-circle testifiers such as Caroline Ellison, Adam Yadida, and Gary Wang. Here he also explained the exchange’s programming and product errors to the jury, as well as how SBF’s conniving management was the backbone behind it all.
Through initially being friends with a seemingly tech wonderkid, Singh stated that he first had a lot of admiration for SBF, however this turned to ‘shame’ once he uncovered what was really going on at FTX. In practice, what this entailed was his new-found knowledge that billions of dollars worth of user funds had gone missing, as well as the fact that SBF would frequently dabble in taking users’ funds ‘unilaterally’ and often excessively.
Singh was exposed to FTX’s lies when he ‘learned of a hole’ to the tune of $8 billion in the company’s finances in September 2022 (just two months before its almighty collapse). Nonetheless, he still continued to approve transactions regardless of the observed ‘hole', therefore meaning that he ‘implicitly’ knew that funds had to be coming from customer deposits.
In other words, here is where he discovered the all-important funnel between FTX and its affiliated trading firm Alameda Research.
When it comes to how prosecutors leveraged Singh’s testimony to prove SBF’s guilt, they prompted him to confirm that the disgraced crypto founder would often ignore objections from other team members, as well as make large investments designed to freshen-up his optics across the celebrity and political spaces.
Anecdotal stories Singh was able to provide here include SBF’s attendance at Michael Kives’ Super Bowl party alongside the likes of Hillary Clinton, Jeff Bezos and Kendall Jenner (among others). Kives is the leader of an investment firm called K5 Global - a company that Alameda invested $200 million into in a ploy for FTX to earn “essentially infinite connections” (per the words of SBF).
Further, Singh reportedly showed explicit aversion to such move by claiming that FTX’s close proximity to celebrities and athletes would be ‘value-extractive’ and ‘toxic to FTX culture’. Instead, he insisted that such funds should come out of SBF’s own pocket, however SBF opted for the Alameda option.
How SBF Lost $11 Billion of User Funds
Singh’s involvement in the matter extends beyond FTX’s inception, as he was initially working at the older entity of Alameda Research.
Come 2019, Singh personally programmed systems that linked FTX user deposits with Alameda’s bank accounts. This included wire instructions called ‘North Dimension’ which would manually send funds to Alameda-controlled accounts if followed.
Two years later, Singh then said himself and other execs became aware of a bug in FTX’s internal accounting systems that overstated user deposits by around $8 billion. Poignantly - and showing acknowledgement - FTX recorded these unadjusted user deposits in an internal database entry called ‘fiat@‘.
Additionally, Singh even programmed ‘special privileges’ for Alameda’s FTX account. These included the allowance of negative balances, as well as the trading and borrowing of FTX funds in excess of balance and collateral amounts.
In turn, this led to Alameda being able to borrow from FTX without its collateral ever being liquidated - and more pivotally, it was able to withdraw money that FTX didn’t even have.
Amongst all these shenanigans - many of which the former FTX engineer did at the direction of SBF and Gary Wang - Singh never recalled ‘it ever being stated that user funds were being taken’. This is despite the fact that Alameda had cultivated a $2.7 billion deficit on FTX by 2022, whilst still owing billions in user funds to FTX that it no longer had.
These frailties, paired with the buggy ‘fiat@‘ accounting system, meant that the actual balance sheet totalled to around -$11 billion.
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This article is intended for educational purposes and is not financial advice.
